The slope of an isocost line depends on the ratio of
A)the output prices.
B)the input prices.
C)an output price over an input price.
D)an input price over an output price.
E)total profits over total costs.

Question

Quizplus · Accepted Answer

The slope of an isocost line is determined by the ratio of the input prices. The isocost line is a straight line that shows all the combinations of labor and capital that can be purchased at a given cost. The steeper the slope, the higher the cost of the input. Therefore, the slope of the isocost line depends on the ratio of input prices, which is captured in choice B.

The Slope of an Isocost Line Depends on the Ratio