Problem
Explain how, in a two-input/two-output economy, the allocation of resources might be improved if the (common) marginal rate of substitution for X and Y held by each of the two consumers were not equal to the marginal rate of transformation. By what mechanism is the condition (mrs = mrt) satisfied in a competitive equilibrium?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.