A. greater than the isocost
B. less than the isocost
C. tangent to the isocost
D. greater than the output

Correct Answer:

Option C – tangent to the isocost

Explanation

The firm is in equilibrium at the point where the isoquant curve is tangent to the iso-cost line. At this point, the firm is maximising its output level by employing the optimal combination of capital and labour.

Copyright warnings! Do not copy.