Question

Suppose you find that at a given input bundle the TRS=-2. Then you can conclude that at that input bundle: labour is more productive than capital capital is more productive than labour labour and capital are equally productive there is not enough information to answer

Answer 1

If the TRS (marginal rate of technical substitution) is equal to -2 at a given input bundle, then we can conclude that capital is more productive than labor. This is because the negative value of TRS implies that the marginal product of labor is diminishing relative to the marginal product of capital. Therefore, it would be more efficient to decrease the amount of labor and increase the amount of capital in the production process, which would increase the overall output.