The slope of the isocost line tells the firm how much
A)capital must be reduced to keep total cost constant when hiring one more unit of labor.
B)capital must be increased to keep total cost constant when hiring one more unit of labor.
C)more expensive a unit of capital costs relative to a unit of labor.
D)the isocost curve will shift outward if the firm wishes to produce more.

Question

Quizplus · Accepted Answer

The slope of the isocost line represents the rate at which a firm can substitute capital for labor while keeping the total cost constant. Therefore, it tells the firm how much capital must be reduced to keep total cost constant when hiring one more unit of labor.

The Slope of the Isocost Line Tells the Firm How