Question 1

In which of the following situations would it be most important to use the general equilibrium analysis?

Accepted Answer

A) The impact of a price floor on the demand for corn 
B) The impact of a rent control on the supply of rental apartments in a city 
C) An increase in the tariff on imported automobiles 
D) An increase in the national sales tax imposed on all goods 
A) The impact of a price floor on the demand for corn 
B) The impact of a rent control on the supply of rental apartments in a city 
C) An increase in the tariff on imported automobiles 
D) An increase in the national sales tax imposed on all goods D

Question 2

Which of the following is true of the points along the welfare frontier?

Accepted Answer

A) Every point along the frontier is efficient. 
B) Every point along the welfare frontier shows a suboptimal allocation of resources. 
C) Movements along the frontier makes one person better off without harming anyone. 
D) The amount of resources available is different at different points on the welfare frontier. 
A) Every point along the frontier is efficient. 
B) Every point along the welfare frontier shows a suboptimal allocation of resources. 
C) Movements along the frontier makes one person better off without harming anyone. 
D) The amount of resources available is different at different points on the welfare frontier. A

Question 3

General equilibrium analysis is the study of:

Accepted Answer

A) how equilibrium is determined in a monopolistically competitive market. 
B) the determination of equilibrium in one factor market. 
C) the determination of equilibrium in a product market. 
D) how equilibrium is determined in all markets simultaneously. 
A) how equilibrium is determined in a monopolistically competitive market. 
B) the determination of equilibrium in one factor market. 
C) the determination of equilibrium in a product market. 
D) how equilibrium is determined in all markets simultaneously. D

Question 4

A general competitive equilibrium in input markets:

Accepted Answer

A) is attained at a point where the isoquants of the two goods intersect each other. 
B) involves an allocation of inputs such that the ratio of the input prices equals the ratio of the marginal revenue of the firms. 
C) is shown by an allocation of inputs that lies on the contract curve of an Edgeworth production box. 
D) is essentially related to an inefficient allocation of inputs between the production of any two commodities. 
A) is attained at a point where the isoquants of the two goods intersect each other. 
B) involves an allocation of inputs such that the ratio of the input prices equals the ratio of the marginal revenue of the firms. 
C) is shown by an allocation of inputs that lies on the contract curve of an Edgeworth production box. 
D) is essentially related to an inefficient allocation of inputs between the production of any two commodities.

Question 5

Explain why economic efficiency cannot be achieved under certain circumstances.

Accepted Answer

Markets may fail to achieve Pareto optim

Question 6

Partial equilibrium analysis tends to ignore:

Accepted Answer

A) the demand side of the product market. 
B) the relevance of diminishing returns to a factor used in production. 
C) the interrelationships among prices and markets. 
D) the supply side of the product market. 
A) the demand side of the product market. 
B) the relevance of diminishing returns to a factor used in production. 
C) the interrelationships among prices and markets. 
D) the supply side of the product market.

Question 7

Figure 19-3 illustrates the determination of an efficient output mix in a two good economy.The output combination is represented by point Z and the consumption point of a representative consumer is W.The slope of the line zz represents the marginal rate of transformation [MRT].  
-Refer to Figure 19-3.Suppose the marginal rate of substitution [MRS] at point W is 3Y/2X instead of 2Y/1X.Which of the following will be true?

Accepted Answer

A) The representative consumer's MRS will be less than the MRT,which implies more Y and less X will make all consumers better off. 
B) The economy will be producing an efficient output combination. 
C) The representative consumer's MRS 3Y/2X will be less than the MRT,which implies more X and less Y will make both consumers better off. 
D) The allocation of the goods between the two individuals is efficient. 
A) The representative consumer's MRS will be less than the MRT,which implies more Y and less X will make all consumers better off. 
B) The economy will be producing an efficient output combination. 
C) The representative consumer's MRS 3Y/2X will be less than the MRT,which implies more X and less Y will make both consumers better off. 
D) The allocation of the goods between the two individuals is efficient.

Question 8

Assume that the price of steel rises because steel workers negotiate for higher wages.The impact of this increase in the price of steel on the market for aluminum is the result of the:

Accepted Answer

A) real income effect on aluminum. 
B) disequilibrium effect on aluminum. 
C) total price effect on aluminum. 
D) spillover effect on aluminum. 
A) real income effect on aluminum. 
B) disequilibrium effect on aluminum. 
C) total price effect on aluminum. 
D) spillover effect on aluminum.

Question 9

If Good P and Good Q are perfect complements,explain with the help of suitable diagrams,the spillover and feedback effects of a per-unit tax on Good P.

Accepted Answer

Complementary goods (like tea and sugar)

Question 10

A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:

Accepted Answer

A) produce homogenous products. 
B) establish a single price for all goods. 
C) allow free entry and exit of firms. 
D) are controlled by the government. 
A) produce homogenous products. 
B) establish a single price for all goods. 
C) allow free entry and exit of firms. 
D) are controlled by the government.

Question 11

Which of the following is not a necessary condition for economic efficiency in competitive markets?

Accepted Answer

A) The marginal rates of substitution of all goods across all consumers are equal. 
B) The prices of productive inputs are the same across all productive uses. 
C) The marginal rates of technical substitution are the same across all firms and industries. 
D) The marginal rates of substitution of two goods across all consumers will equal the marginal rates of transformation of the two goods. 
A) The marginal rates of substitution of all goods across all consumers are equal. 
B) The prices of productive inputs are the same across all productive uses. 
C) The marginal rates of technical substitution are the same across all firms and industries. 
D) The marginal rates of substitution of two goods across all consumers will equal the marginal rates of transformation of the two goods.

Question 12

The length and height of an Edgeworth production box for any two industries:

Accepted Answer

A) have no economic meaning. 
B) must always be equal. 
C) indicate the amount of each input that is employed by the two industries. 
D) indicate the amount of an input that is employed by any two industries. 
A) have no economic meaning. 
B) must always be equal. 
C) indicate the amount of each input that is employed by the two industries. 
D) indicate the amount of an input that is employed by any two industries.

Question 13

A comparison between the resource allocation at different points on the welfare frontier is difficult because:

Accepted Answer

A) the shape of the welfare frontier is nonlinear. 
B) some of the allocations on the frontier are inefficient,and some are efficient. 
C) all the points on the welfare frontier are efficient. 
D) interpersonal utility comparisons cannot be made objectively. 
A) the shape of the welfare frontier is nonlinear. 
B) some of the allocations on the frontier are inefficient,and some are efficient. 
C) all the points on the welfare frontier are efficient. 
D) interpersonal utility comparisons cannot be made objectively.

Question 14

In a competitive equilibrium,each producer produces at a point where:

Accepted Answer

A) the price of the good equals the marginal cost of producing the good. 
B) the price of the good equals the wage rate. 
C) the price is greater than the average revenue. 
D) the wage rate is equal to the marginal revenue. 
A) the price of the good equals the marginal cost of producing the good. 
B) the price of the good equals the wage rate. 
C) the price is greater than the average revenue. 
D) the wage rate is equal to the marginal revenue.

Question 15

Which of the following is not an equilibrium condition in a general equilibrium analysis of a competitive economy?

Accepted Answer

A) Input markets are in equilibrium. 
B) The quantity supplied equals the quantity demanded. 
C) Factor incomes are evenly divided. 
D) The marginal rate of transformation equals the marginal rate of substitution. 
A) Input markets are in equilibrium. 
B) The quantity supplied equals the quantity demanded. 
C) Factor incomes are evenly divided. 
D) The marginal rate of transformation equals the marginal rate of substitution.

Question 16

If the labor market is perfectly competitive:

Accepted Answer

A) the equilibrium wage will be equal to the minimum wage. 
B) the rate of unemployment will be zero. 
C) the wage rate will be the same in all the industries. 
D) the demand for labor will be perfectly inelastic. 
A) the equilibrium wage will be equal to the minimum wage. 
B) the rate of unemployment will be zero. 
C) the wage rate will be the same in all the industries. 
D) the demand for labor will be perfectly inelastic.

Question 17

A point on the production possibility frontier and the contract curve in the Edgeworth production box both reflect:

Accepted Answer

A) identical marginal rates of substitution among consumers. 
B) full employment of resources. 
C) the efficient output mix. 
D) the ratio of the input prices. 
A) identical marginal rates of substitution among consumers. 
B) full employment of resources. 
C) the efficient output mix. 
D) the ratio of the input prices.

Question 18

A general competitive equilibrium:

Accepted Answer

A) must lie on the production contract curve. 
B) requires the input prices to be equal to the respective marginal productivities. 
C) can be attained only if the inputs are perfectly substitutable. 
D) is attained at a point where two isoquants intersect each other. 
A) must lie on the production contract curve. 
B) requires the input prices to be equal to the respective marginal productivities. 
C) can be attained only if the inputs are perfectly substitutable. 
D) is attained at a point where two isoquants intersect each other.

Question 19

In the figure given below,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica.  
-Refer to Figure 19-1.Which of the following would represent a movement from an inefficient allocation of resources to an efficient allocation of resources?

Accepted Answer

A) A movement from point E to point A 
B) A movement from point C to point B 
C) A movement from point B to point D 
D) A movement from point A to point B 
A) A movement from point E to point A 
B) A movement from point C to point B 
C) A movement from point B to point D 
D) A movement from point A to point B

Question 20

A Pareto optimal allocation of resources implies that:

Accepted Answer

A) only one person can be made better off through trade. 
B) no person can be made better off through trade. 
C) no person can be made better off through trade,without harming another person. 
D) through any feasible change in resource allocation,it is possible to make someone better off without leaving someone else worse off. 
A) only one person can be made better off through trade. 
B) no person can be made better off through trade. 
C) no person can be made better off through trade,without harming another person. 
D) through any feasible change in resource allocation,it is possible to make someone better off without leaving someone else worse off.

In which of the following situations would it be most important to use the general equilibrium analysis?

Which of the following is true of the points along the welfare frontier?

General equilibrium analysis is the study of:

A general competitive equilibrium in input markets:

Explain why economic efficiency cannot be achieved under certain circumstances.

Partial equilibrium analysis tends to ignore:

Assume that the price of steel rises because steel workers negotiate for higher wages.The impact of this increase in the price of steel on the market for aluminum is the result of the:

If Good P and Good Q are perfect complements,explain with the help of suitable diagrams,the spillover and feedback effects of a per-unit tax on Good P.

A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:

Which of the following is not a necessary condition for economic efficiency in competitive markets?

The length and height of an Edgeworth production box for any two industries:

A comparison between the resource allocation at different points on the welfare frontier is difficult because:

In a competitive equilibrium,each producer produces at a point where:

Which of the following is not an equilibrium condition in a general equilibrium analysis of a competitive economy?

If the labor market is perfectly competitive:

A point on the production possibility frontier and the contract curve in the Edgeworth production box both reflect:

A general competitive equilibrium:

In the figure given below,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -Refer to Figure 19-1.Which of the following would represent a movement from an inefficient allocation of resources to an efficient allocation of resources?

A Pareto optimal allocation of resources implies that:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

Public Goods and Externalities

Filters

Exam 19: General Equilibrium Analysis and Economic Efficiency

In which of the following situations would it be most important to use the general equilibrium analysis?

Which of the following is true of the points along the welfare frontier?

General equilibrium analysis is the study of:

A general competitive equilibrium in input markets:

Explain why economic efficiency cannot be achieved under certain circumstances.

Partial equilibrium analysis tends to ignore:

Assume that the price of steel rises because steel workers negotiate for higher wages.The impact of this increase in the price of steel on the market for aluminum is the result of the:

If Good P and Good Q are perfect complements,explain with the help of suitable diagrams,the spillover and feedback effects of a per-unit tax on Good P.

A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:

Which of the following is not a necessary condition for economic efficiency in competitive markets?

The length and height of an Edgeworth production box for any two industries:

A comparison between the resource allocation at different points on the welfare frontier is difficult because:

In a competitive equilibrium,each producer produces at a point where:

Which of the following is not an equilibrium condition in a general equilibrium analysis of a competitive economy?

If the labor market is perfectly competitive:

A point on the production possibility frontier and the contract curve in the Edgeworth production box both reflect:

A general competitive equilibrium:

In the figure given below,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -Refer to Figure 19-1.Which of the following would represent a movement from an inefficient allocation of resources to an efficient allocation of resources?

A Pareto optimal allocation of resources implies that:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

Public Goods and Externalities

Filters