The marginal rate of technical substitution is
A)the rate at which the firm can substitute labor for capital while holding total cost constant.
B)the rate at which the firm can substitute labor for capital while holding output constant.
C)the slope of the isocost curve.
D)both a and c
E)none of the above

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) is the rate at which a firm can substitute one input for another while keeping the level of output constant. In other words, it is the slope of the isoquant curve. Therefore, choice B is the correct answer. Choice A is incorrect because it refers to the marginal rate of factor substitution, which is a different concept, while choice C refers to the slope of the isocost curve, which is not the same as the MRTS.

The Marginal Rate of Technical Substitution Is