Production - Production in the long run
3 important questions on Production - Production in the long run
In the long run, all factors of production are by definition variable. With both K and L variable , we now require three dimensions instead of two. Solution = isoquants:
The analogous concept of the MRS in production theory is the marginal rate of technical substitution (MRTS). This is:
On the isoquant, the reduction in output from having less K is exactly offset by the gain in output from having more L, so mathematically it follows that:
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