If the wage increases,the isocost line will
A)stay the same.
B)shift outward in parallel fashion.
C)rotate inward around the point where only capital is employed in production.
D)shift inward in parallel fashion.

Question

Quizplus · Accepted Answer

The isocost line will rotate inward around the point where only capital is employed in production because an increase in wage (cost of labor) makes labor more expensive relative to capital, changing the slope of the isocost line without affecting the amount of capital that can be bought if the entire budget is spent on capital.

If the Wage Increases,the Isocost Line Will