Question 1

Partial equilibrium is

Accepted Answer

A)  exactly like general equilibrium.
B)  studying only the supply side of the market.
C)  studying individual markets.
D)  examining the demand side of the market. C

Question 2

Welfare economics is concerned with individual desirability of alternative economic states.

Accepted Answer

A) True 
 B)False  False

Question 3

Marginal cost of a product is the incremental cost of one additional unit of input.

Accepted Answer

A) True 
 B)False  True

Question 4

A public good is

Accepted Answer

A)  a good that the public must pay for.
B)  nonexcludable in consumption.
C)  more costly than a private good.
D)  paid for by the government.

Question 5

Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will

Accepted Answer

A)  increase the utility of all individuals.
B)  increase the utility of at least one individual,but may decrease the level of utility of another person.
C)  increase the utility of one individual,but cannot decrease the utility of any individual.
D)  decrease the utility of all individuals.

Question 6

Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods.Can Pareto equilibrium be derived?

Accepted Answer

The answer of Consider a simple exchange economy where the...

Question 7

Pareto points in the Edgeworth Box are

Accepted Answer

A)  found when utility curves are tangent.
B)  found when MRS are equal.
C)  found when one person cannot be made better off without making another person worse off.
D)  all of the above.
E)  none of the above.

Question 8

Market failure can occur when

Accepted Answer

A)  monopoly power exists in the market.
B)  markets are missing.
C)  consumers can influence prices.
D)  all of the above.

Question 9

Merit goods have received considerable attention toward the end of this chapter.Can concerts and other publicly provided services be rationalized using these ideas?

Accepted Answer

The answer of Merit goods have received considerable attention toward...

Question 10

The marginal rate of substitution is

Accepted Answer

A)  the slope of the utility curve.
B)  the slope of the contract curve.
C)  the slope of the utility possibilities curve.
D)  none of the above.

Question 11

Pareto improvement can be a reallocation of resources that makes more than one person better off.

Accepted Answer

A) True 
 B)False

Question 12

Consider an Edgeworth economy where there are two citizens,Mr.Cortopassi and Ms.Thomas.There are only two goods to be consumed in the economy,Beer and Pretzels.The total amount of Beer is 12 units.The total amount of Pretzels is 12 units.Answer the following: Suppose Mr.Cortopassi has utility for the two goods characterized as U_C(B,P)=B+P.Ms.Thomas's utility function is U_T(B,P)=B+P.Identify the points that are Pareto efficient.

Accepted Answer

The answer of Consider an Edgeworth economy where there are...

Question 13

Social indifference curves are the same as a Social Welfare Function.

Accepted Answer

A) True 
 B)False

Question 14

Social welfare functions can be formed in many ways.They can be additive,meaning that the all utilities curves are added together.They incorporate the idea of least-best,meaning that the utility of the person with the least is maximized.If you were a central planner for an economy,what type of social welfare function would you create?

Accepted Answer

The answer of Social welfare functions can be formed in...

Question 15

When the First Fundamental Theorem of Welfare Economics doesn't hold,there is a market failure.

Accepted Answer

A) True 
 B)False

Question 16

The First Fundamental Theorem of Welfare Economics requires

Accepted Answer

A)  producers and consumers to be price takers.
B)  that there be a market for every commodity.
C)  that the economy operate at some point on the utility possibility curve.
D)  all of the above.

Question 17

The Edgeworth Box should

Accepted Answer

A)  lie inside the PPF.
B)  lie partially inside the PPF.
C)  lie completely outside of the PPF.
D)  never touch the PPF.

Question 18

The Utility Possibility Frontier is derived from utility curves.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that a competitive firm's marginal cost of producing output q is given by MC=5+2q.Assume that the market price of the firm's product is $27.
A)What level of output will the firm produce?
B)What is the firm's producer surplus?

Accepted Answer

The answer of Suppose that a competitive firm's marginal cost...

Question 20

The absolute value of the slope of the production possibilities curve is the

Accepted Answer

A)  marginal rate of substitution.
B)  contract curve.
C)  offer curve.
D)  Engel curve.
E)  marginal rate of transformation.

Exam 3: Tools of Normative Analysis

Partial equilibrium is

Welfare economics is concerned with individual desirability of alternative economic states.

Marginal cost of a product is the incremental cost of one additional unit of input.

A public good is

Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will

Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods.Can Pareto equilibrium be derived?

Pareto points in the Edgeworth Box are

Market failure can occur when

Merit goods have received considerable attention toward the end of this chapter.Can concerts and other publicly provided services be rationalized using these ideas?

The marginal rate of substitution is

Pareto improvement can be a reallocation of resources that makes more than one person better off.

Social indifference curves are the same as a Social Welfare Function.

When the First Fundamental Theorem of Welfare Economics doesn't hold,there is a market failure.

The First Fundamental Theorem of Welfare Economics requires

The Edgeworth Box should

The Utility Possibility Frontier is derived from utility curves.

Suppose that a competitive firm's marginal cost of producing output q is given by MC=5+2q.Assume that the market price of the firm's product is $27. A)What level of output will the firm produce? B)What is the firm's producer surplus?

The absolute value of the slope of the production possibilities curve is the