Consider the following figure and select the statements that are true. Select on
ID: 1114708 • Letter: C
Question
Consider the following figure and select the statements that are true.
Select one or more:
a. Point c indicates the output and effort levels that a self employed person will choose.
b. Point c indicates the point where the marginal rate of substitution (MRS(y,e)) is equal to the marginal rate of transformation (MRT(y,e)).
c. At point c, the self employed worker is attaining the highest utility possible given what's feasible.
d. Point c is Pareto efficient outcome.
e. Point c is a Pareto efficient outcome but not what the self employed worker chooses and that's precisely the problem.
Maximum level of effort, e y(e) Slope =- 0.5 Slope--mrs(y, e)-_ Ue (1 e) Feasible set U2 Income, yExplanation / Answer
b. Point c indicates the point where the marginal rate of substitution (MRS(y,e)) is equal to the marginal rate of transformation (MRT(y,e)). This point represents the tancency between the two curves and the slopes are equal at this point. Thus b is teh correct option.
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