The correct answer is: A. More quantity of commodity Y than exchange X with consumer B.
The marginal rate of substitution (MRS) is the rate at which a consumer is willing to give up one good in exchange for another. It is measured as the ratio of the marginal utility of the two goods.
If the MRSxy for consumer A is greater than that of MRSxy of B, then this means that consumer A is willing to give up more of good Y in exchange for good X than consumer B is. This implies that consumer A values good Y more highly than consumer B does.
If consumer A and B are able to trade goods, then consumer A will be able to get a better deal than consumer B. Consumer A will be able to trade good Y for good X at a rate that is more favorable to them than the rate at which consumer B would be willing to trade. This means that consumer A will be able to get more of good X than they would if they did not trade, and consumer B will be able to get more of good Y than they would if they did not trade.
In other words, consumer A will be able to get more of good Y than they give up in good X, and consumer B will be able to get more of good X than they give up in good Y. This is because consumer A values good Y more highly than consumer B does, and consumer B values good X more highly than consumer A does.
Therefore, the profit for consumer A will be greater if they are able to trade goods with consumer B.
Here are brief explanations of each option:
- A. More quantity of commodity Y than exchange X with consumer B. This is the correct answer, as explained above.
- B. Consumer B to exchange XY for X for more than X. This is not necessarily true. If consumer A values good Y more highly than consumer B does, then consumer A will be willing to give up more of good Y in exchange for good X than consumer B is. This means that consumer A will be able to get a better deal than consumer B.
- C. Exchanging X or Y. This is not necessarily true. If consumer A values good Y more highly than consumer B does, then consumer A will be willing to give up more of good Y in exchange for good X than consumer B is. This means that consumer A will be able to get a better deal than consumer B, even if they only trade one good.
- D. Nothing can be said without additional information. This is not true. As explained above, we can say that consumer A will be able to get a better deal than consumer B if they are able to trade goods.