Using production method B enables the firm to attain the level of output desired at the lowest possbile cost. Any other method on the same isoquant would be on a higher isocost line and so would be more expensive. Since the isoquant and isocost are tangent at B they have the same slope. This means that the MRTS is equal to the market exchange rate for the two inputs.

    At B the rate at which the firm can exchange capital for labor and maintain output is equal to the rate at which it can exchange them and maintain total costs.

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