Assume That a Firm Spends $500 on Two Inputs, Labor

question 124

Multiple Choice

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis) . If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be:

• A) 500.
• B) 25/500.
• C) -4/5.
• D) 25/20 or 1.25.

Analyze the implications of marginal utility and pricing in consumer choice.

Apply the concept of the marginal utility-to-price ratio in maximizing utility.

Understand how budget constraints affect consumer choices.

Identify the conditions under which a consumer is in equilibrium.