Question

List three ways in which on can move between isoquants?

How do you decide the number of workers to hire?

Please describe the common progression with respect to returns to scale.

Compare economies of scope with economies of scale.

What is the sunk cost fallacy?

Answer 1

An isoquant shows the possible combinations of two variable factors that can be used to produce the same total product. A higher isoquant shows a higher level of output that can be produced while a lower isoquant shows a lower quantity being produced using two inputs. A movement along an isoquant downward to the right each point on it represents the substitution of labour for capital. Thus substitution between the inputs can lead to movement along the demand curve.