The figure below shows the isocost lines and the isoquant map for a firm producing golf tees. FIGURE 8- 6
-Refer to Figure 8- 6. Suppose this firm is producing 3000 golf tees and is at point F on the isoquant map. In order to maintain its output and minimize costs this firm should
A) not change its use of factors.
B) employ more capital and less labour.
C) employ more labour and less capital.
D) move to an isocost line further from the origin.
E) move to an isoquant closer to the origin.

Question

The figure below shows the isocost lines and the isoquant map for a firm producing golf tees.  FIGURE 8- 6
-Refer to Figure 8- 6. Suppose this firm is producing 3000 golf tees and is at point F on the isoquant map. In order to maintain its output and minimize costs this firm should
A) not change its use of factors. 
B) employ more capital and less labour. 
C) employ more labour and less capital. 
D) move to an isocost line further from the origin. 
E) move to an isoquant closer to the origin.

Quizplus · Accepted Answer

At point F, the firm is not minimizing costs because it is not on the lowest possible isocost line for the given isoquant. To minimize costs while maintaining the same level of output, the firm should adjust its input combination to employ more capital and less labor, moving to a point where the isoquant is tangent to a lower isocost line.

The Figure Below Shows the Isocost Lines and the Isoquant