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The graph shows units of labor (labeled L L ) on the horizontal axis, and units of capital (labeled K K ) on the vertical axis.

The graph shows units of labor (labeled L 

L ) on the horizontal axis, and units of capital (labeled K 

K ) on the vertical axis. A budget line intersects the vertical/capital axis at 10 units, and the horizontal/labor axis at 40 units. Two isoquants are drawn: the first is labeled I 

I and is located closer to the origin (which means it is associated with a lower level of output); the second is labeled II 

II and is located further away from the origin (which means it is associated with a higher level of output). Isoquant I 

I intersects the budget line at two points: the first is at a low level of labor and high level of capital and is labeled A 

A ; the second is at a high level of labor and low level of capital and is labeled C 

C . Isoquant II 

II intersects the budget line at a single point of tangency: it is at a medium level of both labor and capital and is labeled B 

B .


B 

B

Select one:

a. less capital and more labor, and produces more output

b. more capital and more labor, and produces more output

c. more capital and less labor, and produces more output

d. less capital and less labor, and produces more output

Top Answer

d. less capital and less... View the full answer

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