Linda consumes two goods: x and y, has preferences that are smooth and maximizers are always interior, and income W=$150. If px=$25 and py=$5, what is the marginal rate of transformation of y into x (MRTxy) at her optimal bundle?

a. -1/2
b. -5
c. 1/5
d. -3
e. 7/2

Marginal rate of transformation is the rate at which one good can be transformed into another in a 2 product economy given a certain amount of resources.

We are asked to calculate marginal rate of transformation of y into x.

The formula we will use is

Marginal rate by transformation= (change in Y)/change in x

Income= $150

Price of x= $25

Price of y= $5

If we were to produce only x from income we will have= 150/25= 6

If we were to produce only y from income= 150/5= 30

To gain 30 units of y we will have to forgo 6 units of x

Marginal rate of transformation= 30/-6

Marginal rate of transformation= -5

Linda consumes two goods: x and y, has preferences that are smooth and maximizers are always interior, and income W=$150. If px=$25 and py=$5, what is the marginal rate of transformation of y into x (MRTxy) at her optimal bundle? a. -1/2 b. -5 c. 1/5 d. -3 e. 7/2

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Linda consumes two goods: x and y, has preferences that are smooth and maximizers are always interior, and income W=$150. If px=$25 and py=$5, what is the marginal rate of transformation of y into x (MRTxy) at her optimal bundle?

a. -1/2
b. -5
c. 1/5
d. -3
e. 7/2