Suppose that there are two firms, Acme and Triple-A, each of which has a production function that depends on capital (K) and labor (L), or fi(Ki,Li), i = Acme or Triple-A. At the current resource allocation, Acme can substitute 4 units of K for 1 unit of L and maintain the same level of output, or in other words MRTS^ACME K,L= 4. Triple-A can substitute 2 units of K for 1 unit of L and still maintain the same level of output, or in other words MRTS^AAA K,L = 2. Is the current resource allocation Pareto efficient? Explain.

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Pareto Efficiency and Marginal Rate of Technical Substitution MRTS No the current resource allocatio... View the full answer