If the Marginal Rate of Substitution Is Not Diminishing, It

question 16

True/False

If the marginal rate of substitution is not diminishing, it must mean that tastes violate convexity (assuming that our other assumptions about tastes hold).

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Definitions:

Marginal Revenue

Marginal revenue is the additional income received from selling one more unit of a product or service.

Marginal Cost

Marginal cost is the increase or decrease in the total cost of producing one additional unit of a good or service.

Total Revenue

The total amount of money generated by a firm from the sale of its goods or services, calculated before any expenses are subtracted.

Profit Maximizes

Refers to achieving the highest possible profit, where the difference between revenue and costs is at its maximum.