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.

How do you find the least cost combination?

Least cost combination principle

1.  A rational firm/producer seeks maximisation of. profit.
2. There are two factors of production – labour. & capital.
3. MPL = marginal productivity of labour. PL = Price of labour.
4. MPC = marginal productivity of capital. Pc = price of capital.
5. Combination Labour Capital (PC = Total cost.

What is the meaning of least cost combination?

The least cost combination or the optimum factor combination refers to the combination of factors with which a firm can produce a specific quantity of output at the lowest possible cost.

What is least cost combination in business economics?

The problem of least-cost combination of factors refers to a firm getting the largest volume of output from a given cost outlay on factors when they are combined in an optimum manner.

What is the least cost combination of resources?

Least Cost Combination occurs when a firm adjusts their employment of resources to minimize costs. 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).

What is isocost line?

An isocost line is a curve which shows various combinations of inputs that cost the same total amount . For the two production inputs labour and capital, with fixed unit costs of the inputs, the isocost curve is a straight line . The line connecting these two points is the isocost line.

What does W and R mean in economics?

w/r is the wage rate to rental rate (the cost of employing capital as an input) ratio. This measures the relative cost of employing inputs. x0 and y0 are isocost curves denotion the various input combinations that yield an output of x0 or y0, respectively.

Which is the least cost 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.

When to choose the least cost factor combination?

The profit maximization firm will choose the least cost combination of factors to produce at any given level of output. The least cost combination or the optimum factor combination refers to the combination of factors with which a firm can produce a specific quantity of output at the lowest possible cost. (i) The marginal product approach.

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.

Which is the maximum output combination of inputs?

In this article we will discuss about:- 1. Least Cost Combination of Inputs 2. Maximum Output Combination of Inputs. The firm may produce a particular quantity of its product at each of the alternative input combinations that lies on the IQ for that quantity.