Answer to Question #30234 in Microeconomics for sania saeed
a firm has a production function y=X1X2. IF THE MINIMUM COST OF THE PRODUCTION AT W1=W2=2 IS 4 WHAT IS THE LEVEL OF OUTPUT Y....?
In economics, a production function relates physical output of a production process to physical inputs or factors of production. The production function is one of the key concepts of mainstream neoclassical theories, used to define marginal product and to distinguish allocative efficiency, the defining focus of economics. The primary purpose of the production function is to address allocative efficiency in the use of factor inputs in production and the resulting distribution of income to those factors, while abstracting away from the technological problems of achieving technical efficiency, as an engineer or professional manager might understand it.
If y = x1x2, the level of output is maximized, when y' = 0, x1x2' = x1 + x2 = 0 If W1 = W2 = 2, then maxi Y = 2x1 + 2x2 = 0. So, we shouldn't produce these goods.