The rate at which one input can be substituted for another is shown by:
A) the slope of a firm's production function.
B) the slope of a firm's efficient production frontier.
C) the slope of a firm's isoquants.
D) the shape of a firm's production function.

Question

Quizplus · Accepted Answer

The slope of a firm's isoquants reflects the rate at which one input can be substituted for another while holding the level of output constant. As we move along an isoquant, the slope becomes steeper as we substitute more of one input for another. Therefore, the slope of isoquants is a measure of the marginal rate of technical substitution (MRTS). Choices A, B, and D are incorrect because they do not directly measure the rate of input substitution.

The Rate at Which One Input Can Be Substituted for Another