Suppose that the marginal product of a firm's labor is 10 units of output per hour.Also assume that the marginal product of the firm's capital is 30 units of output per hour.In this case,the marginal rate of technical substitution for labor with capital is:
A) 3.
B) 300.
C) 40.
D) 1/3.

Question

Quizplus · Accepted Answer

The Marginal Rate of Technical Substitution (MRTS) is the rate at which a firm can substitute capital for labor while keeping the level of output constant. Mathematically, MRTS = MPL/MPK, where MPL is the marginal product of labor and MPK is the marginal product of capital. In this case, MRTS = 10/30 = 1/3. Therefore, the answer is D) 1/3.

Suppose That the Marginal Product of a Firm's Labor Is