The marginal rate of technical substitution is
A)the rate at which a firm is able to substitute one input for another, while keeping total cost constant.
B)the rate at which a firm is able to substitute one input for another, while keeping the level of output constant.
C)the rate at which a firm is able to institute positive technological changes to its production process.
D)the rate at which a firm is able to increase its output by replacing labor with technology.

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) is the rate at which a firm can substitute one input for another while maintaining the same level of output. It measures the slope of the isoquant which represents the various combinations of inputs that can produce the same level of output. Option A refers to the concept of Iso-cost line, while option C and D are not related to the definition of MRTS.

The Marginal Rate of Technical Substitution Is