If the marginal rates of technical substitution between two firms are not equal,then:
A)the society is not on the production possibility frontier.
B)the economy ends up producing on the contract curve of the economy's Edgeworth production box.
C)goods are not allocated between consumers efficiently.
D)the isoquants of the firms do not intersect each other.

Question

Quizplus · Accepted Answer

When the marginal rates of technical substitution (MRTS) between two firms are not equal, it implies that the allocation of resources between the firms is not optimal. This inefficiency means that the society is not operating on its production possibility frontier (PPF), which represents the maximum possible output combinations of goods or services that a society can produce given its resource constraints.

If the Marginal Rates of Technical Substitution Between Two Firms