Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8
-Refer to Figure 7.8. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is
A) $10.
B) $20.
C) $80.
D) indeterminate from this information.

Question

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.  Figure 7.8
-Refer to Figure 7.8. The firm is currently along isocost CD. If the price of capital is $10, then the price of labor is
A) $10. 
B) $20. 
C) $80. 
D) indeterminate from this information.

Quizplus · Accepted Answer

The slope of the isocost is equal to the ratio of the price of capital to the price of labor. Since the slope of CD is 1/2, the price of labor must be $20.

Refer to the Information Provided in Figure 7