The condition that requires MRTS for each input pair to equal the ratio of their marginal costs is known as ________ efficiency, and the condition that requires MRS for each output pair to equal their output price ratio is known as ________ efficiency.
A) economic; market
B) micro; macro
C) cost; revenue
D) technical; output

Question

Quizplus · Accepted Answer

The condition that requires the marginal rate of technical substitution (MRTS) for each input pair to equal the ratio of their marginal costs is known as technical efficiency. This ensures that inputs are used in the most efficient way to minimize cost. The condition that requires the marginal rate of substitution (MRS) for each output pair to equal their output price ratio is known as output efficiency, ensuring that the mix of outputs maximizes revenue given their prices.

The Condition That Requires MRTS for Each Input Pair to Equal