Capital (K) Q= 100 Labor (L) The firm's optimization problem is to minimize total cost for a given level of output. In the diagram above, why is that achieved at point E rather than at point F? Select one: a. Although E uses more labor than F, output is higher to compensate for increased costs. O b. Total costs are the same at Fand E, but the firm prefers the combination of inputs at E. O c. F uses more capital than E, and capital tends to be more expensive than labor. O d. Total costs at E are lower than at F because E is on a lower isocost line.

Capital (K) Q= 100 Labor (L) The firm's optimization problem is to minimize total cost for a given level of output. In the diagram above, why is that achieved at point E rather than at point F? Select one: a. Although E uses more labor than F, output is higher to compensate for increased costs. O b. Total costs are the same at Fand E, but the firm prefers the combination of inputs at E. O c. F uses more capital than E, and capital tends to be more expensive than labor. O d. Total costs at E are lower than at F because E is on a lower isocost line.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following diagram showing a range of isoquants and isocosts, with labour measured on the horizontal axis and capital measured on the vertical axis. Assume that when the firm is producing in the short run, capital is fixed at K but capital is variable in the long run. K, Capital K A B Q3 Isoquant Q2 Isoquant Q₁ Isoquant L, Labour Which of the following can we conclude? O Only point B represents cost minimisation in both the short run and the long run, as it is on the short run expansion path, as well being the cost minimising point in the long run. Points A, B and C represent cost minimisation in the long run only. There are no points that represent cost minimisation in both the short run and the long run. Points A, B and C represent cost minimisation in both the short run and the long run. Points D and E represent cost minimisation in the short run only. Points A, B and C represent cost minimisation but only in the short run. Points D and E represent cost minimisation in…
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