Mistakes N Shit Flashcards
1
Q
3 assumptions behind isocost-isoquant analysis?
A
Only two factors of production
They can be substituted for one another (unless have to be used in fixed proportions)
There is constant technology
2
Q
Explain shape of isoquant?
A
Downward sloping? Because we assume L and K can be substituted at some rate for one another; since when we gain more of one we need to lose some of the other to keep total quantity outputted the same
Bowed shape? Due to diminishing marginal rate of substitution as we tend to more extreme either K or L values
