The marginal rate of technical substitution measures the number of units of one input that can be dispensed with while holding output constant when one additional unit of the other input is added.

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) indeed measures the rate at which one input can be reduced for every additional unit of another input, while keeping the level of output constant. This concept is used in the analysis of production functions to understand how inputs can be substituted for one another while maintaining the same level of production.

The Marginal Rate of Technical Substitution Measures the Number of Units