If the cost of capital increases, the isocost line will
A)stay the same.
B)shift outward in parallel fashion.
C)rotate inward around the point where only labor is employed in production.
D)shift inward in parallel fashion.

Question

Quizplus · Accepted Answer

When the cost of capital increases, the isocost line rotates inward around the point where only labor is employed, as the relative cost of capital becomes more expensive compared to labor.

If the Cost of Capital Increases, the Isocost Line Will