All points on the expansion path have the same marginal rate of technical substitution.

Question

Quizplus · Accepted Answer

The expansion path shows the various combinations of inputs that a firm can use to produce a given level of output at different prices of factors of production. At each point on the expansion path, the ratio of the marginal products of the two inputs is equal to the ratio of their prices. This implies that the slope of the expansion path, which represents the rate at which the firm substitutes one input for another, is equal to the ratio of their marginal products or the marginal rate of technical substitution (MRTS). Therefore, all points on the expansion path have the same MRTS.

All Points on the Expansion Path Have the Same Marginal