The point of tangency between an isocost line and an isoquant is necessarilyGroup of answer choicesthe profit-maximizing combination of inputs that should be hired to produce that output level.the least costly combination of inputs that can be hired to produce the output level.both the profit-maximizing and least costly combination of inputs that can be used to produce the output level.the minimum amount of output that can be attained for that level of expenditure.
Question
The point of tangency between an isocost line and an isoquant is necessarilyGroup of answer choicesthe profit-maximizing combination of inputs that should be hired to produce that output level.the least costly combination of inputs that can be hired to produce the output level.both the profit-maximizing and least costly combination of inputs that can be used to produce the output level.the minimum amount of output that can be attained for that level of expenditure.
Solution
The point of tangency between an isocost line and an isoquant is necessarily the least costly combination of inputs that can be hired to produce the output level.
Here's why:
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An isoquant represents all combinations of inputs that yield the same level of output.
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An isocost line represents all combinations of inputs that can be purchased for a given total cost.
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The point where the isoquant and isocost line are tangent to each other represents the least costly combination of inputs that can be used to produce a certain level of output. This is because at this point, the firm is getting the most output for its money, i.e., it is minimizing its costs.
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This point does not necessarily represent the profit-maximizing combination of inputs, because profit maximization depends not only on costs but also on revenues.
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Similarly, this point does not represent the minimum amount of output that can be attained for that level of expenditure, because the isocost line represents all combinations of inputs that can be purchased for a given total cost, not the minimum output that can be achieved with that cost.
Similar Questions
Isoquants are downward sloping becauseGroup of answer choicesas more units of an input are used to produce a product, total cost increases.as more units of an input are used to produce a product, the firms marginal productivity increases.if more of one input is used, then less of the other input must be used to keep output constant.Both as more units of an input are used to produce a product, the firms marginal productivity increases and if more of one input is used, then less of the other input must be used to keep output constant
The slope of the isoquant tells the firm how muchGroup of answer choicesoutput increases when labour increases by one unit.output increases when capital and labour are doubled.capital must decrease to keep output constant when labour increases by one unit.a unit of capital costs relative to the cost of labour.
7) A country cannot produce a mix of products with a higher value than whereA) theisovalue line is tangent to the production possibility frontier.B) theisovalue line intersects the production possibility frontier.C) theisovalue line is above the production possibility frontier.D) theisovalue line is below the production possibility frontier.E) theisovalue line is tangent with the indifference curve.
The line (or curve) that represents the combinations of the two goods produced on the production possibilities frontier is a boundary between output levels that are and output levels that are unattainable. (Remember - use only one word to fill in the blank.)
A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)Group of answer choicesindifference curve.isoquant.isocost line.production function.
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