An isocost line shows
A)all the possible combinations of two inputs that a firm can use to produce its output.
B)all the possible combinations of two inputs a firm can use that have the same total cost.
C)all the possible combinations of two inputs a firm can use that have the same marginal cost.
D)all the possible combinations of two inputs with constant returns to scale.

Question

Quizplus · Accepted Answer

An isocost line represents all the combinations of two inputs that a firm can use with the same total cost. It shows the tradeoff between the inputs based on their relative prices and the total budget available to the firm. The slope of the isocost line gives the relative prices of the two inputs, which is the ratio of their prices. Therefore, option B is the correct answer. Options A, C, and D are incorrect because they don't accurately describe what an isocost line represents.

An Isocost Line Shows