The figure below shows the isocost lines facing a firm producing golf tees. FIGURE 8-5
-Refer to Figure 8-5.Given the information provided about the isocost lines,we know that the per unit price of capital is ________ and the per unit price of labour is ________.
A)$20; $50
B)$50; $20
C)$2; $5
D)$5; $2
E)not determinable; not determinable

Question

The figure below shows the isocost lines facing a firm producing golf tees.  FIGURE 8-5
-Refer to Figure 8-5.Given the information provided about the isocost lines,we know that the per unit price of capital is ________ and the per unit price of labour is ________.
A)$20; $50 
B)$50; $20 
C)$2; $5 
D)$5; $2 
E)not determinable; not determinable

Quizplus · Accepted Answer

The slope of the isocost line is equal to the ratio of the price of capital to the price of labor. The slope of the isocost line in the figure is 2.5 ($50/$20). Therefore, the per unit price of capital is $5 and the per unit price of labor is $2.

The Figure Below Shows the Isocost Lines Facing a Firm