If an isocost line crosses the isoquant twice,a cost minimizing firm will
A) use a different isocost line to select the bundle of inputs.
B) use the input bundle associated with the intersection on the higher point of the isoquant.
C) use the input bundle associated with the intersection on the lower point of the isoquant.
D) Both B and C.

Question

Quizplus · Accepted Answer

An isocost line crossing an isoquant twice implies that the firm can achieve the same level of output with two different combinations of inputs at the same cost. However, for cost minimization, the firm would seek to adjust the input mix (thus moving to a different isocost line) to reach a point where the isocost line is tangent to the isoquant, indicating the least cost combination of inputs for a given level of output.

If an Isocost Line Crosses the Isoquant Twice,a Cost Minimizing