If everyone in an economy buys and sells goods at market-wide prices:
A) people will pay the same prices, so everyone's marginal rate of substitution will be the same.
B) people will pay the same prices, but will have different marginal rates of substitution.
C) people will pay different prices, but will have the same marginal rates of substitution.
D) people will pay different prices and therefore will have different marginal rates of substitution.

Question

Quizplus · Accepted Answer

If everyone is buying and selling goods at market-wide prices, then everyone will be paying the same prices for the same goods. Therefore, everyone's marginal rate of substitution (the rate at which they are willing to exchange one good for another) will be the same.

If Everyone in an Economy Buys and Sells Goods at Market-Wide