Suppose the production function for a firm is given by q = 4L + 2K. If the firm currently has 20...
Question:
Suppose the production function for a firm is given by {eq}q = 4L + 2K {/eq}. If the firm currently has 20 units of capital {eq}(K) {/eq} and 10 units of labor {eq}(L) {/eq}, then calculate the marginal rate of technical substitution {eq}(MRTS_{LK}) {/eq}.
Marginal Rate of Technical Substitution:
The marginal rate of technical substitution tells us how much input is reduced when adding one more unit of another input. Normally, the inputs determined in the marginal rate of technical substitution are the capital and labor used in the production.
Answer and Explanation: 1
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View this answerThe formula to compute the marginal rate of technical substitution {eq}MRTS_{LK} {/eq} is:
{eq}MRTS_{LK} =...
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Marginal Rate of Substitution: Definition, Formula & Examples
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Chapter 3 / Lesson 13
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The marginal rate of substitution shows how quickly a person will substitute or replace one product for a different one. Study the definition, formula, and examples of the marginal rate of substitution, how producers use it, and differing quantities.
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