Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,an increase in the price of capital would:
A)decrease the horizontal intercept of the isocost line.
B)shift the isocost line outward away from the origin.
C)shift the isocost line inward toward the origin.
D)decrease the vertical intercept of the isocost line.

Question

Quizplus · Accepted Answer

An increase in the price of capital would decrease the amount of capital the firm can afford for any given level of labor, thus decreasing the vertical intercept of the isocost line.

Consider a Firm's Isocost Line Where Labor Is Measured on the Horizontal