Exam 10: General Equilibrium and Economic Welfare

-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Measuring food on the horizontal axis,the joint production possibility frontier has a vertical intercept of

Suppose an economy with two goods (candy and desk)and two identical agents that is in a competitive equilibrium.The marginal cost of a piece of candy is given by MC_c = 3Q_c and the marginal cost of a desk is MC_d = 2 + 2Q_d.The current production level of candy is 6 pieces.What is the marginal rate of substitution (MRS)?

-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.The United States has a comparative advantage in producing

Any policy change that results in a Pareto-superior allocation

Explain why Robin Hood's practice of stealing from the rich to give to the poor is never Pareto efficient.

Employers in a city must pay a specific tax of $t per hour worked by their employees while employers in the suburbs of the city do not have an employment tax.What does a general equilibrium approach predict regarding the wages and employment of both the city and suburban workers if the city decides to substantially reduce their employment tax rate?

Only individuals A and B live on a desert island where no production is possible.A is endowed with 12 units of good X and 18 units of good Y.B is endowed with 6 units of good X and 42 units of good Y.In the Edgeworth box,good X is measured on the horizontal axis.Individual A's utility function is U_A = 3XY so her MU_X = 3Y and her MU_Y = 3X.Individual B's utility function is UB = 10 so his and his MU_Y = 5 . Which of the following allocations are on the contract curve?

Economic growth can be depicted as a

In a competitive marketplace,prices adjust until

-The above figure shows a production possibility frontier for a society with two members,Al and Bruce.If point "a" is the efficient product mix,draw a possible Edgeworth box and indifference curves.

Moving away from the contract curve will

The term "born with a silver spoon in his mouth" mistakenly implies

If two grade-school children willingly trade their lunches with one another,we can conclude that at least one of them preferred the other's lunch to his own.

At a perfectly competitive equilibrium with production and trade,the slope of the production possibility curve will be

-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Measuring food on the horizontal axis,the joint production possibility frontier has a horizontal intercept of

Suppose in a democratic society,all voters prefer choice G over choice B; however,when the two choices are presented along with a third choice,R,B wins the election.This violates the assumption of

Employing a general equilibrium approach,describe the effect of a new law that prohibits steel imports.

The United States is the most inequitable country in the developed world.

If only two people are trading their endowments and no production is possible,then the equilibrium they reach will

The fact that at the competitive equilibrium nobody can be made better off without making someone else worse off implies that