Assume that capital is measured along the vertical axis,and labor is measured along the horizontal axis.The firm has an initial isocost line called .Now suppose that the price of labor trebles and the price of capital also trebles.Which statement accurately describes the movement of the isocost line from to ?
A) The slope of the isocost line becomes flatter.
B) The slope of the isocost line becomes steeper.
C) The slope of the isocost line is unchanged.
D) We cannot determine whether the slope becomes flatter or steeper.

Question

Assume that capital is measured along the vertical axis,and labor is measured along the horizontal axis.The firm has an initial isocost line called  .Now suppose that the price of labor trebles and the price of capital also trebles.Which statement accurately describes the movement of the isocost line from  to  ?
A) The slope of the isocost line becomes flatter. 
B) The slope of the isocost line becomes steeper. 
C) The slope of the isocost line is unchanged. 
D) We cannot determine whether the slope becomes flatter or steeper.

Quizplus · Accepted Answer

The slope of the isocost line is determined by the ratio of the prices of labor and capital. If both prices triple, their ratio remains the same and thus the slope of the isocost line is unchanged.

Assume That Capital Is Measured Along the Vertical Axis,and Labor