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

Question

Quizplus · Accepted Answer

A decrease in the cost of capital makes capital cheaper, causing the isocost line to rotate outward around the point where only labor is employed, as more capital can be used for the same cost.

If the Cost of Capital Decreases, the Isocost Line Will