Optimum Output in Short-run
An optimum level of output is the one, which can be produced at a minimum or least average cost, given the required technology is available. Here, the leastcost’ combination of inputs can be understood with the help of isoquants and isocosts. The least-cost combination of inputs also indicates the optimum level of output at given investment and factor prices. The AC and MC cost Curves can also be used to find the optimum level of output, given the size of the plant in the short-run. The point of intersection between AC and MC curves determines the minimum level of AC. At this level of output AC = MC. Production below or beyond this level will be in optimal. Thus, the cost curves can be useful in finding the optimum level of output. It may be noted here that optimum level of output is not necessarily the maximum profit output. Profits cannot be known unless the revenue curves of firms are known.
3 Comments