If Max's marginal rate of substitution for goods A and B is 3, then
A) the price of good A exceeds the price of good B.
B) the marginal utility of good A is 3 and the marginal utility of good B is 3.
C) the ratio of the total utilities of good A and good B is 3.
D) Max is willing to give up 3 units of good A for 1 unit of good B.

Question

Quizplus · Accepted Answer

Marginal rate of substitution (MRS) is the rate at which a consumer is willing to exchange one good for another while retaining the same level of utility. Therefore, if Max's MRS for goods A and B is 3, it means he is willing to give up 3 units of good A for 1 unit of good B in order to maintain the same level of satisfaction. This indicates that he values good A more than good B, and that the price of good A is likely higher than the price of good B.

If Max's Marginal Rate of Substitution for Goods a and B