Question

If two different fuel sources (e.g., coal and natural gas) are perfect substitutes in the long-run production of energy. How will a profit maximizing firm choose between these two inputs

Answer 1

The firm would choose the input with the lower cost.

Step-by-step explanation:

Perfect subsituites are goods that can be used in place of one another. If the price of one good rises, the demand for the other good increases.

A profit maximising firm would aim to use the cheapest input available, so in the long run when all inputs of production are variable, the firm would choose the less expensive input.

I hope my answer helps you