Author Question: If two different fuel sources (e.g., coal and natural gas) are perfect substitutes in the long-run ... (Read 46 times)

asd123 · **on:** Jul 1, 2018

If two different fuel sources (e.g., coal and natural gas) are perfect substitutes in the long-run production of energy. How will a profit maximizing firm choose between these two inputs?

A) The firm will only use the input with lower cost
B) The firm will use equal amounts of the two inputs, even if one of the inputs has a lower cost
C) The firm will only use the input with higher cost
D) The firm cannot achieve a profit maximizing level of output under these circumstances

Question 2

Government intervention can increase total welfare when

A) there are costs or benefits that are external to the market.
B) consumers do not have perfect information about product quality.
C) a high price makes the product unaffordable for most consumers.
D) all of the above
E) A and B only