A firm's isocost line shifts parallel inward 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. If the isocost line shifts parallel inward, it means the firm has less money to spend on capital and labor, indicating a decrease in total cost for capital and labor.

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