The slope of an isocost line ________ and equals the negative of ________.
A)increases as we move down the line; the ratio of input prices
B)decreases as we move down the line; the ratio of the marginal products
C)is constant; the ratio of input prices
D)is constant; the ratio of the marginal products

Question

Quizplus · Accepted Answer

The slope of an isocost line is constant and equals the ratio of input prices. This can be derived from the equation of the isocost line, which is given by C = w1x1 + w2x2, where C is the total cost, w1 and w2 are the prices of inputs 1 and 2, and x1 and x2 are the quantities of inputs 1 and 2 required to produce a given level of output. Taking the partial derivative of this equation with respect to x1 gives the slope of the isocost line, which is -w1/w2. Therefore, the slope of an isocost line is constant and equals the ratio of input prices.

The Slope of an Isocost Line ________ and Equals the Negative