$$\text { For the production function } \mathrm { Q } = \mathrm { aL } + \mathrm { bK } \text {, where } \mathrm { a } \text { and } \mathrm { b } \text { are constants, the } M R T S _ { L , K }$$
A)declines as the firm substitutes labor for capital.
B)remains constant as the firm substitutes labor for capital.
C)implies upward-sloping, straight-line isoquants.
D)is undefined.

Question

Quizplus · Accepted Answer

The MRTS (Marginal Rate of Technical Substitution) in this production function is constant because the ratio of labor and capital used in production (the slope of the isoquant) is constant. Therefore, as the firm substitutes labor for capital (by moving along the isoquant), the MRTS remains constant.

A)declines as the Firm Substitutes Labor for Capital