Why Are Isoquants Negatively Sloped

question 64

Multiple Choice

Why are isoquants negatively sloped?

• A)Along a single isoquant, the firm can substitute the use of one input for another while holding the total level of output constant.
• B)Due to the effects of diseconomies of scale.
• C)Because the farther the isoquant is from the origin, the higher the level of output.
• D)Because price and quantity demanded are inversely related.

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Definitions:

Cost of Capital

A financial metric representing the minimum return that a company must earn on its existing asset base to satisfy its creditors, owners, and other providers of capital.

Average Rate

The mean value calculated by dividing the sum of all rates by the number of rates.

Payback Period

The length of time required to recover the initial cost of an investment, calculated by dividing the initial investment by annual cash inflows.

Cost of Capital

The yield a business needs to achieve on its investments to keep its market price stable and draw in capital.