In: Economics
1. Explain the concept of marginal rate of technical substitution. What does a MRTS of 4 mean? Is there any difference between production function and Iso-quant? Explain institutively what might cause the marginal product of labor to become negative.
Marginal
product of labour is defined as the change in output by hiring an
additional unit of labour. Adding more labour when other factors of
production are kept fixed will eventually lead to decline in MPL.
As more units of labour is employed, keeping other factors fixed
lead to inefficiency and disorganization which ultimately leads to
fall in the output instead of increase in output.