Question

At Lequals86​, Kequals90​, the marginal product of labor is 8 and the marginal product of capital is 2. What is the marginal rate of technical substitution ​(labor measured on the horizontal axis​)? The marginal rate of technical substitution is nothing. ​(Enter a numeric response using a real number rounded up to two decimal​ places.)

Answer 1

0.25

Step-by-step explanation:

The marginal rate of technical substitution (MRTS) can be described as the rate of a reduction is one factor to maintain the same production level when another factor is increased.

Given that labor is measured on the horizontal axis, the MRST of K for L can be calculated as follows:

`MRST_(KL) = (MP_(K) )/(MP_(L) )`

Where;

MPK = Marginal product of capital = 2

MPL = Marginal product of labor = 8

Substituting the values into the equation, we have:

`MRST_(KL) = (2)/(8) =(1)/(4) = 0.25`

This implies that 0.25 of capital must be given up to have one unit of labor.