The Marginal Rate of Technical Substitution Is

question 206

Multiple Choice

The marginal rate of technical substitution is

• A) the rate at which a firm is able to substitute one input for another, while keeping total cost constant.
• B) the rate at which a firm is able to substitute one input for another, while keeping the level of output constant.
• C) the rate at which a firm is able to institute positive technological changes to its production process.
• D) the rate at which a firm is able to increase its output by replacing labour with technology.

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual hours taken to produce something and the standard hours expected, multiplied by the variable overhead rate.

Materials Price Variance

The difference between the actual cost of materials and the expected cost multiplied by the quantity of materials used.

Unfavorable

A term used to describe a variance or difference that negatively impacts financial performance.

Labor Rate Variance

The difference between the expected cost of labor at standard rates and the actual cost of labor incurred.