If isoquants are plotted on a graph with capital measured on the vertical axis and labor on the horizontal axis, then an increase in the wage rate will cause the isocost line
A) to become steeper and the optimal quantity of labor will decrease.
B) to become steeper and the optimal quantity of labor will increase.
C) to become flatter and the optimal quantity of labor will decrease.
D) to become flatter and the optimal quantity of labor will increase.

Question

Quizplus · Accepted Answer

An increase in the wage rate makes labor more expensive relative to capital, causing the isocost line to become steeper, leading to a decrease in the optimal quantity of labor used.

If Isoquants Are Plotted on a Graph with Capital Measured