8A.1 Isoquants Flashcards
What is an isoquant?
An isoquant describes the firm’s alternative methods for producing a given level of output.
It shows the whole set of technically efficient factor combinations for producing a given level of output.
What is happening when we move from one point on an isoquant to another?
As we move from one point on an isoquant to another, we are substituting one factor for another while holding output constant.
What is the marginal rate of substitution a measure of?
The marginal rate of substitution measures the rate at which one factor is substituted for another with the output being held constant.
What is sometimes called the marginal rate of technical substitution?
Sometimes the term marginal rate of technical substitution is used to distinguish this concept from the analogous one for consumer theory (the marginal rate of substitution)that we examined in Chapter 6.
How can we graphically measure the marginal rate of substitution?
Graphically, the marginal rate of substitution is measured by the slope of the isoquant at a particular point.
What is the standard practice of defining the marginal rate of substitution?
We adopt the standard practice of defining the marginal rate of substitution as the negative of the slope of the isoquant so that it is a positive number.
What is the marginal rate of substitution related to?
The marginal rate of substitution is related to the marginal products of the factors of production.
What is the marginal rate of technical substitution between two factors of production equal to?
The marginal rate of (technical) substitution between two factors of production is equal to the ratio of their marginal products.
What are the two important conditions that economists assume about isoquants?
Economists assume that isoquants satisfy two important conditions: They are downward sloping, and they are convex when viewed from the origin. What is the economic meaning of these conditions?
What does the downward slope indicate?
The downward slope indicates that each factor input has a positive marginal product.
What happens if the input of one factor is reduced and that of the other is held constant?
If the input of one factor is reduced and that of the other is held constant, the output will be reduced.
If one input is decreased, when can production be held constant?
Thus, if one input is decreased, production can be held constant only if the other factor input is increased.
What is an isoquant map?
The isoquant of Figure 8A-1 is for a given level of output. Suppose it is for 6 units. In this case, there is another isoquant for 7 units, another for 7000 units, and a different one for every other level of output. Each isoquant refers to a specific level of output and connects combinations of factors that are technically efficient methods of producing that output. If we plot a representative set of these isoquants from the same production function on a single graph, we get an isoquant map like that in Figure 8A-2. The higher the level of output along a particular isoquant, the farther the isoquant is from the origin.
