The least-cost combination of inputs occurs where: Isoquant is tangent to the y-axis MRTS = ratio of input prices MRTS = wage rate Isoquant intersects the isocost line
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Rashmi S.
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THE MARGINAL RATE OF TECHNICAL SUBSTITUTION 1. An isoquant depicts the different combinations of inputs K and L that can be used to produce a specific level of output Q. One such isoquant for the output level Q = 2144 is 16K^{1/4} L^{3/4} = 2144 (a) Use implicit differentiation to find the slope of the isoquant dK/dL which is called the marginal rate of technical substitution (MRTS). (b) Evaluate the marginal rate of technical substitution at K=256, L = 108. 2. The equation for the production isoquant is 25K^{3/5} L^{2/5} = 5400 (a) Find the MRTS and (b) evaluate it at K = 243, L=181.
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