The producer will become more profitable by selling corn
The producer must shift out of the more expensive input, corn, and use more of the less
expensive input, milo
The producer must shift out of the less expensive input, milo, and use more of the more
expensive input, corn
The producer must shut down
Assume a local producer of beef cattle wishes to remain at the same level of output when the
input cost of corn increases but the substitute input milo does not increase, what will the
producer do to remain at the same level of output?
Solution
Ans. Option b is the correct answer. The producer must shift out of the more expensive
input, corn,and use more of the less expensive input, milo.
Explanation: As the producer has to maintain the same level of output and the goods are
substitute, the producer will substitute the less expensive input milo for the more expensive input
corn. If a producer is able to substitute less expensive input for more expensive input, it indicates
more efficient production technique.