A Firm's Least- Cost Position for Producing a Given Output

question 46

Multiple Choice

A firm's least- cost position for producing a given output level occurs at that point where

• A)the isocost and isoquant intersect the vertical axis.
• B)the isocost line and the isoquant are tangent to each other.
• C)the isocost line intersects the highest isoquant.
• D)the isocost and isoquant intersect the horizontal axis.
• E)the isoquant is closest to the origin.

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Definitions:

Isoquants

Curves that represent combinations of different inputs that produce the same output level, used in production theory.

Marginal Productivity

The increase in output resulting from a one-unit increase in the input of a particular resource, while holding inputs of all other resources constant.

Output Constant

A fixed amount of production that does not change with the levels of input.

Isocost Line

A graph representing all combinations of inputs which cost the same total amount.