Question

If the marginal rate of technical substitution for a cost minimizing firm is -10, and the wage rate for labor is $5, what is the rental rate for capital in dollars

Answer 1

$ -0.5

Step-by-step explanation:

From the information given:

The marginal rate of technical submission MRTS = -10

Wages W = $5

The marginal rate of technical submission MRTS = Wages/ Rental rate of capital

∴

Rental rate of capital = Wages/marginal rate of technical submission MRTS

Rental rate of capital = 5/-10

Rental rate of capital = $ -0.5