Refer to the information provided in Figure 7.11 below to answer the question(s) that follow. Figure 7.11
-Refer to Figure 7.11. The slope of the isocost line is
A) -2.
B) -1/2.
C) 1/2.
D) 2.

Question

Refer to the information provided in Figure 7.11 below to answer the question(s) that follow.  Figure 7.11
-Refer to Figure 7.11. The slope of the isocost line is
A) -2. 
B) -1/2. 
C) 1/2. 
D) 2.

Quizplus · Accepted Answer

The slope of the isocost line is determined by the ratio of the prices of the two inputs. If the isocost line represents the equation C = wL + rK, where C is total cost, w is the wage rate, L is the quantity of labor, r is the rental rate of capital, and K is the quantity of capital, then the slope is -w/r. Given the options, a slope of -2 indicates a specific relationship between the prices of labor and capital that matches the negative slope of an isocost line in economic theory.

Refer to the Information Provided in Figure 7