We are looking at a graph with capital on the vertical axis and labor on the horizontal axis. If the price of labor increases, then the
A)isocost line becomes steeper.
B)isoquants become steeper.
C)isoquants become flatter.
D)isocost line becomes flatter.
E)isocost line and isoquants become flatter.

Question

Quizplus · Accepted Answer

The isocost line represents combinations of labor and capital that a firm can purchase for a given total cost. If the price of labor increases, the firm can afford less labor for any given amount of capital, making the isocost line steeper because it will pivot upwards around the capital axis.

We Are Looking at a Graph with Capital on the Vertical