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Consider an economy with two goods: movies and books. In the graph below, the solid blue curve is the firm's production possibilities frontier. The dashed
Consider an economy with two goods: movies and books. In the graph below, the solid blue curve is the firm's production possibilities frontier. The dashed orange curve represents the consumer's indifference curve. The solid green line has a slope equal to (the negative of) the relative market price of books relative to movies. Movies Books If the consumer and the producer are making optimal choices given market prices, does the market clear in this economy? Explain your reasoning clearly. If you conclude that the market does not clear, explain how market forces will lead to a market clearing equilibrium
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