Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9
-Refer to Figure 7.9 The firm's isocost line could shift from AB to CD if
A) the price of capital increased.
B) the firm's total expenditures decreased by 25%.
C) the price of capital and labor each decreased by 33%.
D) the firm's total expenditures increased by 33% or the price of capital and labor each decreased by 25%.

Question

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9 The firm's isocost line could shift from AB to CD if
A) the price of capital increased. 
B) the firm's total expenditures decreased by 25%. 
C) the price of capital and labor each decreased by 33%. 
D) the firm's total expenditures increased by 33% or the price of capital and labor each decreased by 25%.

Quizplus · Accepted Answer

The isocost line shifts outward from AB to CD if the firm's total expenditures increase or if the prices of both inputs decrease, allowing the firm to purchase more of both inputs for the same cost.

Refer to the Information Provided in Figure 7