Asked by Amanda Herrera on Jun 17, 2024
Verified
In an economy which produces two goods X and Y, using two inputs L and K, efficient input use occurs when:
A) MRTSLKX = MRSLKY.
B) MRTXY = MRSXY.
C) MRSX/PX = MRSY/PY.
D) MRTSLKX = MRTSLKY.
Efficient Input Use
Utilization of inputs in a manner that maximizes the output or minimizes the cost under given technology and constraints.
MRTS
The Marginal Rate of Technical Substitution measures the rate at which one input can be substituted for another input in the production process, while keeping output constant.
- Detail the requirements for optimal efficiency in production activities and the market for outputs, emphasizing the critical roles played by marginal rates of substitution and transformation.
Verified Answer
TO
Tosha OsborneJun 21, 2024
Final Answer :
D
Explanation :
Efficient input use in the production of two goods X and Y using two inputs L and K occurs when the Marginal Rate of Technical Substitution (MRTS) between L and K for producing X is equal to the MRTS between L and K for producing Y. This ensures that inputs are allocated between the production of X and Y in such a way that the marginal product of inputs is equalized across both goods, maximizing efficiency.
Learning Objectives
- Detail the requirements for optimal efficiency in production activities and the market for outputs, emphasizing the critical roles played by marginal rates of substitution and transformation.
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