Say you own a Mexican place that produces, among other things, Mexican burritos. The marginal product of your last worker was 5. If the marginal rate of technical substitution between capital and labor is 0.5, then marginal product of capital is

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) represents the amount of capital that can be replaced by one unit of labor while keeping the level of output constant. In this case, the MRTS is 0.5, which means that to replace one unit of labor, we need to increase the amount of capital by 0.5 units.

If the marginal product of labor is 5, then to maintain the same level of output, the marginal product of capital must be half of that, which is 2.5. However, since we need to increase the amount of capital by 0.5 units to replace one unit of labor, we can simply multiply 2.5 by 2, giving us a marginal product of capital of 5 x 2 = 10. Therefore, the answer is A) 10.

Say You Own a Mexican Place That Produces, Among Other