Shirley knows her marginal rate of substitution of mangos in place of bananas is equal to three.The price of bananas is $0.50 and the price of mangos is $1.00.Shirley should buy more mangos.False

Question

Quizplus · Accepted Answer

Shirley should buy more bananas because the price of bananas is lower than the price of mangos, and her marginal rate of substitution of mangos in place of bananas is equal to three. This means that she is willing to give up three bananas to get one mango. So, she should buy more bananas and fewer mangos until the marginal rate of substitution is equal to the price ratio.

Shirley Knows Her Marginal Rate of Substitution of Mangos in Place