(Figure 6.3) Which of the following statements is (are) TRUE? A) It is easier for a small amount of additional labor to replace a large amount of capital at point A than at point B. B) It is easier for a small amount of additional labor to replace a large amount of capital at point B than at point A. C) The MRTS_LK at point A equals MP_K/MP_L. D) The MRTS_LK at point B is greater the MRTS_LK at point A.

Question

Quizplus · Accepted Answer

At point A, the isoquant (B0) is steeper, meaning that a small amount of additional labor can replace a relatively larger amount of capital. Therefore, it is easier to replace capital with labor at point A than at point B. Choice B is false as it describes the opposite scenario. Choice C is true, as it reflects the formula for the marginal rate of technical substitution for inputs 1 and 2 (labor and capital), given their marginal products. Choice D is false, as there is no information in the graph indicating that MRTSS at point B is greater than at point A.

(Figure 63) Which of the Following Statements Is (Are) TRUE