The competitive equilibrium allocation is the allocation of goods
A) that does not allocate more than the total amount of goods available in the economy
B) in which agents consume exactly the quantities of the goods that the agents initially possessed
C) determined by a competitive equilibrium

Question

Quizplus · Accepted Answer

The definition of a competitive equilibrium allocation is given as the allocation of goods determined by a competitive equilibrium. Therefore, choice C is the correct answer. Choice A is incorrect because it refers to the feasibility constraint of the allocation, while choice B is incorrect because it is a specific type of allocation (i.e. initial endowment allocation) that does not necessarily have to coincide with the competitive equilibrium allocation.

The Competitive Equilibrium Allocation Is the Allocation of Goods