The Marginal Rate of Substitution Between Two Goods Equals the

question 17

Multiple Choice

The marginal rate of substitution between two goods equals the

• A) marginal utility of one divided by the marginal utility of the other.
• B) marginal utility of one times the marginal utility of the other.
• C) marginal cost of one times the marginal cost of the other.
• D) price of one good divided by the price of the other.

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Definitions:

Perfectly Competitive Firm

A company operating in a market where there are many sellers and buyers, the product is homogeneous, and there are no barriers to entry or exit.

Downward Sloping

Describes a line or curve on a graph that shows a decrease in value as it moves from left to right.

Average Total Cost Curve

A graph that shows a firm's per-unit cost (both fixed and variable) at various levels of output.

Upward-sloping

Describes a curve on a graph that moves higher as it goes from left to right, often used to illustrate the relationship between price and supplied quantity in supply curves.