A firm's isocost line shifts parallel outward from the original isocost line as its
A) total cost for capital and labor increases.
B) total cost for capital and labor decreases.
C) total cost for capital increases and its total cost for labor decreases.
D) total cost for capital decreases and its total cost for labor increases.

Question

Quizplus · Accepted Answer

An isocost line represents all combinations of capital and labor that a firm can purchase for a given total cost. When the total cost for capital and labor increases, the firm can afford more of both inputs, causing the isocost line to shift outward.

A Firm's Isocost Line Shifts Parallel Outward from the Original