Exam 10: General Equilibrium and Economic Welfare

Suppose the government currently places tariffs and/or other import restrictions on good X.Will imposing a tariff and/or trade restriction on good Y necessarily reduce overall social welfare for the economy?

Explain the logic behind the First Theorem of Welfare Economics.

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.Points a and b

A competitive equilibrium is not Pareto efficient if some members of society are unable to afford a necessary good.

When two people trade their initial endowments to a point on the contract curve,only the level of the endowments will determine the new allocation.

Consider a society consisting of just a farmer and a tailor.The farmer has 30 units of food but no clothing.The tailor has 60 units of clothing but no food.Suppose each has the utility function U = F^1/3C2/3.If the price of clothing is always $1,and the food price is currently $1,then we can conclude

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

-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

-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

Andrew and Sarah are two traders in a pure exchange economy with two goods,Bikes and TVs.Suppose Andrew has preferences given by: U(B,T)= BT where B is the number of bikes and T is the number of TVs.Sarah only derives utility from TV,so her utility function can be given by: V(B,T)= T Describe the contract curve.

The general-equilibrium analysis of a minimum wage applied to only some sectors of the economy suggests that

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

No clearly defined socially preferred outcome may result when majority voting on outcomes because

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

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

As opposed to general-equilibrium analysis,partial equilibrium analysis looks

-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.Considering only the labeled points,point c is a possible equilibrium

Moving away from the contract curve will

General-equilibrium analysis is the study of

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