Question

The purpose of the iso-cost/isoquant analysis is to:

a. Explain how much of two inputs a firm should use.
b. Explain how much profit a firm can make from the use of the two inputs.
c. Explain the minimum cost usage of two inputs for a given level of output.
d. None of the above

Answer 1

The purpose of the iso-cost/isoquant analysis is to determine the optimal combination of inputs to minimize costs and maximize output for a given level of output.

Step-by-step explanation:

The purpose of the iso-cost/isoquant analysis is to:

1. Explain how much of two inputs a firm should use. This analysis helps firms determine the optimal combination of inputs, such as labor and capital, to minimize costs and maximize output.
2. Explain how much profit a firm can make from the use of the two inputs. While iso-cost/isoquant analysis is not directly focused on profit, understanding the relationship between inputs and output can inform decisions that may impact profit.
3. Explain the minimum cost usage of two inputs for a given level of output. This is the primary objective of iso-cost/isoquant analysis - finding the efficient allocation of inputs to produce a desired level of output while minimizing costs.