If an economy has reached the general equilibrium then
A) the actions leading to it are not grounded in rational behavior.
B) one group is operating in isolation of all other groups.
C) all interconnected groups are included and their decision process is modeled.
D) the outcome is not necessarily feasible.
E) there is a transaction possible that would be a Pareto improvement.

Question

Quizplus · Accepted Answer

General equilibrium means that all interconnected groups in the economy are included and their decision-making processes are modeled, leading to a state of balance where supply equals demand in all markets simultaneously. This requires rational behavior by all participants and assumes that all externalities have been accounted for. Therefore, C is the correct choice. A, B, and D are incorrect because they are contradictory to the assumptions of general equilibrium. E is also incorrect because Pareto improvements do not necessarily lead to general equilibrium, and the existence of such an improvement would not necessarily indicate that the economy is in equilibrium.

If an Economy Has Reached the General Equilibrium Then