Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9
-Refer to Figure 7.9. The firm's isocost line could shift from AB to CD if
A) the price of capital decreased.
B) the firm's total expenditures increased by 50%.
C) the price of capital and labor each decreased by 33.3%.
D) either B or C

Question

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow.  Figure 7.9
-Refer to Figure 7.9. The firm's isocost line could shift from AB to CD if
A) the price of capital decreased. 
B) the firm's total expenditures increased by 50%. 
C) the price of capital and labor each decreased by 33.3%. 
D) either B or C

Quizplus · Accepted Answer

The isocost line represents the combinations of inputs (capital and labor) that a firm can purchase for a given total cost. A shift from AB to CD, which implies the firm can afford more of both inputs, could occur if the firm's total expenditures increased (option B) or if the prices of both inputs decreased significantly (option C), making each unit of input cheaper and thus allowing the purchase of more inputs for the same total cost.

Refer to the Information Provided in Figure 7