Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis) . If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be:

A) 500.
B) 25/500.
C) -4/5.
D) 25/20 or 1.25.

Isocost Curve

An isocost curve represents all combinations of inputs which result in the same total cost for a firm, essentially showing the trade-offs between different types of inputs while maintaining the same budget.

Wage Rate

The amount of money paid to an employee per unit of time worked, often expressed per hour or year.

Rental Cost

The price paid for the temporary use of a good, service, or property owned by another party.