Today's Question
An isoquant is a curve showing all combinations of inputs (like labor and capital) that produce the SAME output level. Think of it like a topographic map line - all points on the line are at the same 'height' (output). If a bakery can make 100 loaves using either 5 bakers + 2 ovens OR 3 bakers + 4 ovens, both points are on the same isoquant. Why do isoquants typically curve inward (convex) rather than being straight lines?
Model Answer
Isoquants curve because of diminishing marginal rate of substitution. When you have many workers but few ovens, each oven is precious - you'd give up several workers to get one more oven. But when you already have many ovens and few workers, ovens aren't as valuable - you'd only give up a few workers for another oven. This changing trade-off rate makes the curve bow inward.
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Fordi at de bliver tegnet ind...
Det er fordi der hvis bare...