When an isocost line is just tangent to an isoquant, we know that:
A) output is being produced at minimum cost.
B) output is not being produced at minimum cost.
C) the two products are being produced at the least input cost to the firm.
D) the two products are being produced at the highest input cost to the firm.

Question

Quizplus · Accepted Answer

When an isocost line is just tangent to an isoquant, it means that the firm is producing output at the minimum cost possible. This is because any movement away from this point (in either direction) will increase the cost of production without increasing output, which is inefficient for the firm. Therefore, option A is the correct answer.

When an Isocost Line Is Just Tangent to an Isoquant