The following diagram shows one indifference curve representing the preferences for goods x and y for one consumer.
What is the marginal rate of substitution between points A and B?
A)2/5
B)1
C)5/2

Question

The following diagram shows one indifference curve representing the preferences for goods x and y for one consumer. 
What is the marginal rate of substitution between points A and B?
A)2/5 
B)1 
C)5/2

Quizplus · Accepted Answer

The marginal rate of substitution between points A and B is the absolute value of the slope of the tangent line at point A, which is -1. Therefore, the consumer is willing to give up one unit of x for one unit of y. The best choice(s) for the consumer would be at point B, where the budget line is tangent to the indifference curve. At point B, the consumer achieves the highest possible level of utility given their budget constraint.

The Following Diagram Shows One Indifference Curve Representing the Preferences