Suppose the equilibrium price of meals is 1 and of films

prefer allocation to allocation ? 2 Suppose the equilibrium price of meals is 1 and of films 5. There is perfect competition and no externality. What can we say about the relative benefit to consumers of a marginal film and a marginal meal? the relative marginal production cost of films and meals? the relative marginal product of variable factors in the film and meal industries? Hence explain why competitive equilibrium is Pareto-efficient. 3 In deciding whether or not to drive your car during the rush hour, you think about the cost of petrol and the time of the journey. Do you slow other people down by driving in the rush hour? Is this an externality? Does this mean that too many or too few people drive cars in the rush hour? Would it make sense for city authorities to restrict commuter parking in cities during the day? 4 Explain how an economist might defend laws making it compulsory to wear seat belts in cars. 5 In

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