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11 October, 19:41

Given labor is on the horizontal axis and capital is on the vertical axis, as the price of labor increases, the isocost line becomes flatter. If both the price of labor and capital rise in the same proportion, which of the following will occur (holding production costs constant) ? A. The isocost line becomes flatter. B. The isocost line makes a parallel shift inward. C. The isoquant makes a parallel shift outward. D. The isocost line shifts outward. E. The isocost line becomes steeper.

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  1. 11 October, 19:56
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    B The isocost line makes a parallel shift inward

    Explanation:

    This is because the increase in price is proportional, less of labor and capital can be bought, and isocost line shifts inward parallely.
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