Question

1. If the MRTS equals 2, then the MPK/MPLis ____. 2. The general rule for allocating...

1. If the MRTS equals 2, then the MPK/MPLis ____.

2. The general rule for allocating a productive resource efficiently across different production activities of the same product is to choose the allocation for which the ________.

A.Average product of the resource is the same in every activity

B.Marginal product of the resource is the same in every activity

C.Total product of the resource is the same in every activity

D.Average product is equal to the marginal product in every activity

Homework Answers

Answer #1

1. If K is taken on Y axis and L on X axis, the MRTS would be , for MRTS being the slope of the isoquant. The MRTS is supposed to be negative, as slope of isoquant will be negative. Now, we have (taking negative scenario as usual) or or or . If MRTS is actually positive 2 indeed, then the answer would be -0.5, but that isn't usual, in economic sense.

2. The correct option is B. Marginal product of the resource is the same in every activity.

The reason being that the marginal product either decreases or remain constant, as more inputs are putted in the activity. At the point where the marginal product is same accross all activity, is the most efficient allocation. The next input addition would mean less efficieny as the marginal product is less in some sectors.

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