The marginal rate of technical substitution is
A)the market rate of exchange between labor and capital.
B)the rate at which the firm can substitute labor for capital while holding total cost constant.
C)the rate at which the firm can substitute labor for capital while holding output constant.
D)both a and b
E)both a and c

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) is the rate at which the firm can substitute labor for capital while holding output constant. It represents the slope of the isoquant curve and measures the amount by which the firm is willing to reduce the use of one input for every additional unit of the other input used, while output remains the same. Therefore, option C is the correct choice. Option A is not correct because the MRTS is not related to the market rate of exchange between labor and capital. Option B is incorrect because it refers to holding total cost constant, which is not relevant for measuring MRTS.

The Marginal Rate of Technical Substitution Is