Question 1

When comparing partial-equilibrium effects to general-equilibrium effects,one can conclude that

Accepted Answer

A) general-equilibrium effects are always larger. 
B) partial-equilibrium effects are always larger. 
C) the effects are of equal size. 
D) one cannot determine before the fact which effect is greater. 
A) general-equilibrium effects are always larger. 
B) partial-equilibrium effects are always larger. 
C) the effects are of equal size. 
D) one cannot determine before the fact which effect is greater.

Question 2

By saying that MRS = MRT,an economist means that

Accepted Answer

A) for all goods,the value that society places on the last unit produced equals the cost of making that unit. 
B) for all goods,the value that a consumer places on the last unit consumed equals the value that all consumers would place on that unit. 
C) society is able to produce more output of one good without reducing the output of any other good. 
D) no other output mix is technically feasible. 
A) for all goods,the value that society places on the last unit produced equals the cost of making that unit. 
B) for all goods,the value that a consumer places on the last unit consumed equals the value that all consumers would place on that unit. 
C) society is able to produce more output of one good without reducing the output of any other good. 
D) no other output mix is technically feasible.

Question 3

There are two consumers in the market,Jack and Jane.Each have some coffee and candies (coffee on the horizontal axis).Jack's MRS of candies for coffee is 3.Jane's MRS of candies for coffee is 3.Which one of the following statements is incorrect?

Accepted Answer

A) This allocation is on the contract curve. 
B) This can be a competitive equilibrium. 
C) This allocation is Pareto efficient. 
D) We can reallocate goods so as to make one person better off without harming another. 
A) This allocation is on the contract curve. 
B) This can be a competitive equilibrium. 
C) This allocation is Pareto efficient. 
D) We can reallocate goods so as to make one person better off without harming another.

Question 4

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

Accepted Answer

The marginal rate of substitution is the

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

When two people are on the contract curve,the allocation of goods

Accepted Answer

A) cannot be improved. 
B) is pareto efficient. 
C) is such that neither individual can be made better off without making the other worse off. 
D) All of the above. 
A) cannot be improved. 
B) is pareto efficient. 
C) is such that neither individual can be made better off without making the other worse off. 
D) All of the above.

Question 8

-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.Suppose each country is in competitive equilibrium prior to free trade being allowed.Once free trade is allowed,the price of food will be

Accepted Answer

A) two times the price of clothing. 
B) equal to the price of clothing. 
C) one-half the price of clothing. 
D) somewhere between one-half the price of clothing and the price of clothing,depending upon the relative bargaining power of the two countries. 
A) two times the price of clothing. 
B) equal to the price of clothing. 
C) one-half the price of clothing. 
D) somewhere between one-half the price of clothing and the price of clothing,depending upon the relative bargaining power of the two countries.

Question 9

Sarah and Andrew are two traders in a pure exchange economic with two goods,Bikes (B)and Computers (C).Sarah's preferences are described by the Cobb-Douglas Utility function:
US = BS1/3CS2/3
Andrew's preferences are given by:
UA = BA1/2CA1/2
Assume the price of Bikes is 1 and the price of computers is p.The initial endowments are BA = 10,BS = 20,CA = 20 and CS = 10.Solve for the competitive equilibrium prices (relative prices)and quantities.

Accepted Answer

Determine the demand equations using the

Question 10

Any point on the contract curve is Pareto efficient regardless of the initial endowment.

Accepted Answer

A) True 
 B)False

Question 11

A dictator is most likely to

Accepted Answer

A) adopt a Rawlsian social welfare function. 
B) maximize her own utility. 
C) place equal weight on everyone's utility function. 
D) have nontransitive preferences. 
A) adopt a Rawlsian social welfare function. 
B) maximize her own utility. 
C) place equal weight on everyone's utility function. 
D) have nontransitive preferences.

Question 12

A competitive equilibrium is Pareto efficient because at the competitive equilibrium,

Accepted Answer

A) prices reflect the differences in marginal rates of substitution across individuals. 
B) there are no further gains from trade. 
C) there is an equal distribution of the goods. 
D) everyone has the same level of utility. 
A) prices reflect the differences in marginal rates of substitution across individuals. 
B) there are no further gains from trade. 
C) there is an equal distribution of the goods. 
D) everyone has the same level of utility.

Question 13

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a and trade is possible,which of the following points are possible equilibria?

Accepted Answer

A) a and b 
B) a and c 
C) b and d 
D) c and d 
A) a and b 
B) a and c 
C) b and d 
D) c and d

Question 14

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 15

The assumptions about tastes and behavior to model the trading between two people do NOT include

Accepted Answer

A) utility maximization. 
B) convex indifference curves. 
C) nonsatiation. 
D) interdependence. 
A) utility maximization. 
B) convex indifference curves. 
C) nonsatiation. 
D) interdependence.

Question 16

If a society relies on competitive markets to allocate goods,then

Accepted Answer

A) an equitable distribution is assured. 
B) an equitable distribution is certain to not occur. 
C) the competitive equilibrium will be Pareto superior to any other. 
D) social welfare as measured by consumer surplus plus producer surplus will equal zero. 
A) an equitable distribution is assured. 
B) an equitable distribution is certain to not occur. 
C) the competitive equilibrium will be Pareto superior to any other. 
D) social welfare as measured by consumer surplus plus producer surplus will equal zero.

Question 17

-The above figure depicts the Edgeworth box for two consumers,Al and Bruce.Explain why point "a" cannot be a competitive equilibrium.

Accepted Answer

Point "a" cannot be a competitive equili

Question 18

Every point on the joint production possibilities frontier represents

Accepted Answer

A) an initial endowment. 
B) inefficient production. 
C) the marginal rate of substitution of goods for each producer. 
D) at least one producer specializing in production. 
A) an initial endowment. 
B) inefficient production. 
C) the marginal rate of substitution of goods for each producer. 
D) at least one producer specializing in production.

Question 19

Explain why a government may select an inefficient allocation.

Accepted Answer

A government may decide the eq

Question 20

If pizza is measured on the horizontal axis and pretzels are measured on the vertical axis,the slope of the production possibility frontier at a given combination reflects

Accepted Answer

A) the total cost of producing that combination. 
B) the total cost of producing that quantity of pizza in terms of pretzels. 
C) the cost of making the last pizza in terms of pretzels. 
D) the cost of making the last pretzel in terms of pizza. 
A) the total cost of producing that combination. 
B) the total cost of producing that quantity of pizza in terms of pretzels. 
C) the cost of making the last pizza in terms of pretzels. 
D) the cost of making the last pretzel in terms of pizza.

When comparing partial-equilibrium effects to general-equilibrium effects,one can conclude that

By saying that MRS = MRT,an economist means that

There are two consumers in the market,Jack and Jane.Each have some coffee and candies (coffee on the horizontal axis).Jack's MRS of candies for coffee is 3.Jane's MRS of candies for coffee is 3.Which one of the following statements is incorrect?

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

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

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

When two people are on the contract curve,the allocation of goods

Any point on the contract curve is Pareto efficient regardless of the initial endowment.

A dictator is most likely to

A competitive equilibrium is Pareto efficient because at the competitive equilibrium,

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a and trade is possible,which of the following points are possible equilibria?

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

The assumptions about tastes and behavior to model the trading between two people do NOT include

If a society relies on competitive markets to allocate goods,then

-The above figure depicts the Edgeworth box for two consumers,Al and Bruce.Explain why point "a" cannot be a competitive equilibrium.

Every point on the joint production possibilities frontier represents

Explain why a government may select an inefficient allocation.

If pizza is measured on the horizontal axis and pretzels are measured on the vertical axis,the slope of the production possibility frontier at a given combination reflects

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 10: General Equilibrium and Economic Welfare

When comparing partial-equilibrium effects to general-equilibrium effects,one can conclude that

By saying that MRS = MRT,an economist means that

There are two consumers in the market,Jack and Jane.Each have some coffee and candies (coffee on the horizontal axis).Jack's MRS of candies for coffee is 3.Jane's MRS of candies for coffee is 3.Which one of the following statements is incorrect?

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

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

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

When two people are on the contract curve,the allocation of goods

Any point on the contract curve is Pareto efficient regardless of the initial endowment.

A dictator is most likely to

A competitive equilibrium is Pareto efficient because at the competitive equilibrium,

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a and trade is possible,which of the following points are possible equilibria?

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

The assumptions about tastes and behavior to model the trading between two people do NOT include

If a society relies on competitive markets to allocate goods,then

-The above figure depicts the Edgeworth box for two consumers,Al and Bruce.Explain why point "a" cannot be a competitive equilibrium.

Every point on the joint production possibilities frontier represents

Explain why a government may select an inefficient allocation.

If pizza is measured on the horizontal axis and pretzels are measured on the vertical axis,the slope of the production possibility frontier at a given combination reflects

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters