The input demand functions that can be derived from cost functions are referred to as "contingent" demand functions because the functions:
A)assume input costs are constant.
B)express input demand as a function of output.
C)depend on the assumption of profit maximization.
D)assume constant returns to scale in production.

Question

Quizplus · Accepted Answer

The contingent demand functions express the demand for inputs as a function of output, which means that the input demand is contingent on the level of output. This is based on the assumption of profit maximization, which means that firms will choose the level of input demand that will maximize their profits given the output level. The input costs may not be constant, and the functions do not necessarily assume constant returns to scale.

The Input Demand Functions That Can Be Derived from Cost