Question 1

If there are consumption externalities,then a competitive equilibrium is not necessarily Pareto optimal.

Accepted Answer

A) True 
 B)False

Question 2

An economy has two people,Charlie and Doris.There are two goods,apples and bananas.Charlie has an initial endowment of 6 apples and 6 bananas.Doris has an initial endowment of 12 apples and 3 bananas.Charlie's utility function is U(A C,B C)= A C B C,where A C is his apple consumption and B C is his banana consumption.Doris's utility function is U(A D,B D)= A D B D,where A D and B D are her apple and banana consumptions.At every Pareto optimal allocation,

Accepted Answer

A)  Charlie consumes more bananas per apple than Doris does. 
B)  Doris consumes equal numbers of apples and bananas. 
C)  Charlie consumes the same number of apples as Doris. 
D)  Charlie consumes 18 apples for every 9 bananas that he consumes. 
E)  Doris consumes 12 apples for every 3 bananas that she consumes. 
A)  Charlie consumes more bananas per apple than Doris does. 
B)  Doris consumes equal numbers of apples and bananas. 
C)  Charlie consumes the same number of apples as Doris. 
D)  Charlie consumes 18 apples for every 9 bananas that he consumes. 
E)  Doris consumes 12 apples for every 3 bananas that she consumes.

Question 3

Kens utility function is U(Q K,W K)= Q K W K and Barbies utility function is U(Q B,W B)=Q B W B.If Kens initial endowment were 5 units of quiche and 7 units of wine and Barbies endowment were 10 units of quiche and 7 units of wine and Barbie's endowment were 10 units of quiche and 7 units of wine,then at any Pareto optimal allocation where both persons consumed some of each good,

Accepted Answer

A)  Ken would consume 15 units of quiche for every 14 units of wine that he consumed. 
B)  Barbie would consume 10 units of quiche for every 7 units of wine that she consumed. 
C)  Ken would consume 5 units of quiche for every 7 units of wine that he consumed. 
D)  Barbie would consume twice as much quiche as Ken. 
E)  None of the above. 
A)  Ken would consume 15 units of quiche for every 14 units of wine that he consumed. 
B)  Barbie would consume 10 units of quiche for every 7 units of wine that she consumed. 
C)  Ken would consume 5 units of quiche for every 7 units of wine that he consumed. 
D)  Barbie would consume twice as much quiche as Ken. 
E)  None of the above.

Question 4

In a pure exchange economy with two goods,if there is a competitive equilibrium with prices p1 = $12 and p2 = $27,then there must also be a competitive equilibrium with prices p1 = $24 and p2 = $54.

Accepted Answer

A) True 
 B)False

Question 5

Partial equilibrium analysis concerns only supply or only demand while general equilibrium analysis deals with supply and demand at the same time.

Accepted Answer

A) True 
 B)False

Question 6

A small economy has only two consumers,Zeke and Maude.Zeke's utility function is U(x,y)= x +48y1/2.Maude's utility function is U(x,y)= x + 4y.At a Pareto optimal allocation in which both individuals consume some of each good,how much y does Zeke consume?

Accepted Answer

A)  36 
B)  12 
C)  5 
D)  10 
E)  We can't tell without knowing the initial endowments. 
A)  36 
B)  12 
C)  5 
D)  10 
E)  We can't tell without knowing the initial endowments.

Question 7

Mutt's utility function is U(m,j)=max{3m,j} and Jeff's utility function is U(m,j)= 4m + j.Mutt is initially endowed with 4 units of milk and 2 units of juice and Jeff is initially endowed with 4 units of milk and 6 units of juice.If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box,then the set of Pareto optimal allocations includes the

Accepted Answer

A)  left edge and bottom edge of the Edgeworth box. 
B)  right edge of the Edgeworth box but no other edges. 
C)  bottom edge of the Edgeworth box but no other edges. 
D)  left edge of the Edgeworth box but no other edges. 
E)  right edge and top edge of the Edgeworth box. 
A)  left edge and bottom edge of the Edgeworth box. 
B)  right edge of the Edgeworth box but no other edges. 
C)  bottom edge of the Edgeworth box but no other edges. 
D)  left edge of the Edgeworth box but no other edges. 
E)  right edge and top edge of the Edgeworth box.

Question 8

Kens utility function is U(Q K,W K)= Q K W K and Barbies utility function is U(Q B,W B)=Q B W B.If Kens initial endowment were 3 units of quiche and 11 units of wine and Barbies endowment were 6 units of quiche and 11 units of wine,then at any Pareto optimal allocation where both persons consumed some of each good,

Accepted Answer

A)  Ken would consume 3 units of quiche for every 11 units of wine that he consumed. 
B)  Barbie would consume twice as much quiche as Ken. 
C)  Ken would consume 9 units of quiche for every 22 units of wine that he consumed. 
D)  Barbie would consume 6 units of quiche for every 11 units of wine that she consumed. 
E)  None of the above. 
A)  Ken would consume 3 units of quiche for every 11 units of wine that he consumed. 
B)  Barbie would consume twice as much quiche as Ken. 
C)  Ken would consume 9 units of quiche for every 22 units of wine that he consumed. 
D)  Barbie would consume 6 units of quiche for every 11 units of wine that she consumed. 
E)  None of the above.

Question 9

Jack Spratt's utility function is U(F,L)= L.His wife's utility function is U(F,L)=F.If Jack's initial endowment is 40 units of F and 20 units of L and if Jack's wife's initial endowment is 24 units of F and 40 units of L,then in an Edgeworth box for Jack and his wife,an allocation of F and L will be Pareto optimal only if it is at a corner of the box.

Accepted Answer

A) True 
 B)False

Question 10

In a model with two consumers,two goods,and no production,the contract curve must be a line going from one consumer's origin to the other consumer's origin.

Accepted Answer

A) True 
 B)False

Question 11

If demand varies continuously with price,then even if there are thousands of goods,there will be at least one set of prices such that demand equals supply in every market.

Accepted Answer

A) True 
 B)False

Question 12

From Walras's law it follows that in a market with two goods,if demand equals supply in one market,then demand must equal supply in the other market.

Accepted Answer

A) True 
 B)False

Question 13

In general equilibrium analysis,an allocation is a feasible allocation if every consumer is consuming a bundle that costs no more than his or her income.

Accepted Answer

A) True 
 B)False

Question 14

Jack Spratt's utility function is U(F,L)= L.His wife's utility function is U(F,L)= F.If Jack's initial endowment is 100 units of F and 50 units of L and if Jack's wife's initial endowment is 60 units of F and 100 units of L,then in an Edgeworth box for Jack and his wife,an allocation of F and L will be Pareto optimal only if it is at a corner of the box.

Accepted Answer

A) True 
 B)False

Question 15

Abduls utility is U(X A,Y A)=min{X A,Y A},where X A and Y A are his consumptions of goods X and Y respectively.Babettes utility function is U(X B,Y B)= X B Y B,where X B and Y B are her consumptions of goods X and Y.Abduls initial endowment is no units of Y and 5 units of X.Babettes initial endowment is no units of X and 11 units of Y.If X is the numeraire good and p is the price of good Y,then supply will equal demand in the market for Y if

Accepted Answer

A)  11/(p + 1)+2.50 = 11. 
B)  5/(p+ 1)+5.50 = 11. 
C)  11/5= p. 
D)  min{5,11}+ 5/2p =11. 
E)  min{5,11} +11/2p= 11. 
A)  11/(p + 1)+2.50 = 11. 
B)  5/(p+ 1)+5.50 = 11. 
C)  11/5= p. 
D)  min{5,11}+ 5/2p =11. 
E)  min{5,11} +11/2p= 11.

Question 16

A small economy has only two consumers,Harold and Irene.Harold's utility function is U(x,y)= x +50y1/2.Irene's utility function is U(x,y)= x + 5y.Harold is endowed with 500 units of x and 60 units of y.They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts.How much y does Harold consume?

Accepted Answer

A)  50 units 
B)  25 units 
C)  28 units 
D)  23 units 
E)  There is not enough information to determine how much y he will consume. 
A)  50 units 
B)  25 units 
C)  28 units 
D)  23 units 
E)  There is not enough information to determine how much y he will consume.

Question 17

Every allocation on the contract curve is Pareto optimal.

Accepted Answer

A) True 
 B)False

Question 18

A competitive equilibrium allocation must be a feasible allocation.

Accepted Answer

A) True 
 B)False

Question 19

If the assumptions of the first theorem of welfare economics apply and if the economy is in a competitive equilibrium,then any reallocation that benefits someone must harm someone else.

Accepted Answer

A) True 
 B)False

Question 20

An economy has two people,Charlie and Doris.There are two goods,apples and bananas.Charlie has an initial endowment of 6 apples and 6 bananas.Doris has an initial endowment of 12 apples and 3 bananas.Charlie's utility function is U(A C,B C)= A C B C,where A C is his apple consumption and B C is his banana consumption.Doris's utility function is U(A D,B D)= A D B D,where A D and B D are her apple and banana consumptions.At every Pareto optimal allocation,

Accepted Answer

A)  Charlie consumes more bananas per apple than Doris does. 
B)  Charlie consumes the same number of apples as Doris. 
C)  Charlie consumes 18 apples for every 9 bananas that he consumes. 
D)  Doris consumes equal numbers of apples and bananas. 
E)  Doris consumes 12 apples for every 3 bananas that she consumes. 
A)  Charlie consumes more bananas per apple than Doris does. 
B)  Charlie consumes the same number of apples as Doris. 
C)  Charlie consumes 18 apples for every 9 bananas that he consumes. 
D)  Doris consumes equal numbers of apples and bananas. 
E)  Doris consumes 12 apples for every 3 bananas that she consumes.

Exam 32:Exchange-Part A

If there are consumption externalities,then a competitive equilibrium is not necessarily Pareto optimal.

In a pure exchange economy with two goods,if there is a competitive equilibrium with prices p1 = $12 and p2 = $27,then there must also be a competitive equilibrium with prices p1 = $24 and p2 = $54.

Partial equilibrium analysis concerns only supply or only demand while general equilibrium analysis deals with supply and demand at the same time.

A small economy has only two consumers,Zeke and Maude.Zeke's utility function is U(x,y)= x +48y1/2.Maude's utility function is U(x,y)= x + 4y.At a Pareto optimal allocation in which both individuals consume some of each good,how much y does Zeke consume?

In a model with two consumers,two goods,and no production,the contract curve must be a line going from one consumer's origin to the other consumer's origin.

If demand varies continuously with price,then even if there are thousands of goods,there will be at least one set of prices such that demand equals supply in every market.

From Walras's law it follows that in a market with two goods,if demand equals supply in one market,then demand must equal supply in the other market.

In general equilibrium analysis,an allocation is a feasible allocation if every consumer is consuming a bundle that costs no more than his or her income.

Every allocation on the contract curve is Pareto optimal.

A competitive equilibrium allocation must be a feasible allocation.

If the assumptions of the first theorem of welfare economics apply and if the economy is in a competitive equilibrium,then any reallocation that benefits someone must harm someone else.

Demand-Part A

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-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

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

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

In a pure exchange economy with two goods,if there is a competitive equilibrium with prices p₁ = $12 and p₂ = $27,then there must also be a competitive equilibrium with prices p₁ = $24 and p₂ = $54.

A small economy has only two consumers,Zeke and Maude.Zeke's utility function is U(x,y)= x +48y^1/2.Maude's utility function is U(x,y)= x + 4y.At a Pareto optimal allocation in which both individuals consume some of each good,how much y does Zeke consume?