16.16. 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.

MP2 MP k " 20. 2 l " 10, MP1 MP k " 50; 1 l " 50, MRSSuvarna x, y " yS /xS.

MRSDavid MRS x, y " 2yD/xD, Maureen x, y " 2yM/xM, MRS D MRS x, y " yD /2xD. R x, y " yR/xR, 16.17. Two firms together employ 10 units of labor (l)

and 10 units of capital (k). The marginal rate of technical substitution of each firm is given by:

and Which of the following input allocations satisfy the condition of input efficiency?

a) Firm 1 uses 5 units of labor, 5 units of capital; Firm 2 uses 5 units of labor, 5 units of capital.

b) Firm 1 uses 5 unit of labor, 8 units of capital; Firm 2 uses 5 units of labor; 2 units of capital.

c) Firm 1 uses 9 units of labor, 9 units of capital; Firm 2 uses 1 unit of labor; 1 unit of capital.

d) Firm 1 uses 2 units of labor; 5 units of capital; Firm 2 uses 8 units of labor; 5 units of capital.