Asked by Ariah Scales on Jun 10, 2024
Verified
Refer to Figure 7.11. The slope of the isocost line is
A) -2.
B) -1/2.
C) 1/2.
D) 2.
Slope
In mathematics, the slope is the measure of the steepness or the inclination of a line or a segment of a line connecting two points.
Isocost Line
In economics, a line that represents all combinations of a firm’s factors of production that have the same total cost.
- Identify the differences in slopes among distinct isocost lines and their implications.
Verified Answer
SA
Sultan AlothriJun 11, 2024
Final Answer :
A
Explanation :
The slope of the isocost line is determined by the ratio of the prices of the two inputs. If the isocost line represents the equation C = wL + rK, where C is total cost, w is the wage rate, L is the quantity of labor, r is the rental rate of capital, and K is the quantity of capital, then the slope is -w/r. Given the options, a slope of -2 indicates a specific relationship between the prices of labor and capital that matches the negative slope of an isocost line in economic theory.
Learning Objectives
- Identify the differences in slopes among distinct isocost lines and their implications.