Figure 19-3 Illustrates the Determination of an Efficient Output Mix

question 24

Multiple Choice

Figure 19-3 illustrates the determination of an efficient output mix in a two good economy.The output combination is represented by point Z and the consumption point of a representative consumer is W.The slope of the line zz represents the marginal rate of transformation [MRT].
Refer to Figure 19-3.Suppose the marginal rate of substitution [MRS] at point W is 3Y/2X instead of 2Y/1X.Which of the following will be true?

• A)The representative consumer's MRS will be less than the MRT,which implies more Y and less X will make all consumers better off.
• B)The economy will be producing an efficient output combination.
• C)The representative consumer's MRS 3Y/2X will be less than the MRT,which implies more X and less Y will make both consumers better off.
• D)The allocation of the goods between the two individuals is efficient.

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Definitions:

Socially Optimum

The most desirable level of output or activity from a societal perspective, balancing costs and benefits to achieve maximum social welfare.

Coal Mine Pollution

The release of harmful substances into the environment as a result of coal mining activities, affecting air, water, and soil quality.

Automobile Emissions

The pollutants released into the atmosphere by motor vehicles, including carbon monoxide, nitrogen oxides, and hydrocarbons.

Specific Tax

A fixed amount imposed by the government on a product, per unit of quantity.