Question

A firm has a production process in which the inputs to production are perfectly substitutable in the long run. Can you tell whether the marginal rate of technical substitution is high or​ low, or is further information​ necessary? Discuss. In this​ example, the marginal rate of technical substitution​ (MRTS) is

Answer 1

Answer: MRTS =1

Step-by-step explanation

Since the inputs of the firm are perfectly substitute

MRTS =DC/DL

Where DC = change in capital

= change labour

This means that the graph of labour on x axis and capital on y axis is a straight line graph