With Its Current Levels of Input Use, a Firm's MRTS

question 166

Multiple Choice

With its current levels of input use, a firm's MRTS is 3 (when capital is on the vertical axis and labor is on the horizontal axis) . This implies:

• A) the firm could produce 3 more units of output if it increased its use of capital by one unit (holding labor constant).
• B) the firm could produce 3 more units of output if it increased its use of labor by one unit (holding capital constant).
• C) if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output.
• D) if it used one more unit of both capital and labor, the firm could produce 3 more units of output.
• E) the marginal product of labor is 3 times the marginal product of capital.

---

Definitions:

Exchange Rate

The value of one currency for the purpose of conversion to another, which determines how much foreign currency one can get with the domestic currency.

Basket of Goods

A selection of various goods and services used to track inflation and the cost of living over time.

Balance of Payments

A record of all financial transactions made between consumers, businesses, and the government in one country with others.

Accounting Techniques

Methods or principles employed in managing and reporting financial information and transactions.