Answer the following statement(s) true (T) or false (F)
1. The price of a good accurately reflects the total value it creates for society.
2. The Invisible Hand Theorem shows that competitive markets create the maximum possible social gain, even when all interactions among the markets are taken into account.
3. In an Edgeworth box, all Pareto-optimal allocations lie within the region of mutual advantage.
4. In an Edgeworth box economy, a competitive equilibrium must lie on the contract curve within the region of mutual advantage.
5. The gains from international trade are greatest when a country's autarkic relative prices are similar to the world relative prices.
1. False
2. True
3. False
4. True
5. False
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In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month, which causes a shortage
Suppose that apartments are a normal good and incomes rise. The increase in income A) decreases the shortage. B) has no effect on the shortage. C) increases the shortage. D) raises the rent.
Define the following terms and explain their significance to the study of macroeconomics:
a. fiscal policy b. transfer payments c. effect of income taxes on the multiplier d. supply-side tax cuts