In the long - run with strictly convex isoquants . If the relative price of labor(w/r) exceeds the marginal rate of technical substitution (MP L/ MP K) What changes should happen to the input mix ? Explain your answer.

In the long - run with strictly convex isoquants . If the relative price of labor(w/r) exceeds the marginal rate of technical substitution (MP L/ MP K) What changes should happen to the input mix ? Explain your answer.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter7: Production And Cost In The Firm

Section7.A: Appendix: A Closer Look At Production And Cost

Problem 1AQ

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Question

Definition Definition Rate at which one factor of production is decreased in order to maintain the same level of output when another factor of production is increased. MRTS allows for the substitution between factors of production: labor (L) and capital (K) in order to maintain a given level of output.

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