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

question 36

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 trebles and the price of capital also trebles. 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.

---

Definitions:

The National Post

A Canadian English-language national newspaper.

Term Structure

Pertains to the connection between interest rates or yields on bonds and varying durations or maturities.

Interest Rates

The percentage charged on the total amount of borrowed money or paid on deposited funds.

Bond Rating Agencies

Organizations that assess the creditworthiness of both corporate and governmental bonds, issuing ratings that affect interest rates and investment attractiveness.