The marginal rate of technical substitution (MRTS)along an isoquant:
A)is equal to the price ratio at all points along an isoquant.
B)is equal to the ratio of the marginal utilities of the two goods.
C)is equal to the ratio of the marginal products of the two inputs.
D)remains constant as we alter the combinations of the two inputs.

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) along an isoquant is equal to the ratio of the marginal products of the two inputs. MRTS measures the rate at which one input can be substituted for another without changing the level of output. When we substitute one input for another, the marginal product of the substituted input decreases, and the marginal product of the other input increases. The MRTS is the slope of the isoquant and it falls as we move along the isoquant from left to right. Therefore, the correct answer is (C) is equal to the ratio of the marginal products of the two inputs.

The Marginal Rate of Technical Substitution (MRTS)along an Isoquant