What Does the Marginal Rate of Substitution Measure

question 196

Multiple Choice

What does the marginal rate of substitution measure?

• A)It measures the rate at which a consumer must give up one good to purchase another good.
• B)It measures the rate at which a consumer will substitute one good for another when the price of one good changes.
• C)It measures the change in utility from consuming one additional unit of a good.
• D)It measures the rate at which a consumer is willing to trade off one product for another while keeping utility constant.

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Definitions:

Natural Resources

Raw materials and resources found in the environment that are used for economic gain, such as minerals, forests, water, and fertile land.

Net Benefits

The difference between the total benefits and total costs associated with an economic decision or project.

Greater Extraction

Refers to the increased removal of natural resources, such as minerals, fossil fuels, or timber from the environment, often for commercial purposes.

Best Use

The most efficient or profitable use of a resource, property, or asset, taking into consideration its potential to generate the highest return or utility.