Assuming There Are Only Two Factors of Production Required, the Slope

question 36

Multiple Choice

Assuming there are only two factors of production required, the slope of the isocost line shows

• A) the marginal rate of substitution.
• B) the ratio of capital to labour.
• C) the best combination of those factors to use.
• D) the potential combination of those factors for a given level of output.

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Definitions:

Identical Firms

Refers to companies within the same industry that have similar methods of production, costs, and characteristics, making their products essentially indistinguishable.

Linear Marginal Cost

A situation where the cost of producing one additional unit of a product or service remains constant, represented graphically as a straight line.

Competitive Market

A market structure characterized by a large number of buyers and sellers, none of whom can control the market price.

Identical Firms

Companies in a market that offer the same products or services under the same conditions, with no differentiation.