The Slope of an Isoquant Tells Us

question 89

Multiple Choice

The slope of an isoquant tells us

• A) how much output increases when both inputs are increased.
• B) the increase in MP_L when capital increases.
• C) the decrease in capital necessary to keep output constant when labor increases by one unit.
• D) the decrease in capital necessary to keep MP_L constant when labor increases by one unit.

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Definitions:

Competitive Firm

A company that operates in a market where prices are determined through competition amongst businesses.

Firm's Profit

The financial gain a company achieves when its total revenues exceed the total costs incurred in conducting its business activities.

Efficient Scale

The level of production at which the average total costs of production are minimized.

Long-Run Equilibrium

A state in which economic forces such as supply and demand are balanced, and in the context of production, all inputs, including prices and wages, can be adjusted.