A competitive equilibrium is efficient in the production and exchange of two goods X and Y when
A) MRSXY = MRTLK (where L = labor input and K = capital input).
B) MRTXY = MRSLK (where L = labor input and K = capital input).
C) MRSXY = MRTXY.
D) MCX/MCY = PY/PX.
C
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Increases in the quantity of money can start a ________ inflation, and an increase in government expenditure can start a ________ inflation
A) demand-pull; demand-pull B) demand-pull; cost-push C) cost-push; cost-push D) cost-push; demand-pull E) None of the above is correct because increases in the quantity of money are necessary to continue an inflation but cannot start an inflation.
Firms in long-run equilibrium in a perfectly competitive industry will produce at the low points of their average total cost curves because
a. free entry implies that long-run profits will be zero no matter how much each firm produces. b. firms seek maximum profits and to do so they must choose to produce where average costs are minimized. c. firms maximize profits and free entry implies that maximum profits will be zero. d. firms in the industry desire to operate efficiently.
During 2001-2004, the Fed injected additional reserves into the banking system, which reduced the federal funds rate and other short-term interest rates. Other things constant, what is the most likely short-run impact of this policy?
a. an increase in the rate of unemployment b. a reduction in the growth of employment c. an increase in aggregate demand and real GDP d. a reduction in the long-run rate of inflation
Given the strict quantity theory of money, if the quantity of money were decreased by 50 percent, prices would:
A. fall by 50 percent. B. rise by 50 percent. C. increase by 100 percent. D. decrease by 100 percent.