If the costs of labor and capital increase in the same proportion,the isocost line will
A) stay the same.
B) shift outward in a parallel fashion.
C) rotate inward around the point where only capital is employed in production.
D) shift inward in a parallel fashion.

Question

Quizplus · Accepted Answer

If the costs of labor and capital increase in the same proportion, the isocost line will shift outward in a parallel fashion because the firm's budget for inputs has effectively increased, allowing it to purchase more of both inputs at the new higher prices.

If the Costs of Labor and Capital Increase in the Same