Figure 7.17
-Refer to Figure 7.17.Starting from point e, a movement along the isocost to point f
A)decreases the total cost of production but not output.
B)increases the total cost of production and decreases output.
C)decreases both the total cost of production and output.
D)decreases output but not the total cost of production.

Question

Figure 7.17 
-Refer to Figure 7.17.Starting from point e, a movement along the isocost to point f
A)decreases the total cost of production but not output. 
B)increases the total cost of production and decreases output. 
C)decreases both the total cost of production and output. 
D)decreases output but not the total cost of production.

Quizplus · Accepted Answer

Moving along the isocost from point e to point f implies a decrease in the amount of the variable input being used in production. This will result in a decrease in output, i.e., decrease output, but the slope of the isocost is equal to the marginal rate of transformation (MRT), which represents the rate at which one input can be substituted for another without affecting output. Therefore, the total cost of production would remain the same because the MRT is constant along the isocost.

Figure 7.17 -Refer to Figure 7.17.Starting from Point E, a Movement Along