Exam 12: General Equilibrium and the Efficiency of Perfect Competition

Suppose a policy change generates $200,000 of benefits for low-income families and $175,000 of costs for high-income and middle-class families. We can best describe the change as

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4 There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S^{0 and D0.} -Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, the likely change in capital flow in sector X will cause the industry's short-run ________ curve to shift to the ________.

General equilibrium exists when any one market in an economy is in equilibrium.

Resources are allocated efficiently when

Market failure occurs when resources are misallocated.

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4 There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S^{0 and D0.} -Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, sector X will likely see ________ and sector Y will likely see ________.

Which of the following is an example of an external benefit?

The whole class of goods that will be underproduced or not produced at all in a completely unregulated market economy are referred to as

Refer to the information provided in Figure 12.3 below to answer the question(s) that follow. Figure 12.3 -Refer to Figure 12.3. The DVD industry is a constant-cost industry. As the demand for DVD players shifts from D to $D ^ { \prime }$ , which of the following is least likely to result?

Free markets, by definition, must always be efficient.

Because public goods are characterized by being collectively consumed,

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4 There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S^{0 and D0.} -Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, the likely change in capital flow in sector Y will eventually

The existence of public goods can be a source of market failure.

An example of a public good is

Partial equilibrium analysis refers to ________ examining the equilibrium conditions in individual markets and for households and firms.

We ________ from consuming the benefits of a public good.

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4 There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S^{0 and D0.} -Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, the likely change in capital flows in sectors X and Y will eventually________ in industry X and ________ in industry Y.

A new technology is developed for producing microwave ovens that reduces production costs by 10%. Which of the following is the most likely consequence of this technological change?

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4 There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S^{0 and D0.} -Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, a new general equilibrium will eventually be reached in sector Y with a price of ________ and a quantity of ________.

For a policy to be Pareto efficient, it must make everyone at least a little better off.