An examination of the production isoquants in the diagram below reveals that:
A) capital and labor must be used in fixed proportions.
B) capital and labor are perfectly substitutable.
C) except at the corners of the isoquants the MRTS is constant.
D) Both B and C are correct.
E) none of the above

Question

An examination of the production isoquants in the diagram below reveals that: 
A) capital and labor must be used in fixed proportions. 
B) capital and labor are perfectly substitutable. 
C) except at the corners of the isoquants the MRTS is constant. 
D) Both B and C are correct. 
E) none of the above

Quizplus · Accepted Answer

The straight lines of the isoquants indicate that capital and labor are perfectly substitutable, as any combination of capital and labor that yields the same level of output can be used. The slope of these lines is constant except at the corners, indicating that the marginal rate of technical substitution (MRTS) is constant except at the points where the isoquants intersect the axes. Therefore, both option B and C are correct. Option A is incorrect because if capital and labor were used in fixed proportions, the isoquants would be L-shaped and not straight lines.

An Examination of the Production Isoquants in the Diagram Below