If the two inputs are perfect substitutes, then the isoquants are: a) convex to the origin....

If the two inputs are perfect substitutes, then the isoquants are:

		a) convex to the origin.
		b) concave to the origin.
		c) linear and down-sloping.
		d) " L " shaped.
		e) inverse U-shape parabola.

Solutions

Expert Solution

The correct answer is (c) linear and down-sloping

Isoquants represents combination of inputs (example : L and K) such at which same amount of Output is produced.

When inputs are perfect substitutes this means one input can be perfectly substitutable for other and also MRTS is constant i.e. when Goods are perfect substitutes i.e. Amount of Capital a firm should sacrifice in order to hier 1 more unit of Labor so that it can produce same amount of Output and Hence dK/dL is constant => dK = c(dL) => K = cL + u which represents linear equation

Also Note that If Isoquant is upward sloping then it means than One Input is increasing production and other input is decreasing production and hence one input will not be a perfect substitutes for other.

Hence When Goods are perfect substitutes then Isoquant will be downward sloping(i.e. c is negative) straight line.

Hence, the correct answer is (c) linear and down-sloping

Rahul Sunny answered 1 year ago

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