Question 1

If the marginal rates of technical substitution between inputs are not equal among firms,it means that:

Accepted Answer

A) output is being inefficiently distributed. 
B) the ratio of the input prices is greater than the ratio of the product prices. 
C) output is not being maximized,given available inputs. 
D) input markets are not in equilibrium. 
A) output is being inefficiently distributed. 
B) the ratio of the input prices is greater than the ratio of the product prices. 
C) output is not being maximized,given available inputs. 
D) input markets are not in equilibrium.

Question 2

Use the following figure to answer the question : Figure 19-1 : 
,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica.  
-In Figure 19-1,TT is referred to as:

Accepted Answer

A) the welfare frontier. 
B) the production possibility frontier. 
C) the marginal rate of transformation curve. 
D) the community indifference curve. 
A) the welfare frontier. 
B) the production possibility frontier. 
C) the marginal rate of transformation curve. 
D) the community indifference curve.

Question 3

The marginal rate of transformation measures the:

Accepted Answer

A) absolute cost of producing a commodity. 
B) relative price of labor. 
C) opportunity cost of one good in terms of the other. 
D) rate at which one input is substituted for the other. 
A) absolute cost of producing a commodity. 
B) relative price of labor. 
C) opportunity cost of one good in terms of the other. 
D) rate at which one input is substituted for the other.

Question 4

When the allocation of two goods between two individuals is efficient:

Accepted Answer

A) the utilities of both the individuals from the consumption of these two goods are equal. 
B) both individuals will derive the maximum utility from the consumption of these two goods. 
C) the marginal rates of substitution between two goods for both the consumers are the same. 
D) the market demand curves in all markets are identical. 
A) the utilities of both the individuals from the consumption of these two goods are equal. 
B) both individuals will derive the maximum utility from the consumption of these two goods. 
C) the marginal rates of substitution between two goods for both the consumers are the same. 
D) the market demand curves in all markets are identical.

Question 5

Which of the following statements about the welfare frontier is incorrect?

Accepted Answer

A) Some of the points on the welfare frontier are efficient. 
B) The welfare frontier is downward sloping. 
C) Any point on the welfare frontier is preferred to any point inside it. 
D) the marginal rate of substitution [MRS] is equal to the marginal rate of transformation [MRT] at all points on the welfare frontier. 
A) Some of the points on the welfare frontier are efficient. 
B) The welfare frontier is downward sloping. 
C) Any point on the welfare frontier is preferred to any point inside it. 
D) the marginal rate of substitution [MRS] is equal to the marginal rate of transformation [MRT] at all points on the welfare frontier.

Question 6

A change in equilibrium in one market that affects other markets is called:

Accepted Answer

A) a multiplier effect. 
B) an external effect. 
C) a spillover effect. 
D) a lagged exchange effect. 
A) a multiplier effect. 
B) an external effect. 
C) a spillover effect. 
D) a lagged exchange effect.

Question 7

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 8

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 9

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 10

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 11

Which of the following is not a cause of economic inefficiency?

Accepted Answer

A) Market power 
B) Externalities 
C) Free entry and exit of firms 
D) Imperfect information 
A) Market power 
B) Externalities 
C) Free entry and exit of firms 
D) Imperfect information

Question 12

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 13

Which of the following is a true statement?

Accepted Answer

A) Every point along a contract curve in an Edgeworth production box indicates an equal distribution of all resources across all the firms. 
B) Every point along a contract curve in an Edgeworth production box directly corresponds to a specific point on a production possibility frontier. 
C) Every point along an isoquant defines a competitive equilibrium. 
D) Every point along a production possibility frontier represents an efficient output mix. 
A) Every point along a contract curve in an Edgeworth production box indicates an equal distribution of all resources across all the firms. 
B) Every point along a contract curve in an Edgeworth production box directly corresponds to a specific point on a production possibility frontier. 
C) Every point along an isoquant defines a competitive equilibrium. 
D) Every point along a production possibility frontier represents an efficient output mix.

Question 14

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].  
In Figure 19-3,at point Z:

Accepted Answer

A) the MRTXY is greater than the MRSXY. 
B) the opportunity cost of producing an additional unit of good X equals 2 units of good Y. 
C) the resources in the economy are being used inefficiently. 
D) the slope of the production possibility frontier is greater than the slope of the line zz. 
A) the MRTXY is greater than the MRSXY. 
B) the opportunity cost of producing an additional unit of good X equals 2 units of good Y. 
C) the resources in the economy are being used inefficiently. 
D) the slope of the production possibility frontier is greater than the slope of the line zz.

Question 15

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.

Question 16

Without trade the price of one unit of product Y is 1/3 that of one unit of X in a small country.
Products X and Y trade on the world market at equal prices.If the small country starts trading with the rest of the world:

Accepted Answer

A) the small country would import product Y. 
B) the small country would export both product X and product Y. 
C) the domestic price of product X would equal the world price. 
D) the relative price of X and Y would not change in the small country. 
A) the small country would import product Y. 
B) the small country would export both product X and product Y. 
C) the domestic price of product X would equal the world price. 
D) the relative price of X and Y would not change in the small country.

Question 17

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 18

In Figure 19-2 given below, points A, B, C, and D show the different allocations of goods between Ann and Bill.
points A,B,C,and D show the different allocations of goods between Ann and Bill.  
In Figure 19-2,which of the following allocations of goods between Ann and Bill is inefficient?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 19

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 20

What are the conditions for efficiency in distribution,efficiency in production,and efficiency in output?

Accepted Answer

Efficiency in distribution is reached wh

If the marginal rates of technical substitution between inputs are not equal among firms,it means that:

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,TT is referred to as:

The marginal rate of transformation measures the:

When the allocation of two goods between two individuals is efficient:

Which of the following statements about the welfare frontier is incorrect?

A change in equilibrium in one market that affects other markets is called:

A general competitive equilibrium:

An Edgeworth production box:

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

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

Which of the following is not a cause of economic inefficiency?

Partial equilibrium analysis:

Which of the following is a true statement?

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

Without trade the price of one unit of product Y is 1/3 that of one unit of X in a small country. Products X and Y trade on the world market at equal prices.If the small country starts trading with the rest of the world:

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

In Figure 19-2 given below, points A, B, C, and D show the different allocations of goods between Ann and Bill. points A,B,C,and D show the different allocations of goods between Ann and Bill. In Figure 19-2,which of the following allocations of goods between Ann and Bill is inefficient?

Identify the correct statement:

What are the conditions for efficiency in distribution,efficiency in production,and efficiency in output?

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

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Exam 19: General Equilibrium Analysis and Economic Efficiency

If the marginal rates of technical substitution between inputs are not equal among firms,it means that:

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,TT is referred to as:

The marginal rate of transformation measures the:

When the allocation of two goods between two individuals is efficient:

Which of the following statements about the welfare frontier is incorrect?

A change in equilibrium in one market that affects other markets is called:

A general competitive equilibrium:

An Edgeworth production box:

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

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

Which of the following is not a cause of economic inefficiency?

Partial equilibrium analysis:

Which of the following is a true statement?

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

Without trade the price of one unit of product Y is 1/3 that of one unit of X in a small country. Products X and Y trade on the world market at equal prices.If the small country starts trading with the rest of the world:

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

In Figure 19-2 given below, points A, B, C, and D show the different allocations of goods between Ann and Bill. points A,B,C,and D show the different allocations of goods between Ann and Bill. In Figure 19-2,which of the following allocations of goods between Ann and Bill is inefficient?

Identify the correct statement:

What are the conditions for efficiency in distribution,efficiency in production,and efficiency in output?

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