Use the Following to Answer Questions 40-45

question 36

Multiple Choice

Use the following to answer questions 40-45:
Figure 15.10
-(Figure 15.10) At point G, the marginal cost of a pancake is 50 cents and the marginal cost of a bowl of cereal is also fifty cents. At this point, consumers are willing to trade 2 bowls of cereal for an additional pancake. Which of the following statements is (are) TRUE?

• A) The economy is not allocating its inputs efficiently.
• B) The economy is not achieving output efficiency because the MRS is less than the MRT.
• C) The economy is achieving output efficiency because the MRT equals 1.
• D) The economy is not achieving output efficiency because the MRS is greater than the MRT.

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Definitions:

Volcker Rule

Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that restricts U.S. banks from making certain kinds of speculative investments that do not benefit their customers.

Proprietary Trading

When a firm trades stocks, bonds, currencies, commodities, derivatives, or other financial instruments with its own money, rather than its clients' money, for its own profit.

Hedge Funds

Investment funds that use various strategies to earn active returns for their investors, often employing leverage and derivatives.

Mortgage Market Meltdown

A significant downturn in the mortgage market, often resulting from a large number of loan defaults and the devaluation of mortgage-backed securities.