Economics · Production Theory

In the context of production theory, what does the term 'Marginal Rate of Technical Substitution' (MRTS) measure?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1The rate at which total cost increases as output expands.
2The rate at which marginal cost decreases with an increase in output.
3The rate at which a firm can substitute one input for another while keeping the total output constant.✓
4The rate at which average variable cost varies with changes in fixed inputs.

Correct answer

The rate at which a firm can substitute one input for another while keeping the total output constant.

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