sec_8 - units of clothing (or any linear combination). What...

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PAM 2000: Section Handout 8 (Based on Chapter 10) TA : Romita Mukherjee April 14, 2009 1 True, False or Uncertain: Explain Your Answers (1) A competitive equilibrium is not Pareto Efficient if some members of society are unable to afford a necessary good. (2) Assume a government likes a particular equilibrium along a contract curve. It can achieve that equilibrium through competition and income distribution. (3) If MRS’s are equal across all consumers, then efficient product mix has been achieved. 2 Problem Solving (1) How does competition ensure that the efficient product mix is attained? (2) Suppose USA can produce 10 units of food and 5 units of clothing (or any linear combination) and Canada can produce 6 units of food and 3
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Unformatted text preview: units of clothing (or any linear combination). What type of trade will occur between these two countries? Explain. (3) Suppose USA can produce 10 units of food and 5 units of clothing (or any linear combination) and Canada can produce 6 units of food and 4 units of clothing (or any linear combination). What type of trade will occur between these two countries? Explain. 1 (4) Suppose the production possibilities for two countries, producing either food or clothing, are shown in the figure above. They can each produce any linear combination as well. Measuring food on the horizontal axis, draw the joint PPF. 2...
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This note was uploaded on 11/14/2009 for the course PAM 2000 taught by Professor Evans,t. during the Spring '07 term at Cornell.

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sec_8 - units of clothing (or any linear combination). What...

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