Are all efficient outcomes also equitable? Explain
What will be an ideal response?
Equity is concerned with the distribution of resources across society. An efficient outcome is one that maximizes social surplus. However, maximizing social surplus is not always consistent with equity considerations. An economy can make the most efficient use of the resources that it has but at the same time, these resources may not be equally distributed in society.
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Use the following diagram to answer the next question.
Assume the economy is initially at the full employment level of real GDP. A decrease in net exports will ________.
A. reduce the full employment level of real GDP B. reduce output in the economy C. raise the price level D. reduce the unemployment rate
"Because chips and salsa are complements, an increase in the price of chips will cause the demand for salsa to decrease
This initial shift in demand for chips results in a higher price for chips; this higher price will cause the demand curve for chips to shift to the right." Which of the following correctly comments on this statement? A) The statement is false because one cannot assume that chips and salsa are complements for all consumers. B) The statement is false because a change in the price of chips would not change the demand for chips. C) The statement will be true if consumer tastes for chips and salsa do not change. D) The statement is false because salsa is an inferior good; chips are normal goods.
One of the conclusions of the model of monopoly is that the firm earns economic profits above the required opportunity cost of the factors of production. Are these profits lost to society? Do they take spending power from the economy, and act as a brake on economic growth?
In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?
A. A higher price and fewer firms. B. A higher price and more firms. C. A lower price and more firms. D. A lower price and fewer firms.