An exchange of goods between two individuals,Frank and Linda,will be mutually beneficial:
A)when their marginal rates of substitution differ.
B)until they consume the same amount of each good.
C)as long as each one thinks he or she can benefit at the other's expense.
D)as long as they are on the contract curve.

Question

Quizplus · Accepted Answer

An exchange is mutually beneficial when their marginal rates of substitution differ because it allows both individuals to trade goods in a way that increases their utility until their marginal rates of substitution equalize.

An Exchange of Goods Between Two Individuals,Frank and Linda,will Be