Why are the slopes of isocost lines constant?
A) Firms must use capital and labor inputs in fixed proportions.
B) Firms can hire as much of an input as they desire without changing wages or rental rates.
C) Firms must use less labor if employing more capital.
D) The marginal rate of technical substitution of labor for capital is constant.

Question

Quizplus · Accepted Answer

Isocost lines represent combinations of inputs (like labor and capital) that cost the same amount. The slope of an isocost line is constant because it reflects the constant ratio of the prices of these inputs. If a firm can hire as much of an input as it desires without changing the input prices (wages for labor or rental rates for capital), then the trade-off between how much capital and labor can be employed for a given cost remains constant, hence the constant slope of the isocost line.

Why Are the Slopes of Isocost Lines Constant