Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million, and the vertical (robot) intercept is 5 million. Which of the following best describes what would happen to the isocost line if the price of robot hours decreased?
A) It would shift to the right.
B) It would rotate outward along the horizontal axis.
C) It would rotate inward along the horizontal axis.
D) It would rotate outward along the vertical axis.
E) It would rotate inward along the vertical axis.

Question

Quizplus · Accepted Answer

If the price of robot hours decreases, the isocost line would rotate outward along the vertical axis, as the firm can now afford more robot hours for the same total cost.