_____ gives the slope of an isocost line where labor (L) and capital (K) are the two inputs measured on the X and Y axes respectively.
A)The ratio of the marginal product of capital to the marginal product of labor, with a negative sign,
B)The ratio of price of labor to the price of capital, with a negative sign,
C)The ratio of the price of capital to the price of labor
D)The ratio of the marginal product of labor to the marginal product of capital

Question

Quizplus · Accepted Answer

The slope of an isocost line represents the rate at which the firm can substitute one input for another while keeping the total cost constant. It is given by the ratio of the price of one input to the price of the other input, with a negative sign. In this case, since labor is measured on the X-axis and capital on the Y-axis, the slope of the isocost line gives the ratio of the price of labor to the price of capital, with a negative sign (as the price of labor is typically lower than the price of capital). Thus, the correct answer is B.

_____ Gives the Slope of an Isocost Line Where Labor