Question #9132

Given the production function:

Q = 100 + P – 0.01P2 + 2N – 0.03N2

Determine the marginal rate of technical substitution

Q = 100 + P – 0.01P2 + 2N – 0.03N2

Determine the marginal rate of technical substitution

Expert's answer

Marginal Rate of Technical Substitution (or Technical Rate of Substitution) is

the amount by which the quantity of one input (N) has to be reduced when one

extra unit of another input (N2) is used, so that the total output (Q) remains

constant:

MRTS = MP(N2)/MP(N) = -0.03/2= -0.015 – MRTS for the input N

for N2

the amount by which the quantity of one input (N) has to be reduced when one

extra unit of another input (N2) is used, so that the total output (Q) remains

constant:

MRTS = MP(N2)/MP(N) = -0.03/2= -0.015 – MRTS for the input N

for N2

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