Consider the case of a linear technology given by

y = 1X1 + 2X2, with i > 0(i = 1; 2).

Let w1 and w2 be the price of each input and assume that w1 w2.

a. Would you consider either of these inputs essential to production?

b. When will the firm only use X1 to produce a certain amount of output, y*?

c. When will the firm only use X2 to produce that same amount of output?

d. In general, do you think that a firm that seeks to maximize profits would use both X1 and X2 or just one of these inputs?