Question 1

Under a perfectly competitive price system

Accepted Answer

A) an equitable allocation of the available resources will always result. 
B) there is no opportunity for individuals to trade amongst themselves. 
C) there is no reason to expect that voluntary trading will result in an equitable allocation of the available resources. 
D) None of the above will result. 
A) an equitable allocation of the available resources will always result. 
B) there is no opportunity for individuals to trade amongst themselves. 
C) there is no reason to expect that voluntary trading will result in an equitable allocation of the available resources. 
D) None of the above will result.

Question 2

In free exchange among two individuals the position on the contract curve finally arrived at will,among other things,depend on: Which of these correctly completes the statement?
I.The bargaining strength of each individual.
II.The initial endowments of the individuals.
III.The individuals' preferences.

Accepted Answer

A) Only III. 
B) Only II. 
C) I and III,but not II. 
D) II and III,but not I. 
E) I,II,and III. 
A) Only III. 
B) Only II. 
C) I and III,but not II. 
D) II and III,but not I. 
E) I,II,and III.

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 markets with imperfect competition. 
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 markets with imperfect competition.

Question 4

Suppose country A has a production possibilities frontier such that $4 x ^ { 2 } + 4 y ^ { 2 } = 500$ and country B has a production possibilities frontier such that $x ^ { 2 } + 4 y ^ { 2 } = 500$ and consumers in each country view x and y as perfect substitutes.Country B will produce

Accepted Answer

A) only x (= $\sqrt { 500 }$
) and trade for y. 
B) only y (= $\sqrt { 125 }$ ) and trade for x. 
C) both x (= 20) and y (= 5) and trade x to get y. 
D) both x (= 20) and y (= 5) and trade y to get x. 
A) only x (= $\sqrt { 500 }$
) and trade for y. 
B) only y (= $\sqrt { 125 }$ ) and trade for x. 
C) both x (= 20) and y (= 5) and trade x to get y. 
D) both x (= 20) and y (= 5) and trade y to get x.

Question 5

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 Y should be produced?

Accepted Answer

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

Question 6

Suppose two goods (X and Y )are being produced efficiently and that the production of X is always more labor intensive than the production of Y.Production depends only on two factors (capital and labor); these may be smoothly substituted for each other.The total quantities of these inputs are fixed.An increase in the production of X and a decrease in the production of Y will

Accepted Answer

A) increase the capital-labor ratio in each firm. 
B) decrease the capital-labor ratio in each firm. 
C) leave the capital-labor ratio for each firm unchanged. 
D) increase the capital-labor ratio in Y production and decrease the capital-labor ratio in X production. 
A) increase the capital-labor ratio in each firm. 
B) decrease the capital-labor ratio in each firm. 
C) leave the capital-labor ratio for each firm unchanged. 
D) increase the capital-labor ratio in Y production and decrease the capital-labor ratio in X production.

Question 7

Consider three ways of allocating two goods in a two-person exchange economy. Which of these situations is efficient?
I.Both individuals take prices as given and equilibrium prices are established by an impartial auctioneer.
II.One individual can act as a perfect price discriminator and force the other individual to pay a different price for each unit of a good that is traded.
III.One individual is a monopolist and can charge the other individual a single,utility-maximizing price.

Accepted Answer

A) None of them. 
B) Only I. 
C) I and II,but not III. 
D) I and III,but not II. 
A) None of them. 
B) Only I. 
C) I and II,but not III. 
D) I and III,but not II.

Under a perfectly competitive price system

Markets can fail to achieve efficiency when

Suppose country A has a production possibilities frontier such that $4 x ^ { 2 } + 4 y ^ { 2 } = 500$ and country B has a production possibilities frontier such that $x ^ { 2 } + 4 y ^ { 2 } = 500$ and consumers in each country view x and y as perfect substitutes.Country B will produce

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 Y should be produced?

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

Under a perfectly competitive price system

Markets can fail to achieve efficiency when

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