According to the No-Overlap Rule,
A) The area above the isoquant that runs through the firm's least-cost input combination does not overlap with the area below the isocost line
B) The area above the isoquant that runs through the firm's least-cost input combination does not overlap with the area above the isocost line
C) The area above the isoquant that runs through the firm's least-cost input combination should overlap with the area below the isocost line
D) The area above the isoquant that runs through any bundle other than the firm's least-cost input combination does not overlap with the area below the isocost line

Question

Quizplus · Accepted Answer

The No-Overlap Rule in economics states that the area above the isoquant (which represents combinations of inputs that produce a certain level of output) that runs through the firm's least-cost input combination does not overlap with the area below the isocost line (which represents combinations of inputs that cost the same amount). This is because the least-cost combination of inputs for a given level of output lies on the isoquant and on the lowest possible isocost line, indicating no cheaper combination can produce the same output.