Author Question: According to the Fundamental Theorems of Welfare Economics, the competitive equilibrium is dependent ... (Read 28 times)

bio_gurl · **on:** Jul 1, 2018

According to the Fundamental Theorems of Welfare Economics, the competitive equilibrium is dependent on the relative bargaining powers of the parties trading.

Indicate whether the statement is true or false

Question 2

The guiding function of price is

A) the movement of price to clear the market of any shortages or surpluses.
B) the use of price as a signal to guide government on the use of market subsidies.
C) a long-run function resulting in the movement of resources into or out of markets.
D) the movement of price as a result of changes in the demand for a product.

ebenov · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

False. The competitive equilibrium assumes that all parties are price takers. The prices and quantities are determined by the endowment point and the MRS's.

Answer to Question 2

C