Isoquants are also known as:
Options
AProduction indifference curves
BCost curves
CRevenue curves
DSupply curves
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Theory of Production and CostPYQ - Nov 2018Question 56 of 20
All Questions Correct Answer
✅ Option a — Production indifference curves
All Options:
- AProduction indifference curves
- BCost curves
- CRevenue curves
- DSupply curves
Detailed Solution & Explanation
To understand why isoquants are also known as production indifference curves, let's break it down:
• Isoquants represent different combinations of inputs that produce the same level of output, essentially showing the various ways a firm can achieve a certain level of production.
• The concept of indifference curves originates from consumer theory, where they represent different combinations of goods that give the consumer the same level of satisfaction.
• In the context of production, isoquants serve a similar purpose, showing different input combinations that yield the same output, thus the term "production indifference curves" is apt.
The correct term is used because it reflects the idea that the firm is indifferent between these different input combinations as they all result in the same output level.
Options like cost curves and revenue curves are incorrect because they represent different economic concepts, with cost curves showing the cost of production and revenue curves showing the revenue generated from sales, neither of which directly relates to the concept of isoquants.
About This Chapter: Theory of Production and Cost
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Function, Cost Concepts (Short/Long Run)
This chapter explores how firms produce goods and services. It covers Production Functions, the Laws of Returns (Increasing, Constant, Diminishing), and all cost concepts including Total Cost, Average Cost, Marginal Cost, Fixed Cost, and Variable Cost. Understanding why the AC and MC curves are U-shaped is crucial for exam success.
View Official ICAI SyllabusExam Strategy Tip
The relationship between MC and AC curves is a favorite examiner topic. Remember: MC cuts AC at its minimum point. Also focus on the difference between Short Run and Long Run cost curves.
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