If two isocost lines are parallel, then both have the same input price ratio but the one further from the origin represents a higher level of total cost.

Question

Quizplus · Accepted Answer

Parallel isocost lines indicate that the ratio of input prices (wage rate to rental rate of capital) is the same for both lines. The isocost line further from the origin represents a higher total cost because it intersects the price axes at higher points, indicating that more of each input can be purchased, given the constant input prices.

If Two Isocost Lines Are Parallel, Then Both Have the Same