Why Are the Slopes of Isocost Lines Constant

question 13

Multiple Choice

Why are the slopes of isocost lines constant?

• A) Firms must use capital and labor inputs in fixed proportions.
• B) Firms can hire as much of an input as they desire without changing wages or rental rates.
• C) Firms must use less labor if employing more capital.
• D) The marginal rate of technical substitution of labor for capital is constant.

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Definitions:

Financial Capital Maintenance

A concept where profit is only recognized if the financial amount of a company's net assets at the end of the period exceeds the financial amount at the beginning, excluding any distributions to, or contributions from, owners during the period.

Net Income

The amount of earnings left over after all expenses, including taxes and cost of goods sold, have been subtracted from total revenue, indicating the financial success or profitability of a company over a specified period.

Extraordinary Items

Events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence, significantly impacting a company's financial position.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the IFRS Foundation and the International Accounting Standards Board to ensure global consistency and transparency in financial reporting.