When the isocost line is tangent to the isoquant,then
A) MPL = MPK.
B) the firm is producing that level of output at minimum cost.
C) the firm has achieved the right economies of scale.
D) All of the above.

Question

Quizplus · Accepted Answer

When the isocost line is tangent to the isoquant, it indicates that the firm is producing that level of output at minimum cost. This means that the firm is optimizing its resources to produce the given level of output efficiently. Option A is not always true as MPL = MPK only indicates a condition of production where the marginal product of labor and capital are equal. Option C is not applicable as achieving the right economies of scale has to do with the firm's long-term operations and not just with tangency between an isocost and isoquant.

When the Isocost Line Is Tangent to the Isoquant,then