Let a firm use labor (L) and capital (K) as its only inputs to produce an output, Q. The cost of labor is w = $5 per labor hour and the cost of capital is r = $15 per machine hour. When capital is measured on the vertical axis and labor on the horizontal axis, what is the slope of an isocost line for this firm?
A) -3.
B) -5.
C) -15.
D) -1/3.

Question

Quizplus · Accepted Answer

The formula for the slope of an isocost line is -w/r, which in this case is -(5/15) = -1/3. Therefore, the correct answer is D.

Let a Firm Use Labor (L) and Capital (K) as Its