-Refer to Exhibit E-8. The marginal rate of substitution going from point a to point b is
A) -4
B) -1
C) -1/4
D) -8
E) -2

Question

-Refer to Exhibit E-8. The marginal rate of substitution going from point a to point b is
A) -4 
B) -1 
C) -1/4 
D) -8 
E) -2

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is calculated as the ratio of the change in the quantity of good Y to the change in the quantity of good X as one moves from point a to point b. Given that the movement from a to b involves a decrease in Y by 4 units and an increase in X by 1 unit, the MRS is -4 (since MRS = ΔY/ΔX = -4/1 = -4).