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.
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