Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

10. The Costs of Production

Isocost Lines

Microeconomics

10. The Costs of Production

Isocost Lines

Previous problem

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Multiple Choice

A change in the price of one input will:

Affect the slope of the isocost line

Not affect the slope of the isocost line

Shift the isocost line inward

Shift the isocost line outward

Previous problem

Verified step by step guidance

Understand the concept of an isocost line: An isocost line represents all combinations of inputs that cost the same total amount. It is similar to a budget line in consumer theory.

Identify the components of the isocost line equation: The equation is typically given by C = wL + rK, where C is the total cost, w is the wage rate (price of labor), L is the quantity of labor, r is the rental rate (price of capital), and K is the quantity of capital.

Analyze how a change in the price of one input affects the isocost line: If the price of one input changes, it will affect the slope of the isocost line. The slope is given by -w/r, where w is the price of labor and r is the price of capital.

Determine the effect of a change in input price: If the price of labor (w) changes, the slope of the isocost line will change because the ratio -w/r will be different. Similarly, if the price of capital (r) changes, the slope will also change.

Consider the shift of the isocost line: A change in the price of one input will not only affect the slope but may also shift the isocost line inward or outward, depending on whether the price increases or decreases, affecting the total cost for the same level of output.