Question

If labor and capital are perfect substitutes: A. isoquants are linear and downward sloping. B. cost-minimizing firms will generally use only labor or only capital in production, depending on the relative prices of labor and capital. C. the elasticity of substitution between the inputs is infinite. D. All of the above are correct. E. None of the above is correct.

Answer 1

Answer: (D.) All of the above are correct.

Explanation: If the factors of production are perfect substitutes then the following will hold true :

A. Isoquants are linear and downward sloping.

B. Cost-minimizing firms will generally use only labor or only capital in production, depending on the relative prices of labor and capital.

C. The elasticity of substitution between the inputs is infinite.