Question: Why, in an economy with a single consumer, output efficiency requires the marginal rates of substitution and transformation to be identical. Explain why the same

Why, in an economy with a single consumer, output efficiency requires the marginal rates of substitution and transformation to be identical. Explain why the same condition must hold in an economy with many consumers, using a graph (or graphs) to illustrate your explanation.

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For the exchange efficiency condition to hold the MRS must be equal for each consumer Every individual maximizes utility by choosing a bundle of goods ... View full answer

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