Suppose that firms operate in a competitive market, attempt to maximize profits, and only use one factor of production. Then we know that for any changes in the input and output price, the input choice and the output choice must obey the Weak Axiom of Profit Maximization, p y − w x ≥ 0.
Which of the following propositions can be proven by the Weak Axiom of Profit Maximizing Behavior (WAPM)? Respond yes or no, and give a short argument.
(a) If the price of the input does not change, then a decrease in the price of the output will imply that the firm will produce the same amount or less output.
(b) If the price of the output remains constant, then a decrease in the input price will imply that the firm will use the same amount or more of the input.
(c) If both the price of the output and the input increase and the firm produces less output, then the firm will use more of the input.