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's isocost line could shift from CD to AB if
A) the price of capital increased.
B) the firm's total expenditures increased by 25%.
C) the price of capital and labor each increased by 25%.
D) the firm's total expenditures decreased by 25% or the price of capital and labor each increased by 33%.

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's isocost line could shift from CD to AB if
A) the price of capital increased. 
B) the firm's total expenditures increased by 25%. 
C) the price of capital and labor each increased by 25%. 
D) the firm's total expenditures decreased by 25% or the price of capital and labor each increased by 33%.

Quizplus · Accepted Answer

The isocost line shifts when the ratio of the input prices changes. If the price of capital and labor each increased by 33%, the ratio of the input prices would remain the same, and the isocost line would not shift.

Refer to the Information Provided in Figure 7