An isoquant is ______ to an iso cost line at equilibrium point.a.Convexb.Concavec.Tangentd.Perpendicular
Question
An isoquant is ______ to an iso cost line at equilibrium point.
- a. Convex
- b. Concave
- c. Tangent
- d. Perpendicular
Solution
The correct answer is c. Tangent.
Explanation:
An isoquant represents combinations of inputs that yield the same level of output, while an isocost line represents combinations of inputs that cost the same amount. At the equilibrium point, the isoquant is tangent to the isocost line, indicating that the firm is achieving the maximum output possible for a given cost. This tangency point indicates the optimal combination of inputs that a producer should use to minimize costs while maximizing output. If the isoquant were convex or concave to the isocost line, or perpendicular, it would not represent an efficient allocation of resources.
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