Refer to the information provided in Figure 7.9 below to answer the questions that follow. Figure 7.9
-Refer to Figure 7.9. The firm is currently along isocost CE. If the price of capital is $12, then the price of labor is
A) $8.
B) $12.
C) $80.
D) $120.

Question

Refer to the information provided in Figure 7.9 below to answer the questions that follow.  Figure 7.9
-Refer to Figure 7.9. The firm is currently along isocost CE. If the price of capital is $12, then the price of labor is
A) $8. 
B) $12. 
C) $80. 
D) $120.

Quizplus · Accepted Answer

The isocost line represents combinations of labor and capital that a firm can purchase for a given total cost. If the price of capital is $12, and the firm is on isocost CE, the slope of the isocost line (which is the ratio of the price of labor to the price of capital) must be consistent with the given options. Given the choices, $8 is the only price that would typically result in a feasible isocost line slope when combined with a capital price of $12.

Refer to the Information Provided in Figure 7