The marginal rate of technical substitution between labor (L) and capital (C) equals A) MU_L/MU_C B) AVC C) MP_L/MP_C D) the capital-labor ratio E) the labor-capital ratio

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution between labor (L) and capital (C) is the rate at which one factor can be substituted for the other while keeping output constant. It is calculated as the ratio of the marginal product of labor to the marginal product of capital (MPL/MPC). Using the production function notation, this can be written as MP_L/MP_C. Therefore, option C is the correct answer.

The Marginal Rate of Technical Substitution Between Labor (L) and Capital