If the Marginal Rate of Technical Substitution of Labor for Capital

question 16

Multiple Choice

If the marginal rate of technical substitution of labor for capital (MRTS_LK) exceeds the relative price of labor in terms of capital (P_L/P_K) ,then

• A) the firm's long-run average cost curve is rising.
• B) the firm is producing its output at the least possible cost,but the firm should reduce its output level to increase its profits.
• C) the firm has increased its output level beyond the point of diminishing marginal returns.
• D) the firm needs to use less capital and more labor to reach its expansion path.

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