I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company1. must accept market price for its physical capital inputs. 2. must reduce what it pays for inputs that make up its costs of production. 3. must reduce production to encourage speculators to drive gold prices higher. 4. must alter the price of its labor inputs to maximize profits.

Question

Business

Marely Eaton

11 February, 13:28

I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company1. must accept market price for its physical capital inputs. 2. must reduce what it pays for inputs that make up its costs of production. 3. must reduce production to encourage speculators to drive gold prices higher. 4. must alter the price of its labor inputs to maximize profits.

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Genesis Schmitt · Answer 1

1) must accept market price for its physical capital inputs.

Explanation:

Option 1 is correct because the company must increase it production output, so it can benefit from current high prices. Sometimes increasing production results in higher unit costs, but if those higher costs are offset by higher prices, then it is worth it.

Option 2 is wrong because the company must focus on increasing its production level in order to benefit from higher prices.

Option 3 is wrong because the company must increase its production level in order to benefit from higher prices.

Option 4 is wrong for the same reason as option 2.