refer to the diagram below. All points along the ray 0P reflect a constant proportion of wages to fringe benefits.

-Suppose some development rotates the isoprofit line outward,to line 2.If history is a guide,we would expect this worker's new wage-fringe optimum to be at point:
A)D
B)E
C)F.

Question

refer to the diagram below. All points along the ray 0P reflect a constant proportion of wages to fringe benefits.

-Suppose some development rotates the isoprofit line outward,to line 2.If history is a guide,we would expect this worker's new wage-fringe optimum to be at point:
A)D 
B)E 
C)F.

Quizplus · Accepted Answer

When the isoprofit line rotates outward to line 2, it indicates that the firm is able to offer a higher combination of wages and fringe benefits while maintaining the same level of profit. The new wage-fringe optimum occurs where the worker's highest indifference curve (representing their preferences for wages and fringe benefits) is tangent to the new isoprofit line. Point F represents this new tangency point, indicating the worker's new optimal combination of wages and fringe benefits given the outward rotation of the isoprofit line.

Refer to the Diagram Below