There are two firms in an economy. Each of them currently employs positive amounts of two inputs,

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There are two firms in an economy. Each of them currently employs positive amounts of two inputs, capital and labor. Their technologies are characterized by diminishing marginal rate of technical substitution of labor for capital. At the current operating basket, Firm A's marginal rate of technical substitution of labor for capital is 3, while Firm B's marginal rate of technical substitution of labor for capital is 1. Do the current production baskets satisfy the condition of input efficiency? If not, describe an exchange of inputs that would improve efficiency.
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Microeconomics

ISBN: 978-0073375854

2nd edition

Authors: Douglas Bernheim, Michael Whinston

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