In a factory setting, if the MRTS between labor and capital is 2, what does this imply about substituting labor for capital?

• A. Labor and capital are perfect substitutes.
• B. Two units of labor can replace one unit of capital while maintaining the same output.
• C. One unit of labor can replace two units of capital while maintaining the same output.
• D. Labor and capital cannot be substituted.

Answer: (B)