consider an (x,y) consumption bundle that lies on the budget constraint but lies to the right...
consider an (x,y) consumption bundle that lies on the budget constraint but lies to the right of an individuals optimal and interior (x,y) consumption bundle. At this point,
a. MRS is equal to the price ratio
b. MRS exceeds the price price ratio
c. MRS is less than the price ratio
d. None of the above because the price ratio is not given
Homework Answers
c. MRS is less than price ratio - is correct
To the right of optimal bundle more than efficient x and less than efficient y are consumed which make MRS less than price ratio.
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consider an (x,y) consumption bundle that lies on the budget
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