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QUESTION 1 Classify the following statement as true or false
QUESTION 1 Classify the following statement as true or false. Justify the answer. The justification is more important than the classification In the perfectly competitive market for surgical masks, demand has increased in the short run, while neither the technology used for their production nor the price of labor (the only input variable in the short run) have changed. If the technology is characterized by decreasing marginal returns of labor, then the equilibrium price of surgical masks must have increased.
2
Which of the following is one of the features of the social indifference curve? Please choose one a. Show the same balance level b. Show the same level of benefit c. Show the same price level D. Show the same production level to. Show the same cost level
Expert Solution
1 A fall in marginal return of labour increase the marginal cost of the firm. This will leads to a fall in supply. The increase in demand and fall in supply will together constitute an increase in equilibrium price in shortrun.
Answer: True
2
Answer: option b
The curve shows various combinations of social welfare those give the same level of benefits to the citizens of the country.
Example: suppose there are 4 policies to be implemented by the government. Usually, the government takes combinations of these policies, giving the same high benefits. Those combinations are plotted in the graph, called social indifference curve.
Other options are not correct.
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