Assume That Capital Is Measured Along the Vertical Axis, and Labor

question 48

Multiple Choice

Assume that capital is measured along the vertical axis, and labor is measured along the horizontal axis. The firm has an initial isocost line called $T C _ { 1 }$ . Now suppose that the price of labor doubles, and the price of capital falls by one-half. Which statement accurately describes the movement of the isocost line from $T C _ { 1 }$ to $T C _ { 2 }$ ?

• A)The slope of the isocost line becomes flatter.
• B)The slope of the isocost line becomes steeper.
• C)The slope of the isocost line is unchanged.
• D)We cannot determine whether the slope becomes flatter or steeper.

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