If the competitive equilibrium price of a good is zero then which of the following situations is indicated
A. There is an excess supply of the good
B. Consumer preferences are such that more of the good is preferred to less.
C. The economy has a zero initial endowment of the good.
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General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
This question is on Walras' law, numeraire and relative prices, part of General equilibrium and exchange economies in Microeconomics.
Why one market clears automatically when the others do, and why only relative prices matter.
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Question from the JNU SIS 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.