Mario sees popcorn and pretzels as perfect substitutes.He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels.If Mario consumes only popcorn, then we know that the relative price of popcorn in terms of pretzels is:
A)less than 1/3.
B)greater than
C)1/3.less than 3.
D)greater than 3.

Question

Quizplus · Accepted Answer

Mario is willing to substitute 3 cups of popcorn for 1 cup of pretzels, indicating that he values 1 cup of pretzels as equivalent to 3 cups of popcorn. Therefore, the relative price of popcorn in terms of pretzels must be less than 1/3 for him to consume only popcorn.

Mario Sees Popcorn and Pretzels as Perfect Substitutes