The diagram below shows the general equilibrium model for X and Y for a small hypothetical economy. Point A in this diagram represents positions where
A)there is an excess supply of good X.
B)there is an excess demand for good X.
C)the economy is at an economically efficient allocation of resources.
D)good Y costs less to produce than its production cost at pointC.

Question

The diagram below shows the general equilibrium model for X and Y for a small hypothetical economy. Point A in this diagram represents positions where 
A)there is an excess supply of good X. 
B)there is an excess demand for good X. 
C)the economy is at an economically efficient allocation of resources. 
D)good Y costs less to produce than its production cost at pointC.

Quizplus · Accepted Answer

At point A, the quantity demanded of good X is less than the quantity supplied, indicating an excess supply. Therefore, there is an excess demand for good Y, meaning that the economy is not at an economically efficient allocation of resources.

The Diagram Below Shows the General Equilibrium Model for X