Question 1

In a competitive equilibrium, no matter how different their preferences may be, no two people with the same income will envy each other's consumption bundles.

Accepted Answer

A) True 
 B)False  True

Question 2

The utility possibilities frontier is the boundary of the production possibilities set.

Accepted Answer

A) True 
 B)False  False

Question 3

If allocation x is Pareto optimal and allocation y is not, then everyone is at least as well off with x as with y, and someone is better off with x than with y.

Accepted Answer

A) True 
 B)False  False

Question 4

In a pure exchange economy if the initial allocation is Pareto optimal, then competitive equilibrium is fair.

Accepted Answer

A) True 
 B)False

Question 5

A Borda count is used to decide an election between 3 candidates, x, y, and z, where a score of 1 is awarded to a first choice, 2 to a second choice, and 3 to a third choice.There are 14 voters.6 voters rank the candidates x first, y second, and z third; 3 voters rank the candidates x first, z second, and y third; 3 voters rank the candidates z first, y second, and x third; 2 voters rank the candidates y first, z second, and x third.Which candidate wins?

Accepted Answer

A) There is a tie between x and y, with z coming in third. 
B) Candidate y. 
C) Candidate x. 
D) Candidate z. 
E) There is a tie between y and z, with x coming in third. 
A) There is a tie between x and y, with z coming in third. 
B) Candidate y. 
C) Candidate x. 
D) Candidate z. 
E) There is a tie between y and z, with x coming in third.

Question 6

Hatfield and McCoy burn with hatred for each other.They both consume corn whisky.Hatfield's utility function is U = WH - W 2M / 8 and McCoy's utility is U = WM - W 2H / 8, where WH is Hatfield's whisky consumption and WM is McCoy's whisky consumption, measured in gallons.The sheriff has a total of 28 gallons of confiscated whisky which he could give back to them.For some reason, the sheriff wants them both to be as happy as possible and he wants to treat them equally.The sheriff should give them each

Accepted Answer

A) 14 gallons. 
B) 4 gallons and spill 20 gallons in the creek. 
C) 2 gallons and spill 24 gallons in the creek. 
D) 8 gallons and spill the rest in the creek. 
E) 1 gallon and spill the rest in the creek. 
A) 14 gallons. 
B) 4 gallons and spill 20 gallons in the creek. 
C) 2 gallons and spill 24 gallons in the creek. 
D) 8 gallons and spill the rest in the creek. 
E) 1 gallon and spill the rest in the creek.

Question 7

Suppose that Romeo has the utility function U = S5RS2J and Juliet has the utility function U = S1RS5J, where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 36 units of spaghetti to divide between them.

Accepted Answer

A) Romeo would want to give Juliet some spaghetti if he had more than 18 units of spaghetti. 
B) Juliet would want to give Romeo some spaghetti if she had more than 28 units. 
C) Romeo and Juliet would never disagree about how to divide the spaghetti. 
D) Romeo would want to give Juliet some spaghetti if he had more than 26 units of spaghetti. 
E) Juliet would want to give Romeo some spaghetti if she had more than 30 units of spaghetti. 
A) Romeo would want to give Juliet some spaghetti if he had more than 18 units of spaghetti. 
B) Juliet would want to give Romeo some spaghetti if she had more than 28 units. 
C) Romeo and Juliet would never disagree about how to divide the spaghetti. 
D) Romeo would want to give Juliet some spaghetti if he had more than 26 units of spaghetti. 
E) Juliet would want to give Romeo some spaghetti if she had more than 30 units of spaghetti.

Question 8

A parent has two children living in cities with different costs of living.The cost of living in city B is 3 times the cost of living in city A.The child in city A has an income of $2,000 and the child in city B has an income of $6,000.The parent wants to give a total of $2,000 to her two children.Her utility function is U(C A, C B)= C A C B, where C A and C B are the consumptions of the children living in cities A and B respectively.She will choose to give

Accepted Answer

A) each child $1,000, even though this will buy less goods for the child in city B 
B) the child in city B 3 times as much money as the child in city A. 
C) the child in city B 1.50 times as much money as the child in city A. 
D) the child in city A 3 times as much money as the child in city B. 
E) the child in city A 1.50 times as much money as the child in city B. 
A) each child $1,000, even though this will buy less goods for the child in city B 
B) the child in city B 3 times as much money as the child in city A. 
C) the child in city B 1.50 times as much money as the child in city A. 
D) the child in city A 3 times as much money as the child in city B. 
E) the child in city A 1.50 times as much money as the child in city B.

Question 9

If a social welfare function is an increasing function of each person's utility, then every allocation that maximizes this social welfare function must be a Pareto optimum.

Accepted Answer

A) True 
 B)False

Question 10

No one is meaner and uglier than Gladys.Someone is meaner and uglier than Harold.Therefore Gladys is meaner and uglier than Harold.Is this reasoning correct? If so, explain why.If not, explain why not.(Assume that people can be ranked from ugliest to least ugly by a complete transitive ordering and that there are no ties.Likewise assume that people can be ranked from meanest to least mean by a complete transitive ordering and that there are no ties.)

Accepted Answer

The reasoning is incorrect.Consider the

Question 11

A Borda count is used to decide an election between 3 candidates, x, y, and z, where a score of 1 is awarded to a first choice, 2 to a second choice, and 3 to a third choice.There are 28 voters.5 voters rank the candidates x first, y second, and z third; 10 voters rank the candidates x first, z second, and y third; 4 voters rank the candidates z first, y second, and x third; 9 voters rank the candidates y first, z second, and x third.Which candidate wins?

Accepted Answer

A) Candidate y. 
B) Candidate z. 
C) There is a tie between x and y, with z coming in third. 
D) Candidate x. 
E) There is a tie between y and z, with x coming in third. 
A) Candidate y. 
B) Candidate z. 
C) There is a tie between x and y, with z coming in third. 
D) Candidate x. 
E) There is a tie between y and z, with x coming in third.

Question 12

Suppose that Romeo has the utility function U = S 7RS3J and Juliet has the utility function U = S 3RS7J, where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 60 units of spaghetti to divide between them.

Accepted Answer

A) Romeo would want to give Juliet some spaghetti if he had more than 30 units of spaghetti. 
B) Romeo would want to give Juliet some spaghetti if he had more than 38 units of spaghetti. 
C) Romeo and Juliet would never disagree about how to divide the spaghetti. 
D) Juliet would want to give Romeo some spaghetti if she had more than 40 units. 
E) Juliet would want to give Romeo some spaghetti if she had more than 42 units of spaghetti. 
A) Romeo would want to give Juliet some spaghetti if he had more than 30 units of spaghetti. 
B) Romeo would want to give Juliet some spaghetti if he had more than 38 units of spaghetti. 
C) Romeo and Juliet would never disagree about how to divide the spaghetti. 
D) Juliet would want to give Romeo some spaghetti if she had more than 40 units. 
E) Juliet would want to give Romeo some spaghetti if she had more than 42 units of spaghetti.

Question 13

An allocation that is worse for somebody than the initial allocation cannot be Pareto optimal.

Accepted Answer

A) True 
 B)False

Question 14

An allocation is fair if whenever one person envies another, the envied person does not envy the envier.

Accepted Answer

A) True 
 B)False

Question 15

According to Arrow's impossibility theorem, it is impossible to find a social ordering that is complete, reflexive, and transitive.

Accepted Answer

A) True 
 B)False

Question 16

A tiny fishing village has 3 residents.Ann has a utility of 10, Bruce has a utility of 6, and Charlie has a utility of 7.If the mayor uses a Rawlsian social welfare function, the social welfare of this tiny village would be

Accepted Answer

A) 6. 
B) 10. 
C) 23. 
D) 420. 
E) 20.49. 
A) 6. 
B) 10. 
C) 23. 
D) 420. 
E) 20.49.

Question 17

A Borda count is used to decide an election between 3 candidates, x, y, and z, where a score of 1 is awarded to a first choice, 2 to a second choice, and 3 to a third choice.There are 29 voters.10 voters rank the candidates x first, y second, and z third; 3 voters rank the candidates x first, z second, and y third; 8 voters rank the candidates z first, y second, and x third; 8 voters rank the candidates y first, z second, and x third.Which candidate wins?

Accepted Answer

A) Candidate x. 
B) Candidate y. 
C) Candidate z. 
D) There is a tie between x and y, with z coming in third. 
E) There is a tie between y and z, with x coming in third. 
A) Candidate x. 
B) Candidate y. 
C) Candidate z. 
D) There is a tie between x and y, with z coming in third. 
E) There is a tie between y and z, with x coming in third.

Question 18

Hatfield and McCoy burn with hatred for each other.They both consume corn whisky.Hatfield's utility function is U = WH - W 2M / 40 and McCoy's utility is U = WM - W 2H / 40, where WH is Hatfield's whisky consumption and WM is McCoy's whisky consumption, measured in gallons.The sheriff has a total of 60 gallons of confiscated whisky which he could give back to them.For some reason, the sheriff wants them both to be as happy as possible and he wants to treat them equally.The sheriff should give them each

Accepted Answer

A) 30 gallons. 
B) 20 gallons and spill 20 gallons in the creek. 
C) 24 gallons and spill the rest in the creek. 
D) 10 gallons and spill 40 gallons in the creek. 
E) 5 gallons and spill the rest in the creek. 
A) 30 gallons. 
B) 20 gallons and spill 20 gallons in the creek. 
C) 24 gallons and spill the rest in the creek. 
D) 10 gallons and spill 40 gallons in the creek. 
E) 5 gallons and spill the rest in the creek.

Question 19

A parent has two children living in cities with different costs of living.The cost of living in city B is 4 times the cost of living in city A.The child in city A has an income of $3,000 and the child in city B has an income of $12,000.The parent wants to give a total of $1,000 to her two children.Her utility function is U(C A, C B)= C A C B, where C A and C B are the consumptions of the children living in cities A and B respectively.She will choose to give

Accepted Answer

A) each child $500, even though this will buy less goods for the child in city B 
B) the child in city B 4 times as much money as the child in city A. 
C) the child in city A 4 times as much money as the child in city B. 
D) the child in city B 2 times as much money as the child in city A. 
E) the child in city A 2 times as much money as the child in city B. 
A) each child $500, even though this will buy less goods for the child in city B 
B) the child in city B 4 times as much money as the child in city A. 
C) the child in city A 4 times as much money as the child in city B. 
D) the child in city B 2 times as much money as the child in city A. 
E) the child in city A 2 times as much money as the child in city B.

Question 20

A parent has two children living in cities with different costs of living.The cost of living in city B is 3 times the cost of living in city A.The child in city A has an income of $2,000 and the child in city B has an income of $6,000.The parent wants to give a total of $1,000 to her two children.Her utility function is U(C A, C B)= C A C B, where C A and C B are the consumptions of the children living in cities A and B respectively.She will choose to give

Accepted Answer

A) the child in city B 3 times as much money as the child in city A. 
B) the child in city B 1.50 times as much money as the child in city A. 
C) each child $500, even though this will buy less goods for the child in city B. 
D) the child in city A 3 times as much money as the child in city B. 
E) the child in city A 1.50 times as much money as the child in city B. 
A) the child in city B 3 times as much money as the child in city A. 
B) the child in city B 1.50 times as much money as the child in city A. 
C) each child $500, even though this will buy less goods for the child in city B. 
D) the child in city A 3 times as much money as the child in city B. 
E) the child in city A 1.50 times as much money as the child in city B.

Exam 32: Welfare-Part A

In a competitive equilibrium, no matter how different their preferences may be, no two people with the same income will envy each other's consumption bundles.

The utility possibilities frontier is the boundary of the production possibilities set.

If allocation x is Pareto optimal and allocation y is not, then everyone is at least as well off with x as with y, and someone is better off with x than with y.

In a pure exchange economy if the initial allocation is Pareto optimal, then competitive equilibrium is fair.

Suppose that Romeo has the utility function U = S5RS2J and Juliet has the utility function U = S1RS5J, where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 36 units of spaghetti to divide between them.

If a social welfare function is an increasing function of each person's utility, then every allocation that maximizes this social welfare function must be a Pareto optimum.

Suppose that Romeo has the utility function U = S 7RS3J and Juliet has the utility function U = S 3RS7J, where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 60 units of spaghetti to divide between them.

An allocation that is worse for somebody than the initial allocation cannot be Pareto optimal.

An allocation is fair if whenever one person envies another, the envied person does not envy the envier.

According to Arrow's impossibility theorem, it is impossible to find a social ordering that is complete, reflexive, and transitive.

A tiny fishing village has 3 residents.Ann has a utility of 10, Bruce has a utility of 6, and Charlie has a utility of 7.If the mayor uses a Rawlsian social welfare function, the social welfare of this tiny village would be

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Suppose that Romeo has the utility function U = S⁵_RS²_J and Juliet has the utility function U = S¹_RS⁵_J, where S_R is Romeo's spaghetti consumption and S_J is Juliet's.They have 36 units of spaghetti to divide between them.

Suppose that Romeo has the utility function U = S ⁷_RS³_J and Juliet has the utility function U = S ³_RS⁷_J, where S_R is Romeo's spaghetti consumption and S_J is Juliet's.They have 60 units of spaghetti to divide between them.