[amp_mcq option1=”MRS is falling” option2=”MRS is rising” option3=”MRS is constant” option4=”None of the above” correct=”option3″]<\/p>\n
The correct answer is C. MRS is constant.<\/p>\n
When two goods are perfect substitutes, the consumer is indifferent between consuming any combination of the two goods. This means that the consumer is willing to trade one good for the other at a constant rate. The marginal rate of substitution (MRS) is the rate at which the consumer is willing to trade one good for the other. When two goods are perfect substitutes, the MRS is constant.<\/p>\n
For example, let’s say that a consumer is indifferent between consuming 1 apple and 1 orange. If the consumer is currently consuming 1 apple and 0 oranges, then the MRS is 1. This means that the consumer is willing to trade 1 apple for 1 orange. If the consumer is currently consuming 2 apples and 0 oranges, then the MRS is still 1. This means that the consumer is still willing to trade 1 apple for 1 orange.<\/p>\n
The MRS is constant when two goods are perfect substitutes because the consumer is indifferent between consuming any combination of the two goods. The consumer is willing to trade one good for the other at a constant rate.<\/p>\n","protected":false},"excerpt":{"rendered":"
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