Three Main Conditions Are Necessary for General Equilibrium to Hold

question 16

Multiple Choice

Three main conditions are necessary for general equilibrium to hold in the market economy. The first requires that all consumers are in equilibrium meaning that all beneficial exchanges have been made between them. The second is that all inputs are employed in their best use meaning that costs are as low as possible for everything being produced. The third condition requires that

• A)the right mix of goods is being produced.
• B)the distribution of income is done according to the societal values so that all the contract curves can be reached.
• C)the production possibilities frontier move outward indicating economic growth.
• D)absolute price levels do not change.

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