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 whch a firm is able to increase its output by replacing labour with technology.

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) measures the amount by which a firm can reduce the quantity of one input like labor or capital, given a one-unit increase in the quantity of another input, and still produce the same level of output. Therefore, it is the rate at which a firm can substitute one input for another while keeping the level of output constant.

The Marginal Rate of Technical Substitution Is