Question 1

Every point _____ corresponds to a point on the production possibility frontier.

Accepted Answer

A) on the production contract curve 
B) in an Edgeworth production box 
C) of tangency between the indifference curves 
D) on the welfare frontier 
A) on the production contract curve 
B) in an Edgeworth production box 
C) of tangency between the indifference curves 
D) on the welfare frontier

Question 2

If the marginal rates of technical substitution between two firms are not equal,then:

Accepted Answer

A) the society is not on the production possibility frontier. 
B) the economy ends up producing on the contract curve of the economy's Edgeworth production box. 
C) goods are not allocated between consumers efficiently. 
D) the isoquants of the firms do not intersect each other. 
A) the society is not on the production possibility frontier. 
B) the economy ends up producing on the contract curve of the economy's Edgeworth production box. 
C) goods are not allocated between consumers efficiently. 
D) the isoquants of the firms do not intersect each other.

Question 3

Which of the following is true of general equilibrium analysis?

Accepted Answer

A) It is useful for analyzing markets when changes are initiated in one market and repercussions are almost nonexistent. 
B) It considers the impact of a change in government policy on a market in isolation. 
C) It is useful for analyzing markets when changes are initiated in one market but they affect prices and output in other markets. 
D) It is useful for analyzing market conditions when there is no mutual interdependence among markets. 
A) It is useful for analyzing markets when changes are initiated in one market and repercussions are almost nonexistent. 
B) It considers the impact of a change in government policy on a market in isolation. 
C) It is useful for analyzing markets when changes are initiated in one market but they affect prices and output in other markets. 
D) It is useful for analyzing market conditions when there is no mutual interdependence among markets.

Question 4

The _____ identifies the different distributions of goods across consumers that are efficient.

Accepted Answer

A) production possibility frontier 
B) contract curve 
C) indifference curve 
D) offer curve 
A) production possibility frontier 
B) contract curve 
C) indifference curve 
D) offer curve

Question 5

An exchange of goods between two individuals,Frank and Linda,will be mutually beneficial:

Accepted Answer

A) when their marginal rates of substitution differ. 
B) until they consume the same amount of each good. 
C) as long as each one thinks he or she can benefit at the other's expense. 
D) as long as they are on the contract curve. 
A) when their marginal rates of substitution differ. 
B) until they consume the same amount of each good. 
C) as long as each one thinks he or she can benefit at the other's expense. 
D) as long as they are on the contract curve.

Question 6

If there is a monopoly in the capital market,whereas the labor market is competitive then:

Accepted Answer

A) the rental rate of capital will be greater than the wage rate. 
B) the labor market will be in equilibrium,but there will be excess supply in the capital market. 
C) the marginal rate of technical substitution must be greater than the input price ratio. 
D) the capital market will be in equilibrium,but there will be excess demand in the labor market. 
A) the rental rate of capital will be greater than the wage rate. 
B) the labor market will be in equilibrium,but there will be excess supply in the capital market. 
C) the marginal rate of technical substitution must be greater than the input price ratio. 
D) the capital market will be in equilibrium,but there will be excess demand in the labor market.

Question 7

According to critics,centrally planned economies fail to attain Pareto optimality because of:

Accepted Answer

A) the difference in the interests of the policy makers and the public. 
B) the lack of efficient and skilled manpower in centrally planned economies. 
C) the inability of policy makers to accommodate the changing information about costs and demand of producers and consumers. 
D) the unmanageable size of the economies that makes planning too difficult. 
A) the difference in the interests of the policy makers and the public. 
B) the lack of efficient and skilled manpower in centrally planned economies. 
C) the inability of policy makers to accommodate the changing information about costs and demand of producers and consumers. 
D) the unmanageable size of the economies that makes planning too difficult.

Question 8

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.Based on the information given in the figure,we can conclude that:

Accepted Answer

A) the allocation of inputs is inefficient. 
B) the allocation of the given output among the two consumers is efficient. 
C) the output mix between goods X and Y is inefficient. 
D) a redistribution of the goods will make both the consumers worse off. 
A) the allocation of inputs is inefficient. 
B) the allocation of the given output among the two consumers is efficient. 
C) the output mix between goods X and Y is inefficient. 
D) a redistribution of the goods will make both the consumers worse off.

Question 9

The marginal rate of transformation between wine and corn refers to:

Accepted Answer

A) the total units of wine that can be produced if nothing of corn is produced in the economy. 
B) the ratio between the per-unit cost of producing wine to the per-unit cost of producing corn. 
C) the opportunity cost of wine in terms of corn and vice versa. 
D) the ratio between the market price of wine and the market price of corn. 
A) the total units of wine that can be produced if nothing of corn is produced in the economy. 
B) the ratio between the per-unit cost of producing wine to the per-unit cost of producing corn. 
C) the opportunity cost of wine in terms of corn and vice versa. 
D) the ratio between the market price of wine and the market price of corn.

Question 10

When economists say that free trade is beneficial for the nation as a whole,they mean that:

Accepted Answer

A) everyone in one country consumes more but everyone in the other country consumes less. 
B) trade ensures that everyone consumes more. 
C) trade makes it possible to consume beyond the production possibility frontier. 
D) society consumes on a more preferred point on the same production possibility frontier. 
A) everyone in one country consumes more but everyone in the other country consumes less. 
B) trade ensures that everyone consumes more. 
C) trade makes it possible to consume beyond the production possibility frontier. 
D) society consumes on a more preferred point on the same production possibility frontier.

Question 11

Identify the correct statement:

Accepted Answer

A) Public goods are usually associated with negative externalities. 
B) As public goods provide benefits to multiple consumers,it must be provided by the government. 
C) Public goods are usually overproduced. 
D) Public goods can result in inefficiency even if perfect competition prevails. 
A) Public goods are usually associated with negative externalities. 
B) As public goods provide benefits to multiple consumers,it must be provided by the government. 
C) Public goods are usually overproduced. 
D) Public goods can result in inefficiency even if perfect competition prevails.

Question 12

Two goods are said to be allocated efficiently between consumers when:

Accepted Answer

A) they are divided equally between them. 
B) the marginal rates of substitution between the two goods are the same for both consumers. 
C) further reallocations can make the consumers better off. 
D) the consumers derive the maximum marginal utility from the consumption of both the goods. 
A) they are divided equally between them. 
B) the marginal rates of substitution between the two goods are the same for both consumers. 
C) further reallocations can make the consumers better off. 
D) the consumers derive the maximum marginal utility from the consumption of both the goods.

Question 13

Any two goods are said to be efficiently distributed among the consumers if:

Accepted Answer

A) the ratio of the marginal utilities derived by each consumer from a certain amount of the two goods is equal to the ratio of their prices. 
B) the real income of the consumers are equal. 
C) every consumer consumes the same amount of the two goods. 
D) the marginal rate of substitution between any two goods is equal across consumers. 
A) the ratio of the marginal utilities derived by each consumer from a certain amount of the two goods is equal to the ratio of their prices. 
B) the real income of the consumers are equal. 
C) every consumer consumes the same amount of the two goods. 
D) the marginal rate of substitution between any two goods is equal across consumers.

Question 14

The three conditions for an efficient allocation of resources are fulfilled:

Accepted Answer

A) when the distribution of income is equal. 
B) whenever all consumers have the same willingness to pay for a good. 
C) if the product and input markets are competitive. 
D) only at the midpoint of the welfare frontier. 
A) when the distribution of income is equal. 
B) whenever all consumers have the same willingness to pay for a good. 
C) if the product and input markets are competitive. 
D) only at the midpoint of the welfare frontier.

Question 15

Partial equilibrium analysis:

Accepted Answer

A) is useful for analyzing markets when changes are concentrated in one market and repercussions are almost nonexistent. 
B) is useful for analyzing markets when changes occur throughout all markets equally but the impact on price and quantity varies across markets. 
C) is useful for analyzing markets when changes occur in one market but repercussions are experienced largely in another market. 
D) is useful for analyzing markets when a change initiated by a government policy affects most of the markets in the economy. 
A) is useful for analyzing markets when changes are concentrated in one market and repercussions are almost nonexistent. 
B) is useful for analyzing markets when changes occur throughout all markets equally but the impact on price and quantity varies across markets. 
C) is useful for analyzing markets when changes occur in one market but repercussions are experienced largely in another market. 
D) is useful for analyzing markets when a change initiated by a government policy affects most of the markets in the economy.

Question 16

Why is efficiency considered to be a reasonable goal for economic performance?

Accepted Answer

An allocation of resources is said to be

Question 17

An Edgeworth production box:

Accepted Answer

A) identifies the most efficient method of producing the output. 
B) identifies the maximum amount of an input required to produce a good. 
C) identifies all the ways in which two inputs can be allocated between two industries in a simple economy. 
D) identifies the different ways in which two goods can be allocated between two people in a simple economy. 
A) identifies the most efficient method of producing the output. 
B) identifies the maximum amount of an input required to produce a good. 
C) identifies all the ways in which two inputs can be allocated between two industries in a simple economy. 
D) identifies the different ways in which two goods can be allocated between two people in a simple economy.

Question 18

Suppose an economy produces two goods,corn and wine.If the marginal rate of substitution between corn and wine for consumers is not equal to the marginal rate of transformation,it means that:

Accepted Answer

A) the quantity demanded does not equal the quantity supplied. 
B) the economy is operating on the production possibility frontier. 
C) both consumers could be made better off with a different distribution of the goods between them. 
D) the output mix is not efficient. 
A) the quantity demanded does not equal the quantity supplied. 
B) the economy is operating on the production possibility frontier. 
C) both consumers could be made better off with a different distribution of the goods between them. 
D) the output mix is not efficient.

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.  
-In Figure 19-1,a movement from A to B would represent:

Accepted Answer

A) a movement from an efficient allocation of resources to an inefficient one. 
B) an improvement of Monica's welfare. 
C) a movement from an efficient to an inefficient resource allocation. 
D) an improvement in Hank's well-being. 
A) a movement from an efficient allocation of resources to an inefficient one. 
B) an improvement of Monica's welfare. 
C) a movement from an efficient to an inefficient resource allocation. 
D) an improvement in Hank's well-being.

Question 20

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 and identify the correct statement.

Accepted Answer

A) If the distribution of output at Z is given by point W,each consumer has the same MRS. 
B) The consumption point W is a suboptimal consumption point 
C) Compared to consumers' tastes,too less of good Y is being produced. 
D) Given the tastes of the consumers,the distribution of the output at point Z must be changed for attaining Pareto optimality. 
A) If the distribution of output at Z is given by point W,each consumer has the same MRS. 
B) The consumption point W is a suboptimal consumption point 
C) Compared to consumers' tastes,too less of good Y is being produced. 
D) Given the tastes of the consumers,the distribution of the output at point Z must be changed for attaining Pareto optimality.

Every point _____ corresponds to a point on the production possibility frontier.

If the marginal rates of technical substitution between two firms are not equal,then:

Which of the following is true of general equilibrium analysis?

The _____ identifies the different distributions of goods across consumers that are efficient.

An exchange of goods between two individuals,Frank and Linda,will be mutually beneficial:

If there is a monopoly in the capital market,whereas the labor market is competitive then:

According to critics,centrally planned economies fail to attain Pareto optimality because of:

The marginal rate of transformation between wine and corn refers to:

When economists say that free trade is beneficial for the nation as a whole,they mean that:

Identify the correct statement:

Two goods are said to be allocated efficiently between consumers when:

Any two goods are said to be efficiently distributed among the consumers if:

The three conditions for an efficient allocation of resources are fulfilled:

Partial equilibrium analysis:

Why is efficiency considered to be a reasonable goal for economic performance?

An Edgeworth production box:

Suppose an economy produces two goods,corn and wine.If the marginal rate of substitution between corn and wine for consumers is not equal to the marginal rate of transformation,it means that:

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. -In Figure 19-1,a movement from A to B would represent:

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

Every point _____ corresponds to a point on the production possibility frontier.

If the marginal rates of technical substitution between two firms are not equal,then:

Which of the following is true of general equilibrium analysis?

The _____ identifies the different distributions of goods across consumers that are efficient.

An exchange of goods between two individuals,Frank and Linda,will be mutually beneficial:

If there is a monopoly in the capital market,whereas the labor market is competitive then:

According to critics,centrally planned economies fail to attain Pareto optimality because of:

The marginal rate of transformation between wine and corn refers to:

When economists say that free trade is beneficial for the nation as a whole,they mean that:

Identify the correct statement:

Two goods are said to be allocated efficiently between consumers when:

Any two goods are said to be efficiently distributed among the consumers if:

The three conditions for an efficient allocation of resources are fulfilled:

Partial equilibrium analysis:

Why is efficiency considered to be a reasonable goal for economic performance?

An Edgeworth production box:

Suppose an economy produces two goods,corn and wine.If the marginal rate of substitution between corn and wine for consumers is not equal to the marginal rate of transformation,it means that:

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. -In Figure 19-1,a movement from A to B would represent:

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