Use the following to answer questions 40-45:
Figure 15.10
-(Figure 15.10) Suppose that the economy is operating at point G. In the cereal industry the marginal product of labor and capital are 10 and 4, respectively. What is the marginal rate of technical substitution of labor for capital in the pancake industry?

Question

Use the following to answer questions 40-45:
Figure 15.10 
-(Figure 15.10) Suppose that the economy is operating at point G. In the cereal industry the marginal product of labor and capital are 10 and 4, respectively. What is the marginal rate of technical substitution of labor for capital in the pancake industry?

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) is calculated as the ratio of the marginal product of labor to the marginal product of capital. Here, MRTS = 10/4 = 2.5.

Use the Following to Answer Questions 40-45