If a Firm Is Operating at the Point of Tangency

question 51

Multiple Choice

If a firm is operating at the point of tangency between an isoquant and an isocost line, its production is:

• A) technically efficient but economically inefficient.
• B) technically inefficient but economically efficient.
• C) both technically and economically efficient.
• D) both technically and economically inefficient.

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Definitions:

Isocost Line

A graph representing all combinations of the inputs' quantities that equal a certain cost.

Capital

Financial assets or the financial value of assets, such as cash and goods, used to generate wealth through investment.

Labor

Refers to human efforts used in the production of goods and services.

Cost Of Capital

The minimum profit percentage a corporation needs to achieve on its ventures to sustain its market value and draw in capital.