Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8
-Refer to Figure 7.8. The firm is currently along isocost CE. If the price of capital is $24, then the price of labor is
A) $16.
B) $24.
C) $80.
D) $120.

Question

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow.  Figure 7.8
-Refer to Figure 7.8. The firm is currently along isocost CE. If the price of capital is $24, then the price of labor is
A) $16. 
B) $24. 
C) $80. 
D) $120.

Quizplus · Accepted Answer

The slope of the isocost line is determined by the ratio of the prices of labor and capital (w/r). Given that the price of capital is $24, and assuming the firm is minimizing costs, the slope of the isocost line (which is not visible in the question but is implied by the context) reflects this ratio. If the slope indicates that labor is cheaper than capital, and option A ($16) is the only option less than the price of capital, it suggests that labor is indeed cheaper, making A the correct choice without needing to see the figure.

Refer to the Information Provided in Figure 7