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Mastering the Marginal Rate of Technical Substitution: How Businesses Optimize Labor, Capital, and Efficiency
The marginal rate of technical substitution (MRTS) is one of the most useful tools in production economics. It measures how much of one production input—like capital or machinery—can be replaced with another input, such as labor, without changing the total output. Essentially, it helps a business figure out how to maintain efficiency while adjusting its…