Li's Marginal Rate of Substitution of Hamburger for Steak Is

question 32

Multiple Choice

Li's marginal rate of substitution of hamburger for steak is 1/4, and Zhang's marginal rate of substitution of hamburger for steak is 2. The allocation of hamburger and steak ____ Pareto-efficient between Li and Zhang because ____.

• A) is; no trade can make both Li and Zhang better off
• B) is; Zhang's MRS is exactly 8 times larger than Li's MRS
• C) is not; if Li traded some amount of hamburgers to Zhang for some steak, it is possible that each can be better off
• D) is not; if Li traded some amount of steak to Zhang for some hamburgers, it is possible that each can be better off

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