If the price of the input on the horizontal axis (X₁) increases, then

Question

Quizplus · Accepted Answer

When the price of the input on the horizontal axis (X₁) increases, the firm will need to spend more money to purchase the same quantity of the input. This will increase the cost of producing output, and therefore the slope of the isocost line will become steeper as the firm will have to reduce the quantity of the other input (the input on the vertical axis) to keep the cost constant. Therefore, choice A is the best answer. The slope of the isoquant will remain the same as it depends solely on the technology and not on the cost of inputs.

If the Price of the Input on the Horizontal Axis