The marginal rate of technical substitution is defined by: A) MRTS_1,2 = MP₁ /MP₂. B) MRTS_1,2 = MP₁MP₂. C) MRTS_1,2 = MP₁/P₁. D) MRTS_1,2 = P₁/P₂. E) MRTS_1,2 = MP₂/P₂.

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) represents the rate at which one input can be substituted for another input while keeping the level of output constant. It is calculated as the ratio of the marginal product of one input to the marginal product of the other input. Therefore, the correct formula for MRTS between inputs 1 and 2 is given by choice A.

The Marginal Rate of Technical Substitution Is Defined By