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If the Marginal Rate of Technical Substitution of Labor for Capital

Question 26

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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