Assume your company produces good X using only two inputs, capital (K) and labor (L). Also, assume L is measured on the vertical axis and K on the horizontal one. If the prices of inputs are PK=$30 and PL=15, and your company is behaving efficiently, what is the slope of the isoquant at the current input mix?

Question

Business

Mcintyre

23 April, 00:09

Assume your company produces good X using only two inputs, capital (K) and labor (L). Also, assume L is measured on the vertical axis and K on the horizontal one. If the prices of inputs are PK=$30 and PL=15, and your company is behaving efficiently, what is the slope of the isoquant at the current input mix?

+2

Answers (1)

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Pacheco · Answer 1

-2 or Minus 2.

Explanation:

An isoquant refers to a curve that presents different combinations or connections of two inputs that produce the same level output.

An slope of an an isoquant can also be referred to as the slope of Marginal Rate of Technical Substitution (MRTS).

From the question, since L is measured on the vertical axis and K on the horizontal one, the slope of the isoquant at the current input mix can simple be calculated as follows:

SI = - PK/PL ... (1)

Where SI denotes the slope of the isoquant at the current input mix.

Substituting PK = $30 and PL = $15 into equation (1), we have:

SI = - $30/$15 = - 2.

Therefor, the slope of the isoquant at the current input mix is - 2 (Minus 2).