Consider the choice between an economic bad, air pollution, and a measure of expenditure on all other goods, income. The MRS of the indifference curves in this space:
A)is zero.
B)is positive.
C)is negative.
D)is not defined properly.

Question

Quizplus · Accepted Answer

The MRS (Marginal Rate of Substitution) between income and air pollution is positive because as income increases, individuals generally desire less air pollution. Therefore, they are willing to give up some income to reduce pollution. This is reflected by the downward sloping indifference curves in this space.

Consider the Choice Between an Economic Bad, Air Pollution, and a Measure