True or false. Your answer to each question should not extend beyond 3 to 5 sentences (i.e., short succinct answers are preferred).

a. A firm’s marginal rate of technical substitution captures the firm’s willingness to trade capital for labour, but not the degree to which capital and labour are substitutes in supply. True or false? Explain your position.

b. A consumer in an exchange economy will always be better off at an allocation which is Pareto efficient than at an allocation which is not Pareto efficient. True or false? Explain your position.