Which of the following are characteristics of a typical isoquant?
a. All input combinations on the isoquant will produce the same level of output.
b. The marginal rate of technical substitution decreases as more labor is substituted forless capital.
c. a change in input prices shifts the isoquant map.
d. both a and b
e. none of the above.
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In order to determine which of the given options are characteristics of a typical isoquant, let's first understand what an isoquant represents.
An isoquant is a graphical representation that shows all the possible combinations of inputs (such as labor and capital) that can produce a certain level of output. It is similar to an indifference curve in consumer theory, but instead of showing different combinations of goods that provide the same level of satisfaction, an isoquant shows different combinations of inputs that produce the same level of output.
Now, let's analyze each option:
a. All input combinations on the isoquant will produce the same level of output.
This statement is true. Since an isoquant represents a constant level of output, any combination of inputs along the isoquant will produce the same level of output.
b. The marginal rate of technical substitution decreases as more labor is substituted for less capital.
This statement is also true. The marginal rate of technical substitution (MRTS) measures the rate at which one input can be substituted for another while keeping the level of output constant. In most production processes, as more labor is substituted for less capital, the MRTS tends to decrease since each additional unit of labor becomes less effective when there's an excess of labor compared to capital.
c. A change in input prices shifts the isoquant map.
This statement is false. Changes in input prices do not directly shift the isoquant map. Instead, they impact the optimal input combination along the isoquant. When input prices change, the firm will choose a different combination of inputs that is both cost-effective and maintains the desired level of output.
d. Both a and b.
Based on the explanations above, both statements a and b are true, so option d would be the correct answer.
e. None of the above.
This option is incorrect since both statements a and b are true.
Therefore, the correct answer to the question is option d.