The marginal rate of transformation of y for x represents A) the slope of the budget constraint. B) the rate at which the consumer must give up y to get one more x. C) -P_x/P_y. D) All of the above.

Question

Quizplus · Accepted Answer

The marginal rate of transformation (MRT) is the slope of the production possibility frontier, which is analogous to the slope of the budget constraint in consumer theory. It represents the rate at which one good must be sacrificed to produce more of another, similar to how a consumer must give up some of one good to obtain more of another. The MRT is also represented by the negative ratio of the prices of the two goods, -P_x/P_y.

The Marginal Rate of Transformation of Y for X Represents