Assume That Capital Is Represented by the Vertical Axis and Labour

question 8

Multiple Choice

Assume that capital is represented by the vertical axis and labour is represented by the horizontal axis. The steeper an isoquant is:

• A) The larger the marginal productivity of labour relative to that of capital.
• B) The greater is the substitutability between capital and labour.
• C) The larger the marginal productivity of capital relative to that of labour.
• D) The greater is the budget available to the firm.

---

Definitions:

Units

Measurements used to quantify physical quantities, such as kilograms for mass or meters for length.

Utility Function

A formula that ranks various outcomes by their level of satisfaction or utility to a consumer.

Numeraire Good

A commodity selected as a standard of value and used as the unit of account in economic models, facilitating comparisons between different goods or services.

Initial Endowment

The initial allocation of assets, income, or resources that an individual, institution, or country possesses.