Figure 21-7

-Refer to Figure 21-7.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.This consumer will choose a consumption bundle where the marginal rate of substitution is
A)2.
B)2/3.
C)1/2.
D)1/3.

Question

Figure 21-7
 
-Refer to Figure 21-7.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.This consumer will choose a consumption bundle where the marginal rate of substitution is
A)2. 
B)2/3. 
C)1/2. 
D)1/3.

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility. It is equal to the ratio of the prices of the two goods. Here, the price of Skittles is $2 and the price of M&M's is $4, so the MRS is 2/4, which simplifies to 1/2.

Figure 21-7 -Refer to Figure 21-7.Assume That the Consumer Depicted in the Consumer