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

Answer:

0.25

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:

$MRST_{KL} = \frac{MP_{K} }{MP_{L} }$

Where;

MPK =  Marginal product of capital = 2

MPL = Marginal product of labor = 8

Substituting the values into the equation, we have:

$MRST_{KL} = \frac{2}{8} =\frac{1}{4} = 0.25$

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