The equilibrium point of a firm is attained at the point where the isoquant is?

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.