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 pay the same prices for the same goods. This means that everyone's budget constraint will look the same, and therefore everyone's marginal rate of substitution (the rate at which they're willing to trade between two goods) will also be the same.

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