Question 1

An efficient allocation of productive inputs requires that

Accepted Answer

A)  each output has the same rate of technical substitution among inputs used. 
B)  each output has the same marginal rate of substitution for consumers. 
C)  each pair of outputs has the same rate of product transformation. 
D)  each individual has the same marginal rate of substitution between outputs. 
A)  each output has the same rate of technical substitution among inputs used. 
B)  each output has the same marginal rate of substitution for consumers. 
C)  each pair of outputs has the same rate of product transformation. 
D)  each individual has the same marginal rate of substitution between outputs. A

Question 2

Markets can fail to achieve efficiency when

Accepted Answer

A)  there are prices consumers do not think are fair. 
B)  there are wages workers do not think are fair. 
C)  trade puts people out of work. 
D)  there are public goods. 
A)  there are prices consumers do not think are fair. 
B)  there are wages workers do not think are fair. 
C)  trade puts people out of work. 
D)  there are public goods. D

Question 3

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is   .How much Y should be produced?

Accepted Answer

A)  0 
B)  5 
C)  10 
D)  20 
A)  0 
B)  5 
C)  10 
D)  20 D

Question 4

Suppose two goods (X and Y )are being produced efficiently and that the production of X is always more labor intensive than the production of Y.Production depends only on two factors (capital and labor); these may be smoothly substituted for each other.The total quantities of these inputs are fixed.An increase in the production of X and a decrease in the production of Y will

Accepted Answer

A)  increase the capital-labor ratio in each firm. 
B)  decrease the capital-labor ratio in each firm. 
C)  leave the capital-labor ratio for each firm unchanged. 
D)  increase the capital-labor ratio in Y production and decrease the capital -labor ratio in X production. 
A)  increase the capital-labor ratio in each firm. 
B)  decrease the capital-labor ratio in each firm. 
C)  leave the capital-labor ratio for each firm unchanged. 
D)  increase the capital-labor ratio in Y production and decrease the capital -labor ratio in X production.

Question 5

Suppose goods X and Y are produced along a production possibilities frontier X2 + 4Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is   .What is the MRS at the optimal point?

Accepted Answer

A)  0 
B)  -1 
C)  -4 
D)  -5 
A)  0 
B)  -1 
C)  -4 
D)  -5

Question 6

Consider three ways of allocating two goods in a two-person exchange economy.
I.Both individuals take prices as given and equilibrium prices are established by an impartial auctioneer.
II.One individual can act as a perfect price discriminator and force the other individual to pay a different price for each unit of a good that is traded.
III.One individual is a monopolist and can charge the other individual a single,utility-maximizing price.
Which of these situations is efficient?

Accepted Answer

A)  None of them. 
B)  Only I. 
C)  I and II, but not III. 
D)  I and III, but not II. 
A)  None of them. 
B)  Only I. 
C)  I and II, but not III. 
D)  I and III, but not II.

Question 7

Suppose goods X and Y are produced along a production possibilities frontier X2 + 4Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is   .How much Y should be produced?

Accepted Answer

A)  0 
B)  5 
C)  10 
D)  20 
A)  0 
B)  5 
C)  10 
D)  20

Question 8

Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade.The men are given food when they walk in and the women are given drink.Suppose they have identical preferences where food and drink provide utility   .The contract curve in the Edgeworth box using a representative man and woman would be

Accepted Answer

A)  a right angle connecting the lower left corner with the upper right corner. 
B)  a curve (not necessarily a line) connecting the lower left corner with the upper right corner. 
C)  a line connecting the lower left corner with the upper right corner. 
D)  a right angle connecting the upper left corner with the lower right corner. 
A)  a right angle connecting the lower left corner with the upper right corner. 
B)  a curve (not necessarily a line) connecting the lower left corner with the upper right corner. 
C)  a line connecting the lower left corner with the upper right corner. 
D)  a right angle connecting the upper left corner with the lower right corner.

Question 9

Suppose two coffee snobs who must have their coffee and cream in exact proportions (each cup is 10 coffee per 1 unit cream)are invited to a weekend long event (during which they can easily consume 8 cups of coffee).Suppose Snob A is given 8 units of cream and Snob B is given 80 units of coffee.The post trading result (one in which any trade that makes both parties better off than their initial allocation)will guarantee each person

Accepted Answer

A)  nothing 
B)  at least 1 cup of properly made coffee. 
C)  at least 2 cups of properly made coffee. 
D)  exactly 4 cups of properly made coffee. 
A)  nothing 
B)  at least 1 cup of properly made coffee. 
C)  at least 2 cups of properly made coffee. 
D)  exactly 4 cups of properly made coffee.

Question 10

The slope of the production possibility frontier shows

Accepted Answer

A)  the marginal rate of substitution between the two goods. 
B)  the relative marginal costs of the two goods. 
C)  the efficient combination of outputs possible using fixed amounts of input. 
D)  the relative marginal productivities of the two goods. 
A)  the marginal rate of substitution between the two goods. 
B)  the relative marginal costs of the two goods. 
C)  the efficient combination of outputs possible using fixed amounts of input. 
D)  the relative marginal productivities of the two goods.

Question 11

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Accepted Answer

A)  the rate of technical substitution for corn divided by the rate of technical substitution for cloth. 
B)  the rate of technical substitution for cloth divided by the rate of technical substitution for corn. 
C)  the marginal cost of producing cloth divided by the marginal cost of producing corn. 
D)  the marginal cost of producing corn divided by the marginal cost of producing cloth. 
A)  the rate of technical substitution for corn divided by the rate of technical substitution for cloth. 
B)  the rate of technical substitution for cloth divided by the rate of technical substitution for corn. 
C)  the marginal cost of producing cloth divided by the marginal cost of producing corn. 
D)  the marginal cost of producing corn divided by the marginal cost of producing cloth.

Question 12

Markets can fail to achieve efficiency when

Accepted Answer

A)  there are prices consumers do not think are fair. 
B)  there are wages workers do not think are fair. 
C)  trade puts people out of work. 
D)  there are markets with imperfect competition. 
A)  there are prices consumers do not think are fair. 
B)  there are wages workers do not think are fair. 
C)  trade puts people out of work. 
D)  there are markets with imperfect competition.

Question 13

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is   .How much X should be produced?

Accepted Answer

A)  0 
B)  5 
C)  10 
D)  20 
A)  0 
B)  5 
C)  10 
D)  20

Question 14

In free exchange among two individuals the position on the contract curve finally arrived at will,among other things,depend on:
I.The bargaining strength of each individual.
II.The initial endowments of the individuals.
III.The individuals' preferences.
Which of these correctly completes the statement?

Accepted Answer

A)  II and III, but not I. 
B)  Only II. 
C)  I and III, but not II. 
D)  I, II, and III. 
A)  II and III, but not I. 
B)  Only II. 
C)  I and III, but not II. 
D)  I, II, and III.

Question 15

Markets can fail to achieve efficiency when

Accepted Answer

A)  there are prices consumers do not think are fair. 
B)  there are wages workers do not think are fair. 
C)  trade puts people out of work. 
D)  there are buyers or sellers without adequate information about the quality of goods. 
A)  there are prices consumers do not think are fair. 
B)  there are wages workers do not think are fair. 
C)  trade puts people out of work. 
D)  there are buyers or sellers without adequate information about the quality of goods.

Question 16

The reason externalities distort the allocation of resources is that

Accepted Answer

A)  too few goods are usually produced. 
B)  firms often go out of business because of the externality. 
C)  a firm's private costs do not reflect the social cost of production. 
D)  regulating externalities uses scarce resources. 
A)  too few goods are usually produced. 
B)  firms often go out of business because of the externality. 
C)  a firm's private costs do not reflect the social cost of production. 
D)  regulating externalities uses scarce resources.

Question 17

Suppose country A has a production possibilities frontier such that   and country B has a production possibilities frontier such that   and consumers in each country view x and y as perfect substitutes.Country B will produce

Accepted Answer

A)  only x (=   ) and trade for y. 
B)  only y (=   ) and trade for x. 
C)  both x (= 20) and y (= 5) and trade x to get y. 
D)  both x (= 20) and y (= 5) and trade y to get x. 
A)  only x (=   ) and trade for y. 
B)  only y (=   ) and trade for x. 
C)  both x (= 20) and y (= 5) and trade x to get y. 
D)  both x (= 20) and y (= 5) and trade y to get x.

Question 18

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.   Suppose they have 100 units of consumption to distribute,they will maximize the joint happiness (   )where

Accepted Answer

A)    ;   
B)    ;   
C)    ;   
D)    ;   
A)    ;   
B)    ;   
C)    ;   
D)    ;

Question 19

The rate of product transformation refers to

Accepted Answer

A)  how a consumer can trade one good for another while still maximizing his or her utility. 
B)  how a firm can substitute one input for another and still maintain the same production level. 
C)  how production of one good can be substituted for another while still using a fixed supply of inputs efficiently. 
D)  how quickly a firm can produce a final good while starting with only natural resources. 
A)  how a consumer can trade one good for another while still maximizing his or her utility. 
B)  how a firm can substitute one input for another and still maintain the same production level. 
C)  how production of one good can be substituted for another while still using a fixed supply of inputs efficiently. 
D)  how quickly a firm can produce a final good while starting with only natural resources.

Question 20

Suppose two coffee snobs who must have their coffee and cream in exact proportions (each cup is 10 coffee per 1 unit cream)are invited to a weekend long event (during which they can easily consume 8 cups of coffee).Suppose Snob A is given 8 units of cream and Snob B is given 80 units of coffee.The contract curve in the Edgeworth box would be

Accepted Answer

A)  a right angle connecting the lower left corner with the upper right corner. 
B)  a curve (not a line) connecting the lower left corner with the upper right corner. 
C)  a line connecting the lower left corner with the upper right corner. 
D)  a right angle connecting the upper left corner with the lower right corner. 
A)  a right angle connecting the lower left corner with the upper right corner. 
B)  a curve (not a line) connecting the lower left corner with the upper right corner. 
C)  a line connecting the lower left corner with the upper right corner. 
D)  a right angle connecting the upper left corner with the lower right corner.

An efficient allocation of productive inputs requires that

Markets can fail to achieve efficiency when

Suppose goods X and Y are produced along a production possibilities frontier 4X² + Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much Y should be produced?

Suppose goods X and Y are produced along a production possibilities frontier X² + 4Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .What is the MRS at the optimal point?

Suppose goods X and Y are produced along a production possibilities frontier X² + 4Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much Y should be produced?

The slope of the production possibility frontier shows

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Markets can fail to achieve efficiency when

Suppose goods X and Y are produced along a production possibilities frontier 4X² + Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much X should be produced?

Markets can fail to achieve efficiency when

The reason externalities distort the allocation of resources is that

Suppose country A has a production possibilities frontier such that and country B has a production possibilities frontier such that and consumers in each country view x and y as perfect substitutes.Country B will produce

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption. Suppose they have 100 units of consumption to distribute,they will maximize the joint happiness ( )where

The rate of product transformation refers to

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 10: General Equilibrium and Welfare

An efficient allocation of productive inputs requires that

Markets can fail to achieve efficiency when

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much Y should be produced?

Suppose goods X and Y are produced along a production possibilities frontier X2 + 4Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .What is the MRS at the optimal point?

Suppose goods X and Y are produced along a production possibilities frontier X2 + 4Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much Y should be produced?

The slope of the production possibility frontier shows

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Markets can fail to achieve efficiency when

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much X should be produced?

Markets can fail to achieve efficiency when

The reason externalities distort the allocation of resources is that

Suppose country A has a production possibilities frontier such that and country B has a production possibilities frontier such that and consumers in each country view x and y as perfect substitutes.Country B will produce

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption. Suppose they have 100 units of consumption to distribute,they will maximize the joint happiness ( )where

The rate of product transformation refers to

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Suppose goods X and Y are produced along a production possibilities frontier 4X² + Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much Y should be produced?

Suppose goods X and Y are produced along a production possibilities frontier X² + 4Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .What is the MRS at the optimal point?

Suppose goods X and Y are produced along a production possibilities frontier X² + 4Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much Y should be produced?

Suppose goods X and Y are produced along a production possibilities frontier 4X² + Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is .How much X should be produced?