When the level of capital is plotted on the vertical axis and the level of labor is plotted on the horizontal axis, the slope of the isocost line is (assuming $\mathrm { W }$ is the price of labor and $r$ is the price of capital and production uses only these two inputs):
A) $- w / r$
B) $- r / w$
C) $M P _ { K } / 1 P _ { 1 }$
D) $M _ { 1 } / M P _ { K }$

Question

When the level of capital is plotted on the vertical axis and the level of labor is plotted on the horizontal axis, the slope of the isocost line is (assuming $\mathrm { W }$ is the price of labor and $r$ is the price of capital and production uses only these two inputs): 
A) $- w / r$
B) $- r / w$
C) $M P _ { K } / 1 P _ { 1 }$
D) $M _ { 1 } / M P _ { K }$

Quizplus · Accepted Answer

The slope of the isocost line is equal to the negative of the ratio of the price of labor to the price of capital, which is -w/r.

When the Level of Capital Is Plotted on the Vertical W\mathrm { W }W

When the Level of Capital Is Plotted on the Vertical $\mathrm { W }$