Figure 7-15

-In Figure 7-15, we would expect a move of the budget line from A to B if
A)the price of machines falls.
B)the price of labor falls.
C)output falls.
D)the product price rises.

Question

Figure 7-15
 
-In Figure 7-15, we would expect a move of the budget line from A to B if
A)the price of machines falls. 
B)the price of labor falls. 
C)output falls. 
D)the product price rises.

Quizplus · Accepted Answer

According to the diagram, A is the initial budget line. If the price of machines falls, the cost of producing a given level of output falls, and the amount of machines that can be purchased for the same amount of money increases. As a result, the budget line shifts to the right, from A to B, allowing for the purchase of more machines and/or more labor with the same level of expenditures.

Figure 7-15 -In Figure 7-15, We Would Expect a Move of the a Move