If the marginal rate of substitution between two goods is not equal for Jack and Jill it means that:
A)both could be made better off with a different distribution of goods between them.
B)the efficient output mix is not being produced.
C)inputs are being allocated inefficiently.
D)the quantity supplied does not equal the quantity demanded.

Question

Quizplus · Accepted Answer

If the marginal rate of substitution between two goods is different for Jack and Jill, it means that they have different preferences and values for those goods. Therefore, a different distribution of goods between them could potentially make both parties better off, as they would receive more of the goods they value more highly. This is known as the Pareto principle, which states that a reallocation of goods can make at least one person better off without making anyone else worse off.

If the Marginal Rate of Substitution Between Two Goods Is