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A budget line is Y = 500 = pAA+pBB = 5A + 10B. Also, the marginal...

A budget line is Y = 500 = pAA+pBB = 5A + 10B. Also, the marginal rate of substitution = MRS = =MUB/MUA = -3A/B.

With apples (A) on the vertical axis and bananas (B) on the horizontal axis, the marginal rate of transformation, MRT, is equal to:

A) -2

B) -.5

C) .5

D) 2

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Answer #1

Ans. A) -2

The marginal rate of transformation (MRT) =

MRT = -10/5 ( from budget equation 500 = 5 A+10 B)

MRT = -2

Hence, the marginal rate of transformation is -2.

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