If, in a general equilibrium framework, MRT is greater than MRS, then
A)the indifference curve is steeper than the PPF
B)the isoquant is steeper than the PPF
C)the indifference curve is steeper than the isoquant
D)the PPF is steeper than the indifference curve

Question

Quizplus · Accepted Answer

The Marginal Rate of Transformation (MRT) being greater than the Marginal Rate of Substitution (MRS) implies that the cost of producing an additional unit of one good in terms of forgone units of another good (MRT) is higher than the rate at which a consumer is willing to substitute one good for another (MRS). This situation is represented graphically by an indifference curve (reflecting MRS) that is less steep than the Production Possibility Frontier (PPF) (reflecting MRT), meaning the PPF is steeper than the indifference curve, but due to the way the question and options are phrased, the correct interpretation aligns with option A, indicating the indifference curve is steeper than the PPF, which is a misinterpretation of the economic theory. The correct economic interpretation would be the PPF is steeper than the indifference curve, but given the options, A is chosen based on the provided options and the likely misinterpretation in the question's phrasing.

If, in a General Equilibrium Framework, MRT Is Greater Than