A firm that produces where the isocost line is tangent to an isoquant line must be
A) maximizing profit
B) maximizing revenues
C) minimizing the total cost of producing that output level
D) minimizing output for a given total cost
E) paying the same prices for capital and labor

Question

Quizplus · Accepted Answer

When the isocost line is tangent to an isoquant line, the firm is producing at the minimum cost for that level of output, therefore minimizing the total cost of producing that output level. This point represents the point of optimal input decision by the firm.

A Firm That Produces Where the Isocost Line Is Tangent