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Author Question: An increase in input prices will cause A) supply to shift rightward, equilibrium price to rise, ... (Read 84 times)

hubes95

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on: Jul 1, 2018
An increase in input prices will cause
 
  A) supply to shift rightward, equilibrium price to rise, and equilibrium quantity to fall.
  B) supply to shift leftward, equilibrium price to rise, and equilibrium quantity to fall.
  C) supply to shift rightward, equilibrium price to fall, and equilibrium quantity to rise.
  D) supply to shift leftward, equilibrium price to fall , and equilibrium quantity to rise.

Question 2

How does competition ensure that the efficient product mix is attained?
 
  What will be an ideal response?


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xMRAZ

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Reply #1 on: Jul 1, 2018
Answer to Question 1

B

Answer to Question 2

In a competitive market, producers choose an output level where marginal cost equals price. Thus Px/Py = MCx/MCy. Each consumer maximizes her own utility subject to the given prices by setting MUx/MUy = px/py. Even though each is acting independently and in her own interest, the final outcome is that px/py = MRS = MRT, which is the condition for efficient product mix.


hubes95

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Reply 2 on: Jul 1, 2018
YES! Correct, THANKS for helping me on my review

softEldritch

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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