Question:
Match List-I with List-II.
List-I List-II A. Efficiency in exchange I. Externalities B. Efficiency in the use of inputs II. \(MRS^A_{xy}=MRS^B_{xy}\) C. Efficiency in the output market III. \(MRTS^X_{LK}=MRTS^Y_{LK}\) D. Market failure IV. \(MRT_{xy}=MRS_{xy}\)
Match List-I with List-II.
| List-I | List-II |
|---|---|
| A. Efficiency in exchange | I. Externalities |
| B. Efficiency in the use of inputs | II. \(MRS^A_{xy}=MRS^B_{xy}\) |
| C. Efficiency in the output market | III. \(MRTS^X_{LK}=MRTS^Y_{LK}\) |
| D. Market failure | IV. \(MRT_{xy}=MRS_{xy}\) |
Show Hint
Efficiency in exchange uses \(MRS\), efficiency in production uses \(MRTS\), and product-mix efficiency uses \(MRT=MRS\).
Updated On: May 22, 2026
- A-II, B-III, C-IV, D-I
- A-II, B-IV, C-I, D-III
- A-IV, B-II, C-I, D-III
- A-III, B-IV, C-II, D-I
Show Solution
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The Correct Option is A
Solution and Explanation
Concept: General equilibrium efficiency has three main conditions: efficiency in exchange, efficiency in production, and efficiency in product mix.
Step 1: Match efficiency in exchange.
Efficiency in exchange occurs when the marginal rate of substitution is equal for all consumers. \[ MRS^A_{xy}=MRS^B_{xy} \] So, \[ A \rightarrow II \]
Step 2: Match efficiency in use of inputs.
Efficiency in the use of inputs occurs when marginal rate of technical substitution is equal across firms. \[ MRTS^X_{LK}=MRTS^Y_{LK} \] So, \[ B \rightarrow III \]
Step 3: Match efficiency in output market.
Efficiency in output market requires: \[ MRT_{xy}=MRS_{xy} \] So, \[ C \rightarrow IV \]
Step 4: Match market failure.
Externalities are an important cause of market failure. \[ D \rightarrow I \] Therefore, the correct matching is: \[ A-II,\ B-III,\ C-IV,\ D-I \]
Step 1: Match efficiency in exchange.
Efficiency in exchange occurs when the marginal rate of substitution is equal for all consumers. \[ MRS^A_{xy}=MRS^B_{xy} \] So, \[ A \rightarrow II \]
Step 2: Match efficiency in use of inputs.
Efficiency in the use of inputs occurs when marginal rate of technical substitution is equal across firms. \[ MRTS^X_{LK}=MRTS^Y_{LK} \] So, \[ B \rightarrow III \]
Step 3: Match efficiency in output market.
Efficiency in output market requires: \[ MRT_{xy}=MRS_{xy} \] So, \[ C \rightarrow IV \]
Step 4: Match market failure.
Externalities are an important cause of market failure. \[ D \rightarrow I \] Therefore, the correct matching is: \[ A-II,\ B-III,\ C-IV,\ D-I \]
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