image
Figure 6.10 Cost Minimization
The firm wants to minimize the cost to produce the quantity image. Because A is on the isoquant, the firm can choose to use input combination A to produce image. However, A is not cost-minimizing because the firm can produce image at a lower cost at any point below and to the left of the isocost CA. Point B, located at the tangency between isocost CB and the isoquant, is the firm’s cost-minimizing capital and labor combination. Input combinations on CC cost less than those on CB, but are too small to allow the firm to produce image.