Manny consumes only bananas and DVDs,and he is on his highest possible indifference curve.Two bundles on this indifference curve are bundle A (5 bananas and 2 DVDs),and bundle B (3 bananas and 3 DVDs).Between points A and B,what is Manny's marginal rate of substitution of bananas for DVDs?
A)1
B)2
C)0.5
D)1.33

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which Manny is willing to give up bananas for DVDs while remaining on the same indifference curve. Between bundles A and B, Manny gives up 2 bananas to gain 1 DVD, so the MRS is 2/1 = 0.5.

Manny Consumes Only Bananas and DVDs,and He Is on His