Question 1

If society were to maximize the utility of its best-off member,the final allocation would be

Accepted Answer

A) perfect equity. 
B) on the contract curve. 
C) Pareto efficient. 
D) one in which one person gets everything. 
A) perfect equity. 
B) on the contract curve. 
C) Pareto efficient. 
D) one in which one person gets everything.

Question 2

In a competitive market,prices adjust until all consumers find themselves

Accepted Answer

A) maximizing utility. 
B) on the contract curve. 
C) happy with their original endowment. 
D) with many opportunities to gain from additional exchange. 
A) maximizing utility. 
B) on the contract curve. 
C) happy with their original endowment. 
D) with many opportunities to gain from additional exchange.

Question 3

-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.Free trade between these two countries will take place

Accepted Answer

A) as long as Canada is willing to give up 0.25 unit of clothing to get a unit of food. 
B) as long as USA asks for at least 1.5 units of clothing in exchange for a unit of food. 
C) as long as Canada asks for at least 3 units of food in exchange for a unit of clothing. 
D) as long as USA is willing to give up at least 1.5 units of food in exchange for a unit of clothing. 
A) as long as Canada is willing to give up 0.25 unit of clothing to get a unit of food. 
B) as long as USA asks for at least 1.5 units of clothing in exchange for a unit of food. 
C) as long as Canada asks for at least 3 units of food in exchange for a unit of clothing. 
D) as long as USA is willing to give up at least 1.5 units of food in exchange for a unit of clothing.

Question 4

According to the Theory of the Second Best,why might market liberalization through elimination of some market distortions,such as particular trade restrictions,lead to social welfare losses?

Accepted Answer

Removing some distortions may

Question 5

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a,and Bruce has no ability to bargain,the final allocation will be at point

Accepted Answer

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

Question 6

The effects of a price change are always understated by a partial-equilibrium analysis when compared to a general-equilibrium analysis.

Accepted Answer

A) True 
 B)False

Question 7

-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 will have a slope of -1

Accepted Answer

A) only when 20-30 units of food are produced. 
B) only when 10-20 units of food are produced. 
C) only when 10-20 units of clothing are produced. 
D) throughout the entire PPF. 
A) only when 20-30 units of food are produced. 
B) only when 10-20 units of food are produced. 
C) only when 10-20 units of clothing are produced. 
D) throughout the entire PPF.

Question 8

Suppose the U.S.can produce 10 units of food and five units of clothing (or any such linear combination)and Canada can produce six units of food and four units of clothing (or any such linear combination).If trade occurs between these two countries,which should produce more food and which more clothing?

Accepted Answer

The U.S.has a comparative adva

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Consider trade between two consumers (1 and 2)and two goods,X and Y.Suppose the total quantities of each good are 100 units.Each consumer has Cobb-Douglas preferences given by:
U(X,Y)= XY
What is the shape of the contract curve,i.e.derive the equation? How does the contract curve change is consumer one has the utility function
U(X,Y)= X2Y
while the other consumer's preferences are as before? Again,derive the equation for the contract curve.

Accepted Answer

In both cases,we find the contract curve

Question 11

If price support policy increases producer surplus more than reducing consumer surplus,then

Accepted Answer

A) the policy leads to a Pareto-superior allocation. 
B) the policy leads to an increase in social welfare. 
C) the policy improves the efficiency of society. 
D) None of above. 
A) the policy leads to a Pareto-superior allocation. 
B) the policy leads to an increase in social welfare. 
C) the policy improves the efficiency of society. 
D) None of above.

Question 12

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

Accepted Answer

A) prices have been allowed to adjust. 
B) there are no further gains from trade. 
C) the final outcome is different from the original inefficient endowment. 
D) all members of society can be made better off. 
A) prices have been allowed to adjust. 
B) there are no further gains from trade. 
C) the final outcome is different from the original inefficient endowment. 
D) all members of society can be made better off.

Question 13

If society were to maximize the utility of its worst-off member,the final allocation would most likely be

Accepted Answer

A) relatively egalitarian. 
B) on the contract curve. 
C) Pareto efficient. 
D) one in which one person gets everything. 
A) relatively egalitarian. 
B) on the contract curve. 
C) Pareto efficient. 
D) one in which one person gets everything.

Question 14

When the U.S.minimum wage was first passed in 1938,only 56% of workers were employed in covered firms.The incomplete coverage suggests that

Accepted Answer

A) the partial equilibrium ignores the movement of workers from uncovered sectors to covered sectors. 
B) the decrease in employment is higher in general-equilibrium analysis. 
C) the general-equilibrium analysis predicts the wage in uncovered sectors will fall. 
D) all the workers will be worse off in both general- and partial-equilibrium analysis. 
A) the partial equilibrium ignores the movement of workers from uncovered sectors to covered sectors. 
B) the decrease in employment is higher in general-equilibrium analysis. 
C) the general-equilibrium analysis predicts the wage in uncovered sectors will fall. 
D) all the workers will be worse off in both general- and partial-equilibrium analysis.

Question 15

An initial allocation of goods is called a(n)

Accepted Answer

A) endowment. 
B) inheritance. 
C) pareto set. 
D) general-equilibrium goods set. 
A) endowment. 
B) inheritance. 
C) pareto set. 
D) general-equilibrium goods set.

Question 16

If a society only cares about efficiency and not equity,then

Accepted Answer

A) all points on the contract curve yield the same level of social welfare. 
B) it will not rely on competitive markets to allocate goods. 
C) it will maximize the utility of its worst-off member. 
D) an equitable outcome is impossible. 
A) all points on the contract curve yield the same level of social welfare. 
B) it will not rely on competitive markets to allocate goods. 
C) it will maximize the utility of its worst-off member. 
D) an equitable outcome is impossible.

Question 17

Does the contract curve for two traders and two goods always go through the origin (0,0)?

Accepted Answer

As long as both consumers have

Question 18

Gains from trade can only occur when

Accepted Answer

A) marginal rates of substitutions differ across people. 
B) marginal rates of substitution are equal across people. 
C) indifference curves are convex. 
D) people find themselves on the contract curve. 
A) marginal rates of substitutions differ across people. 
B) marginal rates of substitution are equal across people. 
C) indifference curves are convex. 
D) people find themselves on the contract curve.

Question 19

For most commonly used social welfare functions,an efficient allocation is

Accepted Answer

A) always preferred over any inefficient allocation. 
B) not possible. 
C) usually preferred. 
D) never preferred. 
A) always preferred over any inefficient allocation. 
B) not possible. 
C) usually preferred. 
D) never preferred.

Question 20

Competition results in the efficient product mix because

Accepted Answer

A) producers are setting MRT equal to minus the price ratio while consumers are setting MRS equal to minus the price ratio ensuring that MRT will equal MRS. 
B) consumers are on the contract curve. 
C) the slope of the production possibility frontier will equal the slope of the contract curve. 
D) the distribution of the final output is Pareto efficient. 
A) producers are setting MRT equal to minus the price ratio while consumers are setting MRS equal to minus the price ratio ensuring that MRT will equal MRS. 
B) consumers are on the contract curve. 
C) the slope of the production possibility frontier will equal the slope of the contract curve. 
D) the distribution of the final output is Pareto efficient.

If society were to maximize the utility of its best-off member,the final allocation would be

In a competitive market,prices adjust until all consumers find themselves

-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.Free trade between these two countries will take place

According to the Theory of the Second Best,why might market liberalization through elimination of some market distortions,such as particular trade restrictions,lead to social welfare losses?

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a,and Bruce has no ability to bargain,the final allocation will be at point

The effects of a price change are always understated by a partial-equilibrium analysis when compared to a general-equilibrium analysis.

-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 will have a slope of -1

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

If price support policy increases producer surplus more than reducing consumer surplus,then

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

If society were to maximize the utility of its worst-off member,the final allocation would most likely be

When the U.S.minimum wage was first passed in 1938,only 56% of workers were employed in covered firms.The incomplete coverage suggests that

An initial allocation of goods is called a(n)

If a society only cares about efficiency and not equity,then

Does the contract curve for two traders and two goods always go through the origin (0,0)?

Gains from trade can only occur when

For most commonly used social welfare functions,an efficient allocation is

Competition results in the efficient product mix because

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

If society were to maximize the utility of its best-off member,the final allocation would be

In a competitive market,prices adjust until all consumers find themselves

-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.Free trade between these two countries will take place

According to the Theory of the Second Best,why might market liberalization through elimination of some market distortions,such as particular trade restrictions,lead to social welfare losses?

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a,and Bruce has no ability to bargain,the final allocation will be at point

The effects of a price change are always understated by a partial-equilibrium analysis when compared to a general-equilibrium analysis.

-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 will have a slope of -1

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

If price support policy increases producer surplus more than reducing consumer surplus,then

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

If society were to maximize the utility of its worst-off member,the final allocation would most likely be

When the U.S.minimum wage was first passed in 1938,only 56% of workers were employed in covered firms.The incomplete coverage suggests that

An initial allocation of goods is called a(n)

If a society only cares about efficiency and not equity,then

Does the contract curve for two traders and two goods always go through the origin (0,0)?

Gains from trade can only occur when

For most commonly used social welfare functions,an efficient allocation is

Competition results in the efficient product mix because

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