If the Marginal Rate of Technical Substitution of Labor for Capital

question 10

Multiple Choice

If the marginal rate of technical substitution of labor for capital is 6,the price of labor is $18,and the price of capital is $9,then the firm

• A)can substitute one unit of capital for six units of labor and keep output unchanged.
• B)should use more labor and less capital.
• C)should use more capital and less labor.
• D)both a and b
• E)both a and c

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Definitions:

Nonprogrammed Decision

Decisions made in response to situations that are unique, poorly defined, and largely unstructured, requiring specific solutions.

Unique Situation

A set of circumstances that is distinct and does not closely resemble any other situation.

Unfamiliar Problem

A challenge or issue that is not previously known or recognized by the individual or group.

Crisis Problems

Unexpected, significant issues that require immediate attention and action to protect an organization, its stakeholders, or the public.