If W equals the price of labor and R equals the price of capital, then at the optimal input combination, the marginal rate of technical substitution equals
A) W $\times$ R
B) W - R
C) W + R
D) W - 1
E) -W/R

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) is the rate at which labor can be substituted for capital while keeping output constant. At the optimal input combination, MRTS equals the ratio of the input prices, which is -W/R.

If W Equals the Price of Labor and R Equals ×\times×

If W Equals the Price of Labor and R Equals $\times$