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Along the expansion path of a firm with typically shaped isoquants, as you move away from the origin, which of the following remains constant (that is, does not change)? a
Along the expansion path of a firm with typically shaped isoquants, as you move away from the origin, which of the following remains constant (that is, does not change)?
| a. |
output |
|
| b. |
total cost |
|
| c. |
marginal rate of technical substitution |
|
| d. |
all of the above remain constant (do not change) |
Expert Solution
When a firm expands, it essentially means that the output produced by the firm has risen. It means that the firm will now move to a higher isoquant curve.
So the output will rise, when the output produced by the firm increases the total cost of production will also rise.
Now, the marginal rate of technical substitution is the rate at which factor inputs can be substituted for one another. So, the marginal rate of technical substitution of the firm depends on the production process and the technology of a firm and does not change with the change in output. So the marginal rate of technical substitutions remains constant even when a firm expands.
So the correct answer is c. marginal rate of technical substitution.
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