The slope of a firm's isocost line is equal to the ratio of
A)the marginal products of its factors.
B)the marginal rate of substitution between factors.
C)the factor prices.
D)total variable cost to total cost.
E)product prices.

Question

Quizplus · Accepted Answer

The slope of an isocost line represents the rate at which the firm can exchange one factor for another while keeping its costs constant. This rate is equal to the ratio of the factor prices, as a change in the price of one factor will affect the firm's ability to substitute it for another. The other choices are not directly related to the slope of the isocost line.

The Slope of a Firm's Isocost Line Is Equal to the Ratio