Question 1

In an Edgeworth production box diagram,if two isoquants intersect,it means that:

Accepted Answer

A) the well-being of the two consumers can be improved without changing the output of either good. 
B) the marginal rate of substitution between consumers does not equal the marginal rate of technical substitution. 
C) by allocating inputs differently between firms,output can be increased at no additional cost. 
D) consumers are not facing the same output price ratio. 
A) the well-being of the two consumers can be improved without changing the output of either good. 
B) the marginal rate of substitution between consumers does not equal the marginal rate of technical substitution. 
C) by allocating inputs differently between firms,output can be increased at no additional cost. 
D) consumers are not facing the same output price ratio.

Question 2

When the marginal rates of substitution differs across any two consumers,then:

Accepted Answer

A) mutually beneficial trade is possible between them. 
B) the only way to make one consumer better off is to make the other worse off. 
C) it is impossible to find a point that makes both worse off. 
D) a mutual exchange between them will leave them worse off. 
A) mutually beneficial trade is possible between them. 
B) the only way to make one consumer better off is to make the other worse off. 
C) it is impossible to find a point that makes both worse off. 
D) a mutual exchange between them will leave them worse off.

Question 3

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.

Question 4

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 5

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 6

Suppose an economy produces two goods,corn and wine.The marginal rate of substitution between corn and wine for consumers is 1C/3W and the marginal rate transformation is 1C/1W.What can be said about the output mix?

Accepted Answer

A) The output mix is inefficient;more wine and less corn should be produced. 
B) The output mix is inefficient;less of both the commodities should be produced. 
C) The output mix is inefficient;more corn and less wine should be produced. 
D) The output mix is efficient. 
A) The output mix is inefficient;more wine and less corn should be produced. 
B) The output mix is inefficient;less of both the commodities should be produced. 
C) The output mix is inefficient;more corn and less wine should be produced. 
D) The output mix is efficient.

Question 7

An efficient distribution of a certain quantity of goods between two parties is one in which:

Accepted Answer

A) neither party can be made better off by changing the allocation of the goods. 
B) one party can be made better off at the expense of the other by changing the allocation of the goods. 
C) both parties evenly divide the total quantities of the goods. 
D) neither party can be made worse off if the allocation of the goods is altered. 
A) neither party can be made better off by changing the allocation of the goods. 
B) one party can be made better off at the expense of the other by changing the allocation of the goods. 
C) both parties evenly divide the total quantities of the goods. 
D) neither party can be made worse off if the allocation of the goods is altered.

Question 8

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 9

According to Hayek,can there ever be an objectively defined efficient outcome other than what currently exists? Explain.

Accepted Answer

No,there can never be a change other tha

Question 10

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.

Question 11

Which of the following is true of contract curves?

Accepted Answer

A) Every point on the contract curve indicates an inefficient distribution of goods among consumers. 
B) At any point on the contract curve,all the consumers have equal marginal rates of substitution. 
C) A movement along the contract curve indicates that,any trade that benefits one person will necessarily benefit the other. 
D) At every point on the contract curve,the marginal utility derived from the consumption of a good is identical for all the consumers. 
A) Every point on the contract curve indicates an inefficient distribution of goods among consumers. 
B) At any point on the contract curve,all the consumers have equal marginal rates of substitution. 
C) A movement along the contract curve indicates that,any trade that benefits one person will necessarily benefit the other. 
D) At every point on the contract curve,the marginal utility derived from the consumption of a good is identical for all the consumers.

Question 12

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 13

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 14

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 15

Assume that the clothing (c.market is a monopoly but perfect competition prevails in the market for food (F).Which of the following is true in this context?

Accepted Answer

A) The price ratio of clothing and food equals the ratio of their marginal costs. 
B) The price ratio of clothing and food is greater than the ratio of their marginal costs. 
C) The price ratio of clothing and food is less than the ratio of their marginal costs. 
D) The price ratio of clothing and food equals unity. 
A) The price ratio of clothing and food equals the ratio of their marginal costs. 
B) The price ratio of clothing and food is greater than the ratio of their marginal costs. 
C) The price ratio of clothing and food is less than the ratio of their marginal costs. 
D) The price ratio of clothing and food equals unity.

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 existing allocation of goods is said to be Pareto efficient:

Accepted Answer

A) if the distribution is equitable. 
B) as long as any redistribution is a positive-sum game. 
C) as long as any redistribution makes at least one person better off and no one else is worse off. 
D) if any redistribution cannot make someone better without leaving someone else worse off. 
A) if the distribution is equitable. 
B) as long as any redistribution is a positive-sum game. 
C) as long as any redistribution makes at least one person better off and no one else is worse off. 
D) if any redistribution cannot make someone better without leaving someone else worse off.

Question 18

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 19

A typical consumer consumes products X and Y.In competitive equilibrium,the price of X is three times the price of Y.If MCX is the marginal cost of producing X and MCY is the marginal cost of producing Y,this implies that:

Accepted Answer

A) MCX = MCY + 3 
B) MCX + 3 = MCY. 
C) MCX = (1/3)MCY. 
D) MCX = 3MCY. 
A) MCX = MCY + 3 
B) MCX + 3 = MCY. 
C) MCX = (1/3)MCY. 
D) MCX = 3MCY.

Question 20

In a general competitive equilibrium,the slope of the production possibility frontier equals all of the following,except:

Accepted Answer

A) the ratio of the marginal costs of the goods. 
B) the marginal rate of substitution for any consumer. 
C) the ratio of the prices of the commodities. 
D) the input ratio in the production of the commodities. 
A) the ratio of the marginal costs of the goods. 
B) the marginal rate of substitution for any consumer. 
C) the ratio of the prices of the commodities. 
D) the input ratio in the production of the commodities.

In an Edgeworth production box diagram,if two isoquants intersect,it means that:

When the marginal rates of substitution differs across any two consumers,then:

A Pareto optimal allocation of resources implies that:

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

Suppose an economy produces two goods,corn and wine.The marginal rate of substitution between corn and wine for consumers is 1C/3W and the marginal rate transformation is 1C/1W.What can be said about the output mix?

An efficient distribution of a certain quantity of goods between two parties is one in which:

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

According to Hayek,can there ever be an objectively defined efficient outcome other than what currently exists? Explain.

Which of the following is true of contract curves?

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:

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

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

Assume that the clothing (c.market is a monopoly but perfect competition prevails in the market for food (F).Which of the following is true in this context?

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

An existing allocation of goods is said to be Pareto efficient:

If the labor market is perfectly competitive:

A typical consumer consumes products X and Y.In competitive equilibrium,the price of X is three times the price of Y.If MC_X is the marginal cost of producing X and MC_Y is the marginal cost of producing Y,this implies that:

In a general competitive equilibrium,the slope of the production possibility frontier equals all of the following,except:

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 an Edgeworth production box diagram,if two isoquants intersect,it means that:

When the marginal rates of substitution differs across any two consumers,then:

A Pareto optimal allocation of resources implies that:

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

Suppose an economy produces two goods,corn and wine.The marginal rate of substitution between corn and wine for consumers is 1C/3W and the marginal rate transformation is 1C/1W.What can be said about the output mix?

An efficient distribution of a certain quantity of goods between two parties is one in which:

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

According to Hayek,can there ever be an objectively defined efficient outcome other than what currently exists? Explain.

Which of the following is true of contract curves?

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:

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

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

Assume that the clothing (c.market is a monopoly but perfect competition prevails in the market for food (F).Which of the following is true in this context?

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

An existing allocation of goods is said to be Pareto efficient:

If the labor market is perfectly competitive:

A typical consumer consumes products X and Y.In competitive equilibrium,the price of X is three times the price of Y.If MCX is the marginal cost of producing X and MCY is the marginal cost of producing Y,this implies that:

In a general competitive equilibrium,the slope of the production possibility frontier equals all of the following,except:

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

A typical consumer consumes products X and Y.In competitive equilibrium,the price of X is three times the price of Y.If MC_X is the marginal cost of producing X and MC_Y is the marginal cost of producing Y,this implies that: