What are the relationship between isoquant and isocost?
An isoquant shows all combinations of factors that produce a certain output. An isocost show all combinations of factors that cost the same amount.
What is isoquant and isocost line at equilibrium point?
The essential condition is that the slope of the isocost line must equal the slope of the isoquant. Thus at a point of equilibrium marginal physical productivities of the two factors must be equal the ratio of their prices. The marginal physical product per rupee of one factor must be equal to tht of the other factor.
Where the isoquant curve and isocost line tangent to each other that point indicates the equilibrium of?
The point where the iso-cost line is tangent to an isoquant shows the least cost combination of the two factors for producing a given output. If all points of tangency like LMN are joined by a line, it is known as an output-factor curve or least-outlay curve or the expansion path of a firm.
Is isoquant and indifference curve same?
An isoquant is analogous to an indifference curve in more than one way. In it, two factors (capital and labour) replace two commodities of consumption. An isoquant shows equal level of product while an indifference curve shows equal level of satisfaction at all points.
What will happen to an isocost if the prices of both factors rise by the same percentage?
If all input prices change by the same percentage then the price ratio remains the same, so the isocost lines have the same slope, and the optimal input bundle remains the same. Consequently the cost of producing any given output rises by the same percentage as do the input prices.
What isoquant is to an ISO cost line at equilibrium point Mcq?
| Q. | An isoquant is ______ to an iso cost line at equilibrium point: |
|---|---|
| A. | convex |
| B. | concave |
| C. | tangent |
| D. | perpendicular |
How is equilibrium attained with isoquant approach?
Producer’s equilibrium can be obtained with the help of isoquant and iso-cost line. An isoquant enables a producer to get those combinations of factor that yield maximum output. On the other hand, iso-cost line provides the ratio of prices of factors of production and the amount that a producer is willing to spend.
How the producer’s equilibrium is determined by the isoquant isocost?
Question: Briefly explain how isoquant curves and isocost lines determine the producer’s equilibrium. Answer: Isoquant curve shows combinations of inputs employable to produce a certain output. Isocost lines portray cost combinations of two inputs like capital and labour which produce the same amount of output.
How do you calculate isocost?
The isocost line is a firm’s budget constraint when buying factors of production. To calculate the isocost line for a firm, begin with the total cost equation, TC = (W x L) + (r x K) and solve for K. W= wages, L =labor, r = the rent (what you pay for the use of capital), and K = capital.
What is an ISO quant curve?
Definition: An Iso-quant Curve shows all the possible combinations of input factors that yield the same quantity of production. In other words, an iso-quant curve is a geometric representation of the production function, wherein different combinations of labor and capital are employed to have the same level of output.
Will the slope of the isocost line always change if the price of factors of production changes?
Only the point in the isocost line shows the combination that can be purchased exactly at the given cost . If the prices of the t factors change, the isocost line will also change .
What is the equation of the isocost line?
What is the difference between indifference curve and isoquant?
How do you calculate producer equilibrium?
Producer’s Equilibrium is determined at OM level of output corresponding to point E as at this point: (i) MC = MR; and (ii) MC is greater than MR after MC = MR output level. 2. MC is greater than MR after MC = MR output level. So, the producer is at equilibrium at OM units of output.
What are the properties of ISO quants?
Properties of Isoquants
- An isoquant lying above and to the right of another isoquant represents a higher level of output.
- Two isoquants cannot cut each other.
- Isoquants are convex to the origin.
- No isoquant can touch either axis.
- Isoquants are negatively sloped.
- Isoquants need not be parallel.
- Each isoquant is oval-shaped.