Question 1

The Arrow impossibility theorem suggests

Accepted Answer

A)  democracies are doomed to fail in the long-run. 
B)  dictatorships are impossible in the long-run. 
C)  there is no universally applicable decision rule in a majority-rule democracy. 
D)  there is no way to make democracy better than a dictatorship. 
A)  democracies are doomed to fail in the long-run. 
B)  dictatorships are impossible in the long-run. 
C)  there is no universally applicable decision rule in a majority-rule democracy. 
D)  there is no way to make democracy better than a dictatorship.

Question 2

-Suppose the U.S.can produce 10 units of food and 5 units of clothing (or any linear combination)and Canada can produce 6 units of food and 3 units of clothing (or any linear combination).What type of trade will occur between these two countries? Explain.

Accepted Answer

In both countries,2 units of f

Question 3

If firms are producing efficiently,but consumers can reallocate goods amongst themselves,

Accepted Answer

A)  the equilibrium is not efficient. 
B)  the equilibrium is efficient. 
C)  the consumers are behaving irrationally. 
D)  the firms are too greedy. 
A)  the equilibrium is not efficient. 
B)  the equilibrium is efficient. 
C)  the consumers are behaving irrationally. 
D)  the firms are too greedy.

Question 4

A cake is to be shared by two people.Both desire the largest piece possible.One of the two will cut the cake.Under which of the following situations will the cutter adopt a Rawlsian social welfare function?

Accepted Answer

A)  The person cutting the cake chooses the first piece. 
B)  The person not cutting the cake chooses the first piece. 
C)  The two individuals will bid for the right to cut the cake and choose first. 
D)  The two individuals will toss a coin for the right to cut the cake and choose first. 
A)  The person cutting the cake chooses the first piece. 
B)  The person not cutting the cake chooses the first piece. 
C)  The two individuals will bid for the right to cut the cake and choose first. 
D)  The two individuals will toss a coin for the right to cut the cake and choose first.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

-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.Assuming free trade between these two countries,Canada will produce food

Accepted Answer

A)  as long as any positive amount of food is demanded. 
B)  as long as more than 10 units of food are demanded. 
C)  as long as people are willing to give up at least 1 unit of clothing to get a unit of food. 
D)  as long as people are willing to give up more than 1/2 unit of clothing to get a unit of food. 
A)  as long as any positive amount of food is demanded. 
B)  as long as more than 10 units of food are demanded. 
C)  as long as people are willing to give up at least 1 unit of clothing to get a unit of food. 
D)  as long as people are willing to give up more than 1/2 unit of clothing to get a unit of food.

Question 7

At a given point in time,the Rawlsian welfare function gives equal weight to each individual's utility.

Accepted Answer

A) True 
 B)False

Question 8

Any competitive equilibrium is Pareto-efficient because,with a competitive equilibrium,

Accepted Answer

A)  the marginal rates of substitution are equal for all consumers. 
B)  the price line is the contract curve. 
C)  mutual gains from trade exist. 
D)  the slope of the price line equals the ratio of the MRS for all consumers. 
A)  the marginal rates of substitution are equal for all consumers. 
B)  the price line is the contract curve. 
C)  mutual gains from trade exist. 
D)  the slope of the price line equals the ratio of the MRS for all consumers.

Question 9

If everyone's utility is given equal weight and a change in resource allocation results in one person's gain exceeding another person's loss,we can say that the new allocation

Accepted Answer

A)  is Pareto superior to the original one. 
B)  increases social welfare. 
C)  decreases social welfare. 
D)  is efficient. 
A)  is Pareto superior to the original one. 
B)  increases social welfare. 
C)  decreases social welfare. 
D)  is efficient.

Question 10

The fact that any Pareto-efficient equilibrium can be achieved through competition by adjusting endowments is called

Accepted Answer

A)  the Second Welfare Theorem. 
B)  the First Welfare Theorem. 
C)  the Third Welfare Theorem. 
D)  That is not possible. 
A)  the Second Welfare Theorem. 
B)  the First Welfare Theorem. 
C)  the Third Welfare Theorem. 
D)  That is not possible.

Question 11

If a market is controlled by one perfect price discriminator who is able to charge each consumer the highest price that consumer is willing to pay,the seller will produce output until the price paid by the last consumer is equal to the marginal cost of making the good.That is,the price of the last good equals the marginal cost of making the good.If welfare is measured as consumer surplus plus producer surplus,compare this market structure to a competitive market in terms of efficiency and equity.

Accepted Answer

A perfect price discriminator is Pareto

Question 12

Robinson starts out with 10 lobsters and 5 coconuts.Friday starts out with 10 lobsters and 15 coconuts.After trading,Robinson ends up with 8 lobsters and 10 coconuts.Robinson feels neither better nor worse off than when he started but cannot get Friday to agree to any more trades.Friday feels better off than when he started.Draw the Edgeworth box consistent with this story.

Accepted Answer

@#IMG-DLM& See the a

Question 13

General equilibrium analysis is the study of

Accepted Answer

A)  how an equilibrium is determined in all markets simultaneously. 
B)  how an equilibrium is determined in all closely related markets. 
C)  the effects of a change in a market, and all spillover effects in all related markets. 
D)  Any of the above. 
A)  how an equilibrium is determined in all markets simultaneously. 
B)  how an equilibrium is determined in all closely related markets. 
C)  the effects of a change in a market, and all spillover effects in all related markets. 
D)  Any of the above.

Question 14

If MRS's are equal across all consumers,then the efficient product mix has been achieved.

Accepted Answer

A) True 
 B)False

Question 15

The ability to produce a good at a lower opportunity cost than someone else is called

Accepted Answer

A)  competitive production. 
B)  comparative advantage. 
C)  selective advantage. 
D)  absolute advantage. 
A)  competitive production. 
B)  comparative advantage. 
C)  selective advantage. 
D)  absolute advantage.

Question 16

At the competitive equilibrium quantity supplied equals quantity demanded in all markets.

Accepted Answer

A) True 
 B)False

Question 17

Explain why having different marginal rates of substitution is necessary for trade to occur.

Accepted Answer

The marginal rate of substitution is the

Question 18

For a given set of prices,two consumers choose bundles that are off the contract curve.In a competitive market,

Accepted Answer

A)  prices will adjust until the consumers choose bundles that are on the contract curve. 
B)  the indifference curves will shift back to the contract curve. 
C)  the contract curve will shift to connect these bundles. 
D)  no adjustments need to be made. 
A)  prices will adjust until the consumers choose bundles that are on the contract curve. 
B)  the indifference curves will shift back to the contract curve. 
C)  the contract curve will shift to connect these bundles. 
D)  no adjustments need to be made.

Question 19

Suppose that the minimum wage covers all sectors of the economy; however,for unionized laborers,the minimum wage is ineffective.That is,the union wage is already above the minimum wage.Analyze the impact of an increase in the minimum wage on both the unionized and non-unionized labor markets.(Assume that the higher minimum wage is still ineffective in the unionized sector and that union and nonunion labor are substitutable.)

Accepted Answer

@#IMG-DLM& See the above figure.The higher minimum

Question 20

A government policy of providing free public K-12 education is most consistent with

Accepted Answer

A)  Pareto-efficiency. 
B)  the First Theorem of Welfare Economics. 
C)  the Second Theorem of Welfare Economics. 
D)  the contract curve. 
A)  Pareto-efficiency. 
B)  the First Theorem of Welfare Economics. 
C)  the Second Theorem of Welfare Economics. 
D)  the contract curve.

The Arrow impossibility theorem suggests

-Suppose the U.S.can produce 10 units of food and 5 units of clothing (or any linear combination)and Canada can produce 6 units of food and 3 units of clothing (or any linear combination).What type of trade will occur between these two countries? Explain.

If firms are producing efficiently,but consumers can reallocate goods amongst themselves,

A cake is to be shared by two people.Both desire the largest piece possible.One of the two will cut the cake.Under which of the following situations will the cutter adopt a Rawlsian social welfare function?

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

-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.Assuming free trade between these two countries,Canada will produce food

At a given point in time,the Rawlsian welfare function gives equal weight to each individual's utility.

Any competitive equilibrium is Pareto-efficient because,with a competitive equilibrium,

If everyone's utility is given equal weight and a change in resource allocation results in one person's gain exceeding another person's loss,we can say that the new allocation

The fact that any Pareto-efficient equilibrium can be achieved through competition by adjusting endowments is called

General equilibrium analysis is the study of

If MRS's are equal across all consumers,then the efficient product mix has been achieved.

The ability to produce a good at a lower opportunity cost than someone else is called

At the competitive equilibrium quantity supplied equals quantity demanded in all markets.

Explain why having different marginal rates of substitution is necessary for trade to occur.

For a given set of prices,two consumers choose bundles that are off the contract curve.In a competitive market,

A government policy of providing free public K-12 education is most consistent with

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 10: General Equilibrium and Economic Welfare

The Arrow impossibility theorem suggests

-Suppose the U.S.can produce 10 units of food and 5 units of clothing (or any linear combination)and Canada can produce 6 units of food and 3 units of clothing (or any linear combination).What type of trade will occur between these two countries? Explain.

If firms are producing efficiently,but consumers can reallocate goods amongst themselves,

A cake is to be shared by two people.Both desire the largest piece possible.One of the two will cut the cake.Under which of the following situations will the cutter adopt a Rawlsian social welfare function?

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

-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.Assuming free trade between these two countries,Canada will produce food

At a given point in time,the Rawlsian welfare function gives equal weight to each individual's utility.

Any competitive equilibrium is Pareto-efficient because,with a competitive equilibrium,

If everyone's utility is given equal weight and a change in resource allocation results in one person's gain exceeding another person's loss,we can say that the new allocation

The fact that any Pareto-efficient equilibrium can be achieved through competition by adjusting endowments is called

General equilibrium analysis is the study of

If MRS's are equal across all consumers,then the efficient product mix has been achieved.

The ability to produce a good at a lower opportunity cost than someone else is called

At the competitive equilibrium quantity supplied equals quantity demanded in all markets.

Explain why having different marginal rates of substitution is necessary for trade to occur.

For a given set of prices,two consumers choose bundles that are off the contract curve.In a competitive market,

A government policy of providing free public K-12 education is most consistent with

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters