How do you find the least cost combination?
The least cost combination is found where the marginal product per dollar for all the resources a firm employs are equal (MPL/PL=MPN/PN=MPC/PC). If the ratios are not equal, a firm would reduce cost by employing more of the resource with a higher MP/P and less of the resource with a lower MP/P.
What is meant by least cost combination?
Since the firm’s goal is to maximise profit, the optimum input combination for producing a particular quantity of its product would be one that would produce the output at the minimum possible cost. The optimum input combination in this case is known as the least cost combination of inputs.
What is the least cost rule?
The least‑cost rule. States that costs are minimized where the marginal product per dollar’s worth of each resource used is the same. (Example: MP of labor/labor price = MP of capital/capital price).
What is least cost input combination and how does a producer attain equilibrium at this combination?
A producer can attain equilibrium by applying the least cost combination of factors of production to attain maximum profit. Therefore, he/she needs to decide the appropriate combination among different combinations of factors of production to get maximum profit at least cost.
How is the least cost combination attained by a firm?
ADVERTISEMENTS: 2. To maximise its output for a given cost. Thus the least cost combination of factors refers to a firm producing the largest volume of output from a given cost and producing a given level of output with the minimum cost when the factors are combined in an optimum manner.
Which technique is used to identify the least costly combination of raw materials to produce a product?
The isoquant–isocost diagram (or the corresponding solution by the alternative means of the calculus) solves the short-run cost minimization problem by determining the least-cost combination of variable factors that can produce a given output in a given plant.
Is use of least cost input combinations a necessary condition for profit maximization is it a sufficient condition explain?
Q7. 1ANSWEREmployment of least-cost input combinations is a necessary but not sufficient condition for profit maximization. It is necessary because a failure to operate with a least-cost input combination means that costs could be lowered and profits increased at any given output level.
How does a producer achieve least cost combination of factors?
To maximise its output for a given cost. Thus the least cost combination of factors refers to a firm producing the largest volume of output from a given cost and producing a given level of output with the minimum cost when the factors are combined in an optimum manner.
What is optimal input combination?
Optimal input proportions are employed when an additional dollar spent on any input yields the same increase in output. Any input combination violating this rule is suboptimal because a change in input proportions could result in the same quantity of output at lower cost.
What are the necessary and sufficient conditions for determining least cost combination of inputs?
The first order conditions state that the variable factors are combined in an optimal manner when the ratio of marginal products is equal to the ratio of factor prices. This optimal combination is called the least cost combination of inputs.
What do you mean by least cost method of producing a given amount of output?
Definition: The Least Cost Method is another method used to obtain the initial feasible solution for the transportation problem. Here, the allocation begins with the cell which has the minimum cost. The lower cost cells are chosen over the higher-cost cell with the objective to have the least cost of transportation.
Which is the least cost combination of factors?
2. to maximise its output for given cost. Thus the least cost combination of factors refers to a firm producing the largest volume of output from a given cost & producing a given level of output with the minimum cost when the factors are combined in an optimum manner.
How do firms choose the optimal combination of inputs?
Since the firm’s goal is to maximise profit, the optimum input combination for producing a particular quantity of its product would be one that would produce the output at the minimum possible cost. The optimum input combination in this case is known as the least cost combination of inputs.
What is the definition of the least cost method?
Definition: The Least Cost Method is another method used to obtain the initial feasible solution for the transportation problem. Here, the allocation begins with the cell which has the minimum cost. Generally, the cost where maximum quantity can be assigned should be chosen to obtain the better initial solution. What is an Isocost line?
Which is the maximum output combination of inputs?
Since the firm’s goal is to maximise the level of profit, the optimum input combination in this case would be one that would produce the maximum possible output. Therefore, this input combination is called the maximum- output combination of inputs.