Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the $MR T S_{L ,K}$=
decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing
A) neutral technological progress.
B) labor-saving technological progress.
C) capital-saving technological progress.
D) both labor-saving and capital-saving technological progress.

Question

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the $MR T S_{L ,K}$=
 decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing
A) neutral technological progress.
B) labor-saving technological progress.
C) capital-saving technological progress.
D) both labor-saving and capital-saving technological progress.

Quizplus · Accepted Answer

Labor-saving technological progress occurs when the marginal rate of technical substitution of labor for capital decreases, meaning less labor is needed for the same amount of capital to produce the same output.

Assume That Labor Is Measured Along the Horizontal Axis and Capital