The following figure shows the isoquants,IQ 1 and IQ 2 ,for a competitive firm. Figure 16-1 -Refer to Figure 16-1.Which of the following is true at point C? A)At point C,the marginal product of labor and capital is maximized. B)Point C identifies the level of output that gives the firm the highest marginal revenue. C)Point C identifies the least cost method of producing output Q₁. D)Point C shows that the firm operates with constant returns to scale.

Question

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Point C identifies the least-cost method of producing output level Q₁. This is because it lies on the lowest isoquant that passes through that output level. At point C, the firm is using the optimal combination of inputs (labor and capital) given the price of those inputs, to produce the desired level of output. Therefore, option C is the correct choice. Option A is incorrect because we do not have information about the marginal product of labor and capital at point C, and it may not be maximized. Option B is incorrect because we do not have information about marginal revenue. Option D is incorrect because we do not have information about returns to scale.

The Following Figure Shows the Isoquants,IQ1 and IQ2,for a Competitive

The Following Figure Shows the Isoquants,IQ₁ and IQ₂,for a Competitive