Question

If two inputs must be used in a fixed proportion, then: a) the inputs are perfect...

If two inputs must be used in a fixed proportion, then:

a) the inputs are perfect substitutes.

b) the inputs are imperfect substitutes.

c) the inputs are complementary inputs.

d) the isoquant is up-sloping and linear.

e) the isoquant is down-sloping and linear.
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Answer #1

The correct answer is (c) the inputs are complementary inputs

Goods are used in fixed proportion means that in order to increase production a firm should hire u unit of one input for every 1 unit of other input( i.e. u unit of K for every 1 unit of L). This means that If we want to increase production then increase in amount of L hired by 1 unit will result in increase in amount of K hired by u units. Hence This means that inputs are complementary to each other.

Isoquant for such fixed proportion inputs are kink shaped (like L shaped) curve and Production function is like

Q = min{K , aL} which is L shaped curve.

Hence the correct answer is (c) the inputs are complementary inputs

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