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.

Question

Quizplus · Accepted Answer

The least-cost position occurs where the isocost line and the isoquant are tangent to each other. This is because at this point, the firm is using the least amount of inputs to produce the given output level, which minimizes their costs. At any other point, they would either be using too many inputs for the output level, or not using enough to produce the desired output level.

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