If the two individuals' indifference curves through their endowment bundles are tangent to one another at the endowment bundle (in the Edgeworth Box), then the endowment bundle is a competitive equilibrium allocation.
Answer the following statement true (T) or false (F)
True
Rationale: In this case, we can draw a budget line through the endowment bundle such that both individuals optimize at the endowment bundle along that budget line. The slope of that line then incorporates competitive equilibrium prices that support the endowment allocation as a competitive equilibrium allocation.
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Refer to Figure 8.3. Holding other variables constant, if the economy is originally in equilibrium at the intersection of D1 and S1 and firms experience an increase in technology of production, the economy would move to the new equilibrium point
represented by A) w1 and L2. B) w3 and L2. C) w2 and L2. D) w2 and L3.
Which product listed is an example of an inferior good?
The relationship between a consumer's monthly income and monthly consumption of four products, A-D, is shown below.
A. A
B. B
C. C
D. D