1. Explain how consumers in an economy can be made better off if the marginal rate of transformation does not equal consumers' marginal rates of substitution.
2. Explain how the conditions of utility maximization, cost minimization, and profit maximization in competitive markets imply that the allocation arising in a general competitive equilibrium is economically efficient.
3. What is comparative advantage? What is absolute advantage? Which of these two concepts is more important in determining the benefits from free trade?