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Unformatted text preview: capital would lead to decreased efficiency (since the Isoquous line would no longer reach the highest possible Isoquant curve), in turn causing the MRTS to fall to 1:x, x>1; in essence, as more units of labor are traded for units of capital, a unit of capital becomes increasingly more valuable for the firm (as related to labor), which causes a decline in MRTS....
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This note was uploaded on 06/26/2008 for the course ECON S-10ab taught by Professor Medoff during the Summer '07 term at Harvard.
- Summer '07