-Rick's income is $54 a week and he spends all of it on CDs and sandwiches. The price of a CD is $6 and the price of a sandwich is $3. The figure above illustrates Rick's preferences. At Rick's best affordable point, the marginal rate of substitution is
A) 0.5 sandwiches per CD.
B) 1 sandwich per CD.
C) 1.5 sandwiches per CD.
D) 2 sandwiches per CD.

Question

-Rick's income is $54 a week and he spends all of it on CDs and sandwiches. The price of a CD is $6 and the price of a sandwich is $3. The figure above illustrates Rick's preferences. At Rick's best affordable point, the marginal rate of substitution is
A) 0.5 sandwiches per CD. 
B) 1 sandwich per CD. 
C) 1.5 sandwiches per CD. 
D) 2 sandwiches per CD.

Quizplus · Accepted Answer

At the best affordable point, the marginal rate of substitution (MRS) equals the price ratio. The price of a CD is $6, and the price of a sandwich is $3, so the price ratio is 6/3 = 2 sandwiches per CD.

-Rick's Income Is $54 a Week and He Spends All