Suppose the wage rate is $25 per hour and the rent on capital is $50 per hour. The equation for the isocost line is given by:
A) C = 75LK.
B) C = 25L + 50K.
C) C = 75(L + K).
D) C = 2K/L.

Question

Quizplus · Accepted Answer

The isocost line equation is given by C = wL + rK, where C is the total cost, w is the wage rate, L is the amount of labor, r is the rent on capital, and K is the amount of capital. Substituting the given wage rate ($25) and rent on capital ($50) into this equation gives C = 25L + 50K, which matches option B.

Suppose the Wage Rate Is $25 Per Hour and the Rent