A firm's least- cost position for producing a given output level occurs at that point where
A) the isocost line intersects the highest isoquant.
B) the isocost and isoquant intersect the vertical axis.
C) the isocost and isoquant intersect the horizontal axis.
D) the isocost line and the isoquant are tangent to each other.
E) the isoquant is closest to the origin.

Question

Quizplus · Accepted Answer

The least-cost position for producing a given output level occurs where the isocost line and isoquant are tangent to each other. This is because at this point, the firm is using the optimal combination of inputs to produce the output at the minimum possible cost. Any other point on the isocost line will either be inefficient or more expensive.

A Firm's Least- Cost Position for Producing a Given Output