Figure 16.4.1 -A Competitive Equilibrium Is Efficient in the Production and Exchange

question 71

Multiple Choice

Figure 16.4.1
-A competitive equilibrium is efficient in the production and exchange of two goods X and Y when:

• A) MRS_XY = MRT_LK (where L = labor input and K = capital input).
• B) MRT_XY = MRS_LK (where L = labor input and K = capital input).
• C) MRS_XY = MRT_XY.
• D) MC_X/MC_Y = P_Y/P_X.

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Definitions:

Tacit Collusion

An unspoken, unofficial agreement between competitors to avoid certain competitive behaviors, such as price wars, without explicit communication.

Quantity-fixing Agreements

Arrangements among competitors to limit the amount of goods or services produced or supplied, in order to influence market prices or conditions.

Explicitly Colludes

A situation where companies or individuals openly agree to work together, often illegally, to manipulate prices or markets.

Price-and-quantity-fixing

Practices by which firms set the price and output levels to control market conditions, often regarded as anti-competitive.