Three main conditions are necessary for general equilibrium to hold in the market economy. The first requires that all consumers are in equilibrium meaning that all beneficial exchanges have been made between them. The second is that all inputs are employed in their best use meaning that costs are as low as possible for everything being produced. The third condition requires that
A. the production possibilities frontier move outward indicating economic growth.
B. absolute price levels do not change.
C. the distribution of income is done according to the societal values so that all the contract curves can be reached.
D. the right mix of goods is being produced.
Answer: D
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Which of the following would lead to a positive supply shock?
a. An increase in the money supply. b. A decrease in taxes. c. The discovery of a more efficient production method. d. An increase in consumer confidence. e. An increase in energy prices.
Answer the following statements true (T) or false (F)
1. The revenue and protective purposes of a tariff are largely incompatible. 2. Tariffs bring about a transfer of income from the consumer of the protected product to domestic producers of the product. 3. For an anti dumping tariff to be imposed in the United States, competitive damage from dumping must be shown. 4. Perhaps the strongest argument for trade restrictions is that they protect U.S. workers from low-wage foreign workers. 5. During times of recession, retaining the domestic economy’s money at home is a valid argument for restricting imports.