Suppose,given their initial endowments of milk [M] and cookies [C],you know that Ashley's marginal rate of substitution of cookies for milk [MRS_CM] = 3M/1C,Bill's MRS_CM = 8M/8C,and Carol's MRS_CM = 5M/10C.Given this information,a mutually beneficial trade: A)cannot not exist between the three individuals. B)would involve Ashley and Bill selling cookies to Carol. C)would involve Ashley and Bill selling milk to Carol. D)would involve Carol selling milk to Ashley and cookies to Bill.

Question

Quizplus · Accepted Answer

Since Ashley's MRS_CM is the lowest at 3M/1C, it means that she values cookies relatively more than milk compared to Bill and Carol. Conversely, Carol values cookies relatively less than milk compared to Ashley and Bill. Therefore, a mutually beneficial trade would involve Ashley and Bill selling their milk to Carol, who values it more, and in return, Carol can sell her cookies to them, as they value it relatively more. This trade benefits all parties involved.

Suppose,given Their Initial Endowments of Milk [M] and Cookies [C],you