Suppose that choice sets are convex. State assumptions about tastes that are necessary and sufficient to guarantee that the solution to the consumer optimization problem is a unique interior solution. (Explain)
What will be an ideal response?
To rule out corner solutions, it is necessary and sufficient to assume that all goods are essential. To rule out multiple interior solutions, it is necessary and sufficient to assume that tastes are (strictly) convex. While these assumptions are not necessary for the solution to be a unique interior solution, they are necessary to guarantee that the solution to be unique and in the interior.
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A private subsidy has what effect on the amount of a good or service produced? Is a private subsidy an appropriate policy to offset the inefficiency from an external cost or an external benefit?
What will be an ideal response?
In the BOP, travel and tourism are included in
A) unilateral transfers. B) the capital account. C) the merchandise account. D) the services account.