Concept of isocost, Managerial Economics

Assignment Help:

The concept of isocost

In the use of resources, firms are faced with opportunity cost.  For every addition of say capital, they must forego a unit of say labour.

Exposition:                                               

194_isocost.png

Suppose the firm pays:

W for L (labour)

r for k (capital)

If C is the Total Cost (TC), then

C = rk + WL.  So if C is given as c, then the producer can choose among various combinations e.g.

                        k = C - WL

                              r     r

Thus if he spends all the money on k then he shall be at A and if he spends all the money on L then he shall be at B.  At A he spends C while at B he shall also spend C.  The line joining A and B is called Isocost line and is defined as locus of all different combinations of factors the firm can purchase given a stipulated money outlay and factor prices.


Related Discussions:- Concept of isocost

A budget deficit that is only temporary, "A budget deficit that is only tem...

"A budget deficit that is only temporary cannot be the source of inflation."  Is this statement true, false, or uncertain?  Describe your answer.

The balancing item, THE BALANCING ITEM Since for ever position entry i...

THE BALANCING ITEM Since for ever position entry in the current and capital accounts there is a corresponding negative entry in the monetary account, and for every negative en

What are the concept of managerial economics, Concept of Managerial Economi...

Concept of Managerial Economics The discipline of managerial economics deals with characteristics of economics and tools of analysis that are used by business enterprises for dec

What is an opportunity cost?, Opportunity cost is cost of a different that ...

Opportunity cost is cost of a different that must be forgone in order to pursue a definite action. Put another way, the advantages you could have received by taking an alternative

Bertrand equilibrium benefits, The computer graphics chip industry is one w...

The computer graphics chip industry is one with a little number of competitors that earn normal economic profit. Two chip manufacturers, NVIDIA and ATI both face the prospect of lo

MANAGEMENT INFORMATION SYSTEMS, Write a detailed note on the planning and d...

Write a detailed note on the planning and development of Management Information Systems

Volatility of the stock market, You have been provided with daily data star...

You have been provided with daily data starting in January 2009 on the main New Zealand stock market index, the NSX-50. Choose a suitable model for measuring volatility on the New

Loss at the point of equilibrium, Q. Loss at the point of equilibrium? ...

Q. Loss at the point of equilibrium? Losses: At the point of equilibrium i.e. E where MR = MC, firm produces OM amount of the output. To produce this output, firm incurs an a

Find the profit maximizing output and monopoly profit, The demand curve for...

The demand curve for the product of a monopolist is a straight line such that quantity just falls to zero at a price of Rs 20 per unit and that the maximum quantity (at zero price)

Long-term policies to cure balance of payment deficits, Long-Term Policies ...

Long-Term Policies One long term option of tackling balance of payments deficit is export promotion .  In the long run this is the best method of improving a balance of payme

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd