Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods. Can Pareto equilibrium be derived?
What will be an ideal response?
It is possible to pick points along the PPF that have an MRT that matches equilibrium set of
MRS. Mathematically, it can be very difficult and sometimes impossible to find.
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We expect the marginal utility curve to be downward sloping
Indicate whether the statement is true or false
When the central bank of a country sells government bonds, _____
a. money flows from individual banks to the central bank, thus increasing the money supply in the economy b. money flows from the central bank to individual banks, thus reducing the money supply in the economy c. money flows from individual banks to the central bank, thus reducing the money supply in the economy d. money flows from the central bank to individual banks, thus increasing the money supply in the economy
The budget constraint shows the
A. amount of a good the consumer will buy at various prices. B. possible combinations of goods that can be purchased with a specified income. C. changes in consumption of goods that a consumer makes when his income increases. D. combinations of goods that generate the same amount of total satisfaction.
Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month
Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that A) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250. B) Soo Jin did not have a choice; her roommate was a slob. C) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $950. D) the cost of having one's own space outweighs the benefits.