The input efficiency condition
A) Holds if at least one pair of firms share the same marginal rate of technical substitution between every pair of inputs
B) Holds if at least one pair of consumers share the same marginal rate of substitution between two goods
C) Holds if every pair of firms share the same marginal rate of technical substitution between every pair of inputs
D) Holds if every pair of firms share the same marginal rate of substitution between two goods

Question

Quizplus · Accepted Answer

The input efficiency condition holds if every pair of firms share the same marginal rate of technical substitution between every pair of inputs. This condition ensures that firms are all using the same efficient combination of inputs to produce their output, leading to maximum efficiency in the industry as a whole. Options A and B are incorrect because they only require the condition to hold for one pair, rather than all pairs. Option D is incorrect because it refers to the marginal rate of substitution between goods, rather than between inputs.

The Input Efficiency Condition