At the point of tangency between an isoquant and an isocost line,
A) the firm is minimizing the cost of producing a given amount of output
B) the firm is maximizing the cost of producing a given amount of output
C) the household is maximizing its total utility given its income
D) the society is maximizing the social value of output, given its resources and technology
E) none of the above

Question

Quizplus · Accepted Answer

At the point of tangency between an isoquant and an isocost line, the firm is producing a given amount of output at the minimum possible cost. This is because any movement away from this point would result in either a higher cost for the same output or a lower output for the same cost. Therefore, the firm is minimizing the cost of producing a given amount of output.

At the Point of Tangency Between an Isoquant and an Isocost