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In equilibrium, the MRT should not equal the MRS of all individuals. Uncertain True False

In equilibrium, the MRT should not equal the MRS of all individuals.

Uncertain

True

False
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Answer #1

The statement is True

Because, “MRS defines how much a consumer is willing to give up of good X for 1 additional unit of good Y to stay on the same utility level, while MRT is how much a supplier is willing to give up producing good X for 1 additional unit of good Y, therefore in a perfectly competitive market, equilibrium will take place only when all the parties are better off by making the trade”. ‘In equilibrium, either of the parties will switch from what they wish to give up as it is favourable for them’ Therefore, for equilibrium, the MRT should not equal the MRS of all individuals.

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