CA Foundation · Business Economics · Theory of Production and Cost
Which of the following correctly describes two isoquants of the same firm?
Isoquants of a firm cannot intersect, because one input combination cannot yield two different outputs. An isoquant lying farther from the origin represents larger input quantities and therefore a higher level of output than one closer to the origin.
- AThey can intersect, provided they show different outputs
- BThey cannot intersect, and the isoquant farther from the origin shows a higher outputCorrect
- CThey cannot intersect, and the isoquant farther from the origin shows a lower output
- DThey are always parallel straight lines
Explanation
If two isoquants intersected, the common point would imply two different output levels from one input combination, which is contradictory. Isoquants farther from the origin use more inputs under efficient production and so show higher output. Straight parallel lines occur only for perfect substitutes, not generally.
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