Question 1

The reason externalities distort the allocation of resources is that

Accepted Answer

A) too few goods are usually produced. 
B) firms often go out of business because of the externality. 
C) a firm's private costs do not reflect the social cost of production. 
D) regulating externalities uses scarce resources. 
A) too few goods are usually produced. 
B) firms often go out of business because of the externality. 
C) a firm's private costs do not reflect the social cost of production. 
D) regulating externalities uses scarce resources. C

Question 2

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is $\frac { - X } { 2 \sqrt { 500 - X ^ { 2 } } }$ .What is this slope at the utility-maximizing point?

Accepted Answer

A) 0 
B) -1 
C) -4 
D) -5 
A) 0 
B) -1 
C) -4 
D) -5 B

Question 3

Markets can fail to achieve efficiency when

Accepted Answer

A) there are prices consumers do not think are fair. 
B) there are wages workers do not think are fair. 
C) trade puts people out of work. 
D) there are public goods. 
A) there are prices consumers do not think are fair. 
B) there are wages workers do not think are fair. 
C) trade puts people out of work. 
D) there are public goods. D

Question 4

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is $\frac { - 4 X } { \sqrt { 500 - 4 X ^ { 2 } } }$ .How much X should be produced?

Accepted Answer

A) 0 
B) 5 
C) 10 
D) 20 
A) 0 
B) 5 
C) 10 
D) 20

Question 5

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Accepted Answer

A) the rate of technical substitution for corn divided by the rate of technical substitution for cloth. 
B) the rate of technical substitution for cloth divided by the rate of technical substitution for corn. 
C) the marginal cost of producing cloth divided by the marginal cost of producing corn. 
D) the marginal cost of producing corn divided by the marginal cost of producing cloth. 
A) the rate of technical substitution for corn divided by the rate of technical substitution for cloth. 
B) the rate of technical substitution for cloth divided by the rate of technical substitution for corn. 
C) the marginal cost of producing cloth divided by the marginal cost of producing corn. 
D) the marginal cost of producing corn divided by the marginal cost of producing cloth.

Question 6

Markets can fail to achieve efficiency when

Accepted Answer

A) there are prices consumers do not think are fair. 
B) there are wages workers do not think are fair. 
C) trade puts people out of work. 
D) there are buyers or sellers without adequate information about the quality of goods. 
A) there are prices consumers do not think are fair. 
B) there are wages workers do not think are fair. 
C) trade puts people out of work. 
D) there are buyers or sellers without adequate information about the quality of goods.

Question 7

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is $\frac { - 4 X } { \sqrt { 500 - 4 X ^ { 2 } } }$ .What is this slope at the utility-maximizing point?

Accepted Answer

A) 0 
B) -1 
C) -4 
D) -5 
A) 0 
B) -1 
C) -4 
D) -5

Question 8

Suppose two coffee snobs who must have their coffee and cream in exact proportions (each cup is 10 coffee per 1 unit cream)are invited to a weekend long event (during which they can easily consume 8 cups of coffee).Suppose Snob A is given 8 units of cream and Snob B is given 80 units of coffee.The contract curve in the Edgeworth box would be

Accepted Answer

A) a right angle connecting the lower left corner with the upper right corner. 
B) a curve (not a line) connecting the lower left corner with the upper right corner. 
C) a line connecting the lower left corner with the upper right corner. 
D) a right angle connecting the upper left corner with the lower right corner. 
A) a right angle connecting the lower left corner with the upper right corner. 
B) a curve (not a line) connecting the lower left corner with the upper right corner. 
C) a line connecting the lower left corner with the upper right corner. 
D) a right angle connecting the upper left corner with the lower right corner.

Question 9

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the man is more selfish than the woman 
UM = CM2/3 UW1/3
UW = CW1/2 UM1/2
They will maximize the joint happiness (UM + UW)where

Accepted Answer

A) CM = 100; CW = 0 
B) CW = 100; CM = 100 
C) 50 < CM < 100; 0 < CW < 50 
D) 50 < CW < 100; 0 < CM < 50 
A) CM = 100; CW = 0 
B) CW = 100; CM = 100 
C) 50 < CM < 100; 0 < CW < 50 
D) 50 < CW < 100; 0 < CM < 50

Question 10

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the woman is more selfish than the woman 
UM = CM1/2 UW1/2
UW = CW2/3 UM1/3
They will maximize the joint happiness (UM + UW)where

Accepted Answer

A) CM = 100; CW = 0 
B) CW = 100; CM = 100 
C) 50 < CM < 100; 0 < CW < 50 
D) 50 < CW < 100; 0 < CM < 50 
A) CM = 100; CW = 0 
B) CW = 100; CM = 100 
C) 50 < CM < 100; 0 < CW < 50 
D) 50 < CW < 100; 0 < CM < 50

Question 11

Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade.The men are given food when they walk in and the women are given drink.Suppose they have identical preferences where food and drink provide utility U = FαDβ.The contract curve in the Edgeworth box using a representative man and woman would be

Accepted Answer

A) a right angle connecting the lower left corner with the upper right corner. 
B) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. 
C) a line connecting the lower left corner with the upper right corner. 
D) a right angle connecting the upper left corner with the lower right corner. 
A) a right angle connecting the lower left corner with the upper right corner. 
B) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. 
C) a line connecting the lower left corner with the upper right corner. 
D) a right angle connecting the upper left corner with the lower right corner.

Question 12

The rate of product transformation refers to

Accepted Answer

A) how a consumer can trade one good for another while still maximizing his or her utility. 
B) how a firm can substitute one input for another and still maintain the same production level. 
C) how production of one good can be substituted for another while still using a fixed supply of inputs efficiently. 
D) how quickly a firm can produce a final good while starting with only natural resources. 
A) how a consumer can trade one good for another while still maximizing his or her utility. 
B) how a firm can substitute one input for another and still maintain the same production level. 
C) how production of one good can be substituted for another while still using a fixed supply of inputs efficiently. 
D) how quickly a firm can produce a final good while starting with only natural resources.

Question 13

The slope of the production possibility frontier shows

Accepted Answer

A) the marginal rate of substitution between the two goods. 
B) the relative marginal costs of the two goods. 
C) the efficient combination of outputs possible using fixed amounts of input. 
D) the relative marginal productivities of the two goods. 
A) the marginal rate of substitution between the two goods. 
B) the relative marginal costs of the two goods. 
C) the efficient combination of outputs possible using fixed amounts of input. 
D) the relative marginal productivities of the two goods.

Question 14

Consider a two-good production economy in which both goods are produced with fixed proportions production functions.Then,some efficient allocations will exhibit unemployment of some factor providing

Accepted Answer

A) the firms use the inputs in different proportions. 
B) the firms exhibit diminishing returns to scale. 
C) the firms exhibit increasing returns to scale. 
D) production can never be efficient if there are unemployed inputs. 
A) the firms use the inputs in different proportions. 
B) the firms exhibit diminishing returns to scale. 
C) the firms exhibit increasing returns to scale. 
D) production can never be efficient if there are unemployed inputs.

Question 15

Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade.The men are given food when they walk in and the women are given drink.Suppose they have very different preferences where food and drink provide utility.For men U = FαDβ.For women U=min(F,D)The contract curve in the Edgeworth box using a representative man and woman would be

Accepted Answer

A) a right angle connecting the lower left corner with the upper right corner. 
B) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. 
C) a line connecting the lower left corner with the upper right corner. 
D) a right angle connecting the upper left corner with the lower right corner. 
A) a right angle connecting the lower left corner with the upper right corner. 
B) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. 
C) a line connecting the lower left corner with the upper right corner. 
D) a right angle connecting the upper left corner with the lower right corner.

Question 16

Suppose two coffee snobs who must have their coffee and cream in exact proportions (each cup is 10 coffee per 1 unit cream)are invited to a weekend long event (during which they can easily consume 8 cups of coffee).Suppose Snob A is given 8 units of cream and Snob B is given 80 units of coffee.The post trading result (one in which any trade that makes both parties better off than their initial allocation)will guarantee each person

Accepted Answer

A) nothing 
B) at least 1 cup of properly made coffee. 
C) at least 2 cups of properly made coffee. 
D) exactly 4 cups of properly made coffee. 
A) nothing 
B) at least 1 cup of properly made coffee. 
C) at least 2 cups of properly made coffee. 
D) exactly 4 cups of properly made coffee.

Question 17

Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade.The men are given food when they walk in and the women are given drink.Suppose they have identical preferences where food and drink provide utility U = FαDβ.The exchange would be such that

Accepted Answer

A) both would be guaranteed to be better off than when they entered. 
B) both would be guaranteed to be at least as well off as when they entered. 
C) the men would end up with more. 
D) the women would end up with more. 
A) both would be guaranteed to be better off than when they entered. 
B) both would be guaranteed to be at least as well off as when they entered. 
C) the men would end up with more. 
D) the women would end up with more.

Question 18

Suppose goods X and Y are produced along a production possibilities frontier 4X2 + Y2 = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is $\frac { - X } { 2 \sqrt { 500 - X ^ { 2 } } }$ .How much Y should be produced?

Accepted Answer

A) 0 
B) 5 
C) 10 
D) 20 
A) 0 
B) 5 
C) 10 
D) 20

Question 19

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption. 
$U _ { M } = \left( C _ { M } U _ { W } \right) ^ { \frac { 1 } { 2 } }$
$U _ { W } = \left( C _ { W } U _ { M } \right) ^ { \frac { 1 } { 2 } }$
Suppose they have 100 units of consumption to distribute,they will maximize the joint happiness (UM + UW)where

Accepted Answer

A) CM = 100; CW = 0 
B) CW = 100; CM = 100 
C) CM = 67; CW = 33 
D) CW = 50; CM = 50 
A) CM = 100; CW = 0 
B) CW = 100; CM = 100 
C) CM = 67; CW = 33 
D) CW = 50; CM = 50

Question 20

Each of the following factors might interfere with the efficiency of perfect competition except:

Accepted Answer

A) increasing returns to scale. 
B) imperfect price information. 
C) externalities. 
D) diminishing returns to scale. 
A) increasing returns to scale. 
B) imperfect price information. 
C) externalities. 
D) diminishing returns to scale.

The reason externalities distort the allocation of resources is that

Markets can fail to achieve efficiency when

Suppose goods X and Y are produced along a production possibilities frontier 4X² + Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is $\frac { - 4 X } { \sqrt { 500 - 4 X ^ { 2 } } }$ .How much X should be produced?

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Markets can fail to achieve efficiency when

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the man is more selfish than the woman UM = CM^2/3 UW^1/3 UW = CW^1/2 UM^1/2 They will maximize the joint happiness (UM + UW)where

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the woman is more selfish than the woman UM = CM^1/2 UW^1/2 UW = CW^2/3UM^1/3 They will maximize the joint happiness (UM + UW)where

The rate of product transformation refers to

The slope of the production possibility frontier shows

Consider a two-good production economy in which both goods are produced with fixed proportions production functions.Then,some efficient allocations will exhibit unemployment of some factor providing

Suppose goods X and Y are produced along a production possibilities frontier 4X² + Y² = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is $\frac { - X } { 2 \sqrt { 500 - X ^ { 2 } } }$ .How much Y should be produced?

Each of the following factors might interfere with the efficiency of perfect competition except:

Economic Models

Utility and Choice

Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 10: General Equilibrium and Welfare

The reason externalities distort the allocation of resources is that

Markets can fail to achieve efficiency when

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Markets can fail to achieve efficiency when

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the man is more selfish than the woman UM = CM2/3 UW1/3 UW = CW1/2 UM1/2 They will maximize the joint happiness (UM + UW)where

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the woman is more selfish than the woman UM = CM1/2 UW1/2 UW = CW2/3 UM1/3 They will maximize the joint happiness (UM + UW)where

The rate of product transformation refers to

The slope of the production possibility frontier shows

Consider a two-good production economy in which both goods are produced with fixed proportions production functions.Then,some efficient allocations will exhibit unemployment of some factor providing

Each of the following factors might interfere with the efficiency of perfect competition except:

Economic Models

Utility and Choice

Demand Curves

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the man is more selfish than the woman UM = CM^2/3 UW^1/3 UW = CW^1/2 UM^1/2 They will maximize the joint happiness (UM + UW)where

Suppose a man and a woman are in love and care for the other's happiness as well as their own consumption.Suppose the woman is more selfish than the woman UM = CM^1/2 UW^1/2 UW = CW^2/3UM^1/3 They will maximize the joint happiness (UM + UW)where