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Firm X Produces Output xx And Firm Y Produces Output yy Using Capital, K, and Labor, L, as Inputs

Question 13

Multiple Choice

Firm X produces output xx and Firm Y produces output yy using capital, K, and labor, L, as inputs. Firm X has marginal rate of technical substitution MRTSxK,L = Kx/Lx, while firm Y has marginal rate of technical substitution MRTSyK,L = 9Ky/Ly. Which of the following allocations satisfies input efficiency?


A) Firm X has 5 units of K and 3 units of L, and Firm Y has 3 units of K and 1 unit of L.
B) Firm X has 5 units of K and 5 units of L, and Firm Y has 1 unit of K and 9 units of L.
C) Firm X has 9 units of K and 1 units of L, and Firm Y has 5 units of K and 5 units of L.
D) Firm X has 5 units of K and 5 units of L, and Firm Y has 1 unit of K and 3 units of L.

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