FIGURE 8-4
-Refer to Figure 8-4.The firm is initially operating at point B.If prices of both factors fell by 25% and the firm wished to continue expending the same amount on each resource (while continuing to maintain efficiency)the firm would
A)move towards point D.
B)move toward point A.
C)shift towards the origin.
D)move toward point C.
E)stay at point B.

Question

FIGURE 8-4
-Refer to Figure 8-4.The firm is initially operating at point B.If prices of both factors fell by 25% and the firm wished to continue expending the same amount on each resource (while continuing to maintain efficiency)the firm would
A)move towards point D. 
B)move toward point A. 
C)shift towards the origin. 
D)move toward point C. 
E)stay at point B.

Quizplus · Accepted Answer

The firm would move towards point D because the isocost line would shift inward, and the firm would want to maintain the same level of output.

FIGURE 8-4 -Refer to Figure 8-4.The Firm Is Initially Operating at Point