Final answer:
Declining marginal rates of technical substitution are a consequence of the law of diminishing returns.
Step-by-step explanation:
Declining marginal rates of technical substitution are a consequence of the law of diminishing returns. The law of diminishing returns states that as a firm adds more inputs (like labor or capital) to production, the marginal benefit from each additional input will decline.
This principle applies to the marginal rate of technical substitution as well, which measures the rate at which a firm can substitute one input for another while keeping output constant. When a firm reaches a point of diminishing returns, it becomes more difficult and less efficient to substitute inputs, resulting in declining marginal rates of technical substitution.