Asked by Aparna Narayanan on Jul 21, 2024
Verified
Which of the following is a condition for efficiency in the output market?
A) MRT = MPL/MPK
B) The marginal rate of substitution is the same for all customers.
C) The marginal rate of technical substitution must be the same for all producers.
D) The marginal rate of transformation must equal the marginal rate of substitution.
Efficiency
The extent to which resources are used optimally to achieve the desired output, often maximizing productivity while minimizing waste.
Output Market
A marketplace in which finished goods and services are traded, involving businesses selling to consumers or other businesses.
Marginal Rate
The rate of change in a quantity or cost in response to a one-unit change in another variable.
- Describe the factors that contribute to efficiency in production and output markets, highlighting the importance of marginal rates of substitution and transformation.
Verified Answer
KC
Krutika ChordiaJul 27, 2024
Final Answer :
D
Explanation :
Efficiency in the output market occurs when the marginal rate of transformation (MRT) equals the marginal rate of substitution (MRS), meaning that the rate at which one good can be transformed into another must equal the rate at which consumers are willing to substitute one good for another. This ensures that resources are being allocated in the most efficient way possible.
Learning Objectives
- Describe the factors that contribute to efficiency in production and output markets, highlighting the importance of marginal rates of substitution and transformation.