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(Solved): Mike and John are camping and each has brought cans of tuna sh and baked beans. Mike's marginal rate ...



Mike and John are camping and each has brought cans of tuna sh and baked beans. Mike's marginal rate of substitution (MRS) of tuna for beans is 2.0, which means he is willing to give up 2.0 cans of beans for one can of tuna. John's MRS of tuna for beans is 2.5. What trade, if any, should Mike and John make to reach an ecient allocation of tuna and beans assuming both goods have diminishing marginal utility? (a) Mike should trade beans to John for tuna (b) Mike should trade tuna to John for beans (c) No trade is necessary. They are already at an ecient allocation. (d) There is not enough information to determine what trade should be made



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