Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?
A) C = 50
B) S = 20
C) C = 25, S = 10
D) All points on the P = 100 isoquant, including those listed in a-c would cost the same.

Question

Quizplus · Accepted Answer

The cost-minimizing combination is the point on the isoquant where the ratio of the marginal products of the two inputs is equal to the ratio of their prices. In this case, the marginal product of corn feed is 2 and the marginal product of soybean feed is 5. The ratio of these marginal products is 2/5, which is equal to the ratio of the prices of the two inputs, $2/$5. Therefore, the cost-minimizing combination is the point on the isoquant where the slope of the isoquant is -2/5. This point is (C = 25, S = 10).

Suppose Pigs (P)can Be Fed Corn-Based Feed (C)or Soybean-Based Feed