Question

In the presence of Diminishing Marginal Rate of Technical Substitution between Labour and Capital, output can be kept unchanged only if __________.

• A. equal successive sacrifices of capital go hand in hand with even smaller increases of labor
• B. equal successive sacrifices of labour go hand in hand with even smaller increases of capital
• C. equal successive increases in labor go hand in hand with even smaller increases in capital
• D. equal successive increases in labor go hand in hand with even smaller sacrifices of capital

Answer 1

The correct option is D equal successive increases in labor go hand in hand with even smaller sacrifices of capital

Diminishing Marginal Rate of Technical Substitution talks about the rate of decrease of one factor at which the same level of output is achieved and the other factor is increased. Thus, Option D is the right answer. Labor employed will be successively and slowly increased with the Capital put in diminishing slowly.