Question

If labor and capital are perfect substitutes in production, what shape do the isoquants take? 1) isoquants are straight lines. 2) isoquants are convex to the origin. 3) isoquants are drawn as right angles. 4) isoquants are kinked

Answer 1

Answer: 1) isoquants are straight line

Step-by-step explanation:

The isoquant curve assists companies and businesses in making adjustments to their manufacturing operations, to produce the most goods at the most minimal cost.

The isoquant curve demonstrates the principle of the marginal rate of technical substitution, which shows the rate at which you can substitute one input for another, without changing the level of resulting output.

Answer 2

If labor and capital are perfect substitutes, the isoquants are straight lines, reflecting constant marginal rates of technical substitution between the two inputs (Option 1).

Step-by-step explanation:

If labor and capital are perfect substitutes in production, the shape that isoquants take is: isoquants are straight lines.

When labor and capital can be substituted for each other in production on a one-to-one basis without affecting the output level, firms can freely choose between all combinations of labor and capital, and the isoquants reflecting these combinations are straight lines.

These straight lines indicate constant marginal rates of technical substitution (MRTS) between labor and capital.

Hence, the correct answer is Option 1.