The first principle of cost minimization is:
A)that the optimal input bundle is below the feasible set.
B)that the optimal input bundle is on the isoquant.
C)that the firm maximizes profits.
D)that the optimal input bundle is in the feasible set.

Question

Quizplus · Accepted Answer

The first principle of cost minimization is that the optimal input bundle must be on the isoquant, which represents all combinations of inputs that produce a certain level of output. Being on the isoquant ensures that the firm is producing efficiently with the chosen inputs.

The First Principle of Cost Minimization Is