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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If the government finances an increase in government purchases with an increase in taxes, which of the following would you expect to see?
A) a decrease in the interest rate B) a decrease in aggregate demand C) an increase in the exchange rate D) an increase in net exports
Suppose when a market has four firms, average economic profit is $1,000 per month. When the market has five firms, the average economic profit is -$50 per month. This suggests that
A) the long-run equilibrium number of firms is between four and five. B) the long-run equilibrium number of firms is four. C) the long-run equilibrium number of firms is five. D) there is no long-run equilibrium in this market as profits can never be zero.