1. Estimate the Marginal Rate of Technical Substitution (MRTS) between water and fertilizer. Resources/ Factors/ Inputs Water (X1) 39 28 20 14 9 5 1 0 Fertilizer (X2) 0 1 3 5 8 12 17 25 MRTS -11 -4 -3 -1.7 -0.8 -0.13

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Chapter1: Making Economics Decisions
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2. Factor-Factor Relationship: Cucumber can be produced with the following
combinations of water and fertilizer.
i Estimate the Marginal Rate of Technical Substitution (MRTS)
between water and fertilizer.
Resources/ Factors/ Inputs
Water (X1)
MRTS
Fertilizer (X2)
39
28
1.
-11
20
3.
-4
14
-3
6.
-1.7
12
-1
17
-0.8
25
-0.13
i Using the estimated MRTS find the optimal combination of factors
(water and fertilizer) that minimizes the cost for the following factor
prices.
Price of
Fertilizer
Price of
Optimal Combination of
Water
Water
Price Ratio
Fertilizer
(Pxi)
8.00
(Px)
6.40
-0.8
-3
17
0.25
0.75
14
0.40
1.60
-4
20
3
16.00
12.80
-0.8
0.20
17
0.80
-4
20
Transcribed Image Text:2. Factor-Factor Relationship: Cucumber can be produced with the following combinations of water and fertilizer. i Estimate the Marginal Rate of Technical Substitution (MRTS) between water and fertilizer. Resources/ Factors/ Inputs Water (X1) MRTS Fertilizer (X2) 39 28 1. -11 20 3. -4 14 -3 6. -1.7 12 -1 17 -0.8 25 -0.13 i Using the estimated MRTS find the optimal combination of factors (water and fertilizer) that minimizes the cost for the following factor prices. Price of Fertilizer Price of Optimal Combination of Water Water Price Ratio Fertilizer (Pxi) 8.00 (Px) 6.40 -0.8 -3 17 0.25 0.75 14 0.40 1.60 -4 20 3 16.00 12.80 -0.8 0.20 17 0.80 -4 20
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