If MPPa/Pa = MPPb/Pb, then the firm should increase the usage of both input a and input

Question

Quizplus · Accepted Answer

This condition indicates that the marginal rate of technical substitution (MRTS) is equal to the ratio of input prices, suggesting the firm is optimizing the use of inputs a and b. There's no inherent indication that increasing both inputs is necessary or beneficial without further context on production functions, cost constraints, or output goals.

If MPPa/Pa = MPPb/Pb, Then the Firm Should Increase the Usage