Optimal input combination for maximisation of output, Managerial Economics

Assignment Help:

Q. Optimal Input Combination for Maximisation of Output?

Equilibrium conditions of the firm are identical to the above situation which is, iso-cost line must be tangent to the highest possible isoquant and isoquant should be convex. Though the present problem is theoretically different. In this case firm has to maximise its output for a given cost. This is elucidated in the figure:

1544_Optimal Input Combination for Maximisation of Output.png

Figure: Maximisation of Output

Firm's cost constraint is given by iso-cost line AB. The maximum level of output that firm can produce is Q2since the point 'e' lies on the isoquant Q2. Point 'e' is the equilibrium point since at this point the iso-cost line AB is tangent to the isoquant Q2. Other points on the isocost line which is S and T, lie on a lower isoquant Q1. Points to the right of 'e' indicate higher levels of output that are desirable, however aren't attainable because of the cost constraint. Therefore Q2 is the maximum output possible for given cost. The optimal combination of factors is OK1 and OL1.

The above analysis illustrates that optimal combination of inputs required for a firm to minimise the cost of producing a given level of output or to maximise the output for a given cost outlay is given at tangency point of an isoquant and is cost line.

The above analysis is based on constant factor prices. If factor prices change, firm will choose another factor combination which will minimise the cost of production for given output or maximise the level of output for a given cost


Related Discussions:- Optimal input combination for maximisation of output

Marginal Revenue Function, if market demand is Q= 30 - 3P how do you write ...

if market demand is Q= 30 - 3P how do you write the marginal revenue function as a function of Q

Commercial banks, Commercial Banks A Commercial Bank is a financial in...

Commercial Banks A Commercial Bank is a financial institution which undertakes all kinds of ordinary banking business like accepting deposits, advancing loans and is a member

Show the long term goals - demand forecast, Q. Show the Long Term Goals - D...

Q. Show the Long Term Goals - Demand forecast? Long Term Goals:   If the demand forecast period is more than a year, in that scenario it's termed as long term forecast. Follow

Equilibrium national income in a frugal economy, Equilibrium National Incom...

Equilibrium National Income in a Frugal Economy Saving and investment are examples of two categories of expenditure called withdrawals and injections.  A WITHDRAWAL is any inc

The position of an economic relationship, Using the relationship among the ...

Using the relationship among the price of a visit to a physiotherapist and the quantity of visits demanded, explain and distinguish between the direction, the slope, and the positi

Fezzes is perfectly competitive, The  fez is the typical Arabic hat in the ...

The  fez is the typical Arabic hat in the shape of a short red cylinder. Historians believe it was manufactured in the city of Fes, in Morocco, during the 17 th century. It has be

Types of unemployment, TYPES OF UNEMPLOYMENT   A  person  can  be  eith...

TYPES OF UNEMPLOYMENT   A  person  can  be  either  in the labour force  or  not  in  the  labour  force  of  an economy. The person not  included  in  the  labour force includ

Calculate the marginal product of labor, The production function of a small...

The production function of a small shop that frames pictures is Q = 5 √ LK where Q is the number of pictures framed per day, L is labor hours and K is the machine hours.

Consumer welfare, '' monopoly is good for consumer welfare" is this crrect

'' monopoly is good for consumer welfare" is this crrect

Show the example on transaction cost theory, Q. Show the example on transac...

Q. Show the example on transaction cost theory? Coase begins from standpoint that markets could in theory carry out all production and that what needs to be illustrated is th

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