To derive the equation for an isocost line when the level of capital is plotted on the vertical axis and the level of labor is plotted on the horizontal axis,you should
A) solve the production function for
B) solve the production function for .
C) solve the total cost equation for .
D) solve the total cost equation for

Question

To derive the equation for an isocost line when the level of capital is plotted on the vertical axis and the level of labor is plotted on the horizontal axis,you should
A) solve the production function for 
B) solve the production function for .
C) solve the total cost equation for .
D) solve the total cost equation for

Quizplus · Accepted Answer

To derive the equation for an isocost line, we need to use the total cost equation, which is given by C = rK + wL, where r is the rental rate for capital, K is the level of capital, w is the wage rate for labor, and L is the level of labor. We can rearrange this equation to solve for K, which gives us K = (C - wL)/r. This equation shows us the combinations of K and L that can be purchased for a given total cost C. Therefore, the correct choice is C - solve the total cost equation for K.

To Derive the Equation for an Isocost Line When the Level