If the Marginal Rate of Technical Substitution for a Cost

question 101

Multiple Choice

If the marginal rate of technical substitution for a cost minimizing firm is 10, and the wage rate for labor is $5, what is the rental rate for capital?

• A)$0.5
• B)$1
• C)$2
• D)$10

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Definitions:

Tax Deductible

Expenses or payments that can be subtracted from gross income to reduce the amount of income subject to tax.

Bonds

Long-term securities issued by corporations, municipalities, or governments to raise funds, paying interest to holders.

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specified time period.

Callable Bonds

Bonds that give the issuer the right but not the obligation to redeem the bonds before their maturity date, usually at a predefined call price.