Question

Define an isoquant and then explain what decreasing returns of scale

implies. What happens to the isoquants on an isoquant map in such an

instance?

Answer 1

Isoquants are curves that represent efficient blend of different inputs such as labor and capital which yield the same (iso) level of output (quantity). Isoquants are usually downward sloping convex curves whose shape depend on the degree of substitution between different inputs.