Which of the Following Statements Correctly Characterizes the Solution to a Cost

question 31

Multiple Choice

Which of the following statements correctly characterizes the solution to a cost minimization problem with an interior solution?

• A)The isoquant is tangent to the isocost line.
• B)The isoquant lies to the interior of the isocost line.
• C)The isocost line lies to the interior of the isoquant.
• D)The distance between the isoquant and the isocost line is maximized.

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Definitions:

Substitution Effect

The change in demand for a good that results from a change in its price, making consumers more likely to purchase more of a less expensive alternative or less of a more expensive one.

Demand Curves

Graphs showing the relationship between the price of a good and the quantity demanded by consumers, typically downward-sloping.

Marginal Utility Data

Information regarding the additional satisfaction or use received by consuming one more unit of a good or service.

Prices

The monetary value expected, necessary, or allocated for the purchase of something.