© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant Analysis
Isocost/Isoquant Analysis
Chapter 10 Appendix
Chapter 10 Appendix
10A - 2
© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant Analysis
Isocost/Isoquant Analysis
◆In the long run, a firm can vary all of the
factors of production.
◆One important decision in the long run
is which combination of factors to use?
◆Economic efficiency involves choosing
the factors so that the cost of production
is at the minimum.
10A - 3
© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant Analysis
Isocost/Isoquant Analysis
◆A graphical tool used in economics to
analyze the long run choice of factors of
production is the isocost/isoquant
analysis.
10A - 4
© 2003 McGraw-Hill Ryerson Limited
The Isoquant Curve
The Isoquant Curve
◆An isoquant curve (equal quantity)
represents combinations of factors of
production that result in equal amounts
of output.
10A - 5
© 2003 McGraw-Hill Ryerson Limited
The Isoquant Curve for 60
The Isoquant Curve for 60
Earrings,
Earrings, Fig. A10-2, p 229
Fig. A10-2, p 229
Units of labour
Machines
B
A
G
C
D
F
E
(Q60)