Suppose MRS is not the same across all consumers. In this case, the economic outcome is not fully efficient because:
A) exchange is inefficient.
B) the use of inputs in production is inefficient.
C) the mix of outputs in inefficient.
D) none of the above

Question

Quizplus · Accepted Answer

When the Marginal Rate of Substitution (MRS) is not the same across all consumers, it indicates that there is an inefficiency in exchange. This is because if one consumer values a good more than another, there is potential for welfare-enhancing trade that has not been exploited.

Suppose MRS Is Not the Same Across All Consumers