Exhibit 7-21
-For the three isocost lines shown in Exhibit 7-21 which of the following is true:
A) the expenditure on inputs does not change as the isocost lines get farther from the origin
B) the amount of output produced gets smaller the farther the isocost lines get from the origin
C) the amount of output produced gets larger the farther the isocost lines get from the origin
D) the expenditure on inputs required by the firm gets smaller the farther the isocost lines get from the origin
E) the expenditure on inputs required by the firm gets larger the farther the isocost lines get from the origin

Question

Exhibit 7-21 
-For the three isocost lines shown in Exhibit 7-21 which of the following is true:
A) the expenditure on inputs does not change as the isocost lines get farther from the origin 
B) the amount of output produced gets smaller the farther the isocost lines get from the origin 
C) the amount of output produced gets larger the farther the isocost lines get from the origin 
D) the expenditure on inputs required by the firm gets smaller the farther the isocost lines get from the origin 
E) the expenditure on inputs required by the firm gets larger the farther the isocost lines get from the origin

Quizplus · Accepted Answer

The expenditure on inputs required by the firm gets larger the farther the isocost lines get from the origin because the isocost lines represent the combinations of inputs that can be purchased with a given budget. As the isocost lines get farther from the origin, the budget increases, allowing the firm to purchase more inputs.

Exhibit 7-21 -For the Three Isocost Lines Shown in Exhibit 7-21 Which