Indicate whether the following statements are TRUE or FALSE and explain your answer fully with an...

Indicate whether the following statements are TRUE or FALSE and explain your answer fully with an adequate explanation

a)An efficient outcome is desirable because it allows us to make Pareto improvements.

b)Unlike a consumer, a firm does not face a budget constraint.

c)If the wage rate increases, then those who work have a stronger incentive to supply labor.

Solutions

Expert Solution

Answer 1) An efficient outcome is desirable because it allows us to make Pareto improvements - This statement is True because pareto outcome is always efficient and if the outcome is pareto efficient then there would be chance to reallocate the efficient to have pareto outcome.

2) Unlike a consumer, a firm does not face a budget constraint - This statement is False because firms have also budget constraint, they also want to choose all those combination of input which minimise their total cost. Hence firms also face a constraint like consumer.

3) If the wage rate increases, then those who work have a stronger incentive to supply labor - This statement is True because as wage increases the opportunity cost of leisure increases as a result because if substitution he will substitute labor for work.

Note : Please like my answer and comment for further clarification, it's urgent.

Rahul Sunny answered 1 year ago

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