Isoquantsand Isocosts

Anisoquant is a curve that indicates a combination of certain inputssuch as labor (L) and capital (K) to produce certain output (Q).Isoquants shows the extent to which a firm is capable of producingsame level of output by substituting two different inputs. To thisend isoquants helps firms make adjustment on inputs to maximizeoutputs and profits. Isocosts lines show how a combination of inputscosts leads to total amount. Isocosts are used in cost-minimizationduring production. A firm will use isoquants and isocosts todetermine how well the costs of inputs can be minimized to realizegreater profits (Jeffrey, 2014).

Theisoquant-isocost approach helps in making input substitution toproduce same quantity of products. For instance, the use of barcodereader and computer in a store market can be replaced with a clerkwho records data manually. In this case, change in inputs is meant tominimize cost of service. It is valid to say that the market in whicha firm is operating is competitive when isoquants and isocosts areused. This is because when firms use isoquants and isocosts, the goalis to minimize the cost of production and thus leap more profits(Jeffrey, 2014). For instance, when a firm substitutes barcode at aservice store with manual records, the firm lowers its capital costs.By using the isoquant-isocost approach, firms seek the bestcombination of inputs that produce similar outputs at reduced costs(Stiglitz, 2012).

Lowproduction costs allow firms to maximize on profits in a competitivemarket. For instance, a firm may wish to use capital intensive inputsto produce more services efficiently and fast rates than using laborintensive inputs which is slower and inefficient. The overriding goalis to use inputs whose costs are low but produce optimal product andservices (Hallock, 2007). If the market is not perfectly competitiveisoquants-isocost may not be distorted because a firm will stillmaximize on production and make more profits. Isoquants and isocostshelps in assessing which best combination of inputs a firm may usefor optimal outputs and maximum profits (Stiglitz, 2012). To thisend, even if the market is not competitive, a firm will benefit morefrom low production costs and possibly offer low prices to attractmore customers to the firm.


Hallock,K. (2007). “Review of the book Personneleconomics in imperfect labor markets.”[Electronic version]. Journalof Economic Literature, 45(4),1073-1076.

JeffreyWolcowitz. (2014). Linking the substitution and output effects ofproduction to profit maximization in the intermediate microeconomicscourse. BusinessEducation and Accreditation. Vol. 6. No. 1. Available at

Stiglitz,Joseph E., (2012). &quotRethinking Macroeconomics: What Failed andHow to Repair it,&quot Journalof the European Association,9(4, August): 591-645.



Historyof the Company and Products

APPLEInc. describes an American multinational company, which dates backfrom 1976 when Steve Jobs and Steve Wozniak started a new companythat had the objective of revolutionizing the manner in which peopleperceived computers (Linzmayer,2004). During the initial stages of Apple, Wozniak and Jobs desiredto make computers that people could use in offices or homes put inother words, Wozniak and Jobs desired to make a computer, which wasuser-friendly. The two innovators built Apple I computers and soldthem without a keyboard, monitor, and casing (later added in 1977).However Apple II made a revolution to the computer industry since itintroduced the first ever color graphics. Although Apple Inc. becameestablished as a computer company, over the past decade, the companyhas grown into a very complex business unit which is more than just acomputer company (Lashinsky, 2012).

Initially,the company was only selling one product, the Apple I personalcomputer kit. The Apple I kit comprised a motherboard that hadcentral processing unit and random access memory that were verybasic. However since Apple I went on sale in 1976, there has been aradical change in the productivity of the company, as well as thenumber of products that the company has been producing since then.The business has expanded from one product to four chief productlines that have different variations (Linzmayer,2004). Within a period of ten years, the products provided by thecompany have increased, which have also made the revenues of thecompany to increase too.

AppleCompany devises and produces consumer electronics, personalcomputers, and computer software. The company also deals withhardware products and the best recognized hardware products mayinclude the iPod, the iPad, and Macintosh computers. On the otherhand, the company’s software products include the following iTunes, Mac OS X operating system, the iLife suite of multimedia andcreativity software, Aperture, Final Cut Studio, professionalphotography package, and media browser among others. Apart from thehardware and software products designed and manufactured by thecompany, there are also other commodities and services that theorganization offers such as the Apple TV and offering of networkingsolutions (Linzmayer,2004).


Thecost structure of Apple Company is such that there are both variableand fixed costs, which makes up the total cost. It is this coststructure that determines the profitability of the company. Variablecosts forming the cost structure of the company include costs inresearch and development. Research and development can be consideredas variable cost because the financial department and the researchand development department have limited communication, which impliesthat there is a variation in the cost spent by the organization inresearch and development every year. Labor cost can also be considered to fall under variable cost because labor may be increasedor decreased depending with the introduction of new line of productsor decrease or increase on the number units expected to be produced.On the other hand, some of the fixed costs experienced by the companyinclude depreciation cost and administration cost every year, thedepreciation cost on buildings or equipment is kept constant.Besides, the administration cost also remains constant.

MarketStructure of the Company

AppleCompany can be considered to fall under two forms of market, whichare the monopolistic competition market structure and oligopoly.Oligopoly entails a form of market, where the market is controlled bya limited number of competitors due to the high entry barriers intothe market (Hirschey,2009). The Apple Company can be considered to fall under an oligopolybecause it does business in the operating systems’ market thatsells Smartphones. There are three chief operating systems in themarket, which include iOS, Android, and Windows phone. These threeoperating systems remain dominant in the globe and the threecompanies associated with the operating systems keep on adding newfeatures in order to make it hard for new entrants to keep up withthe competition. Therefore, because of this, Apple Company can beconsidered to fall under oligopoly market structure.

Onthe other hand, Apple Company can also fall under monopolisticcompetition market structure. The Apple’s Macbook and iMac can beconsidered to make the company fall well in monopolistic competition.In the international market for branded computer companies, there arefew companies such as Apple, Toshiba, Acer, Dell, and Asus. Thesecomputers offer differentiated products this makes Apple to fit inthe monopolistic competition market.

Howto Improve Position in the Market

AlthoughApple Company has been considered to perform well in the computer andmobile industry, it has to consider ways that can help it inmaintaining the market position or even doing better. Thus, I thinkinnovation and adoption of new technologies would be of immense aidto the company. Through innovation, the company will be capable ofdeveloping new products that fits customer needs or even help indeveloping the existing products.


Hirschey,M. (2009).&nbspManagerialeconomics.Mason, OH: South-Western Cengage Learning.

Lashinsky,A. (2012). InsideApple: How America`s most admired-and secretive-company really works.New York: Business Plus.

Linzmayer,O. W. (2004).&nbspAppleconfidential 2.0: The definitive history of the world`s most colorfulcompany.San Francisco, Calif: No Starch Press.