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(Figure: Pancakes and Cereal I) Suppose the Economy Is Achieving

Question 42

Multiple Choice

(Figure: Pancakes and Cereal I) Suppose the economy is achieving output efficiency at point I, where the marginal rate of transformation (MRT) is 1/4 and the marginal product of labor in the cereal industry is 12. Which of the following statements is TRUE? (Figure: Pancakes and Cereal I)  Suppose the economy is achieving output efficiency at point I, where the marginal rate of transformation (MRT)  is 1/4 and the marginal product of labor in the cereal industry is 12. Which of the following statements is TRUE?   A)  The marginal rate of substitution (MRS)  between pancakes and cereal is 4. B)  The marginal product of capital in the pancake industry divided by the marginal product of capital in the cereal industry is 4. C)  The marginal product of capital in the pancake industry is 3. D)  MRS/MRT = 1/4.


A) The marginal rate of substitution (MRS) between pancakes and cereal is 4.
B) The marginal product of capital in the pancake industry divided by the marginal product of capital in the cereal industry is 4.
C) The marginal product of capital in the pancake industry is 3.
D) MRS/MRT = 1/4.

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