The marginal rate of technical substitution between two inputs:
A) shows the rate at which one input can be traded for another, holding output constant.
B) shows the efficient combination of inputs.
C) increases as we move down an isoquant.
D) shows the rate at which output can be increased by using more of both inputs.
E) shows the rate at which output decreases when using less of one of the inputs.

Question

Quizplus · Accepted Answer

The marginal rate of technical substitution (MRTS) indicates the rate at which one input can be substituted for another while keeping the level of output constant, not the efficiency of input combination, the increase in output from using more inputs, or the decrease in output from using less of one input.

The Marginal Rate of Technical Substitution Between Two Inputs