Exam 5: Introduction to Neoclassical Trade Theory: Tools to Be Employed

The slope of a consumer indifference curve at any given point on the curve reflects (ignoring the negative sign)

Suppose that, in the isoquant-isocost diagram, with given relative factor prices, an Equilibrium input combination of 10 units of capital and 30 units of labor yields an output Level for the firm of 120 units. Suppose that, for this firm, at the same relative factor Prices but with a larger budget, an equilibrium input combination of 15 units of capital And 45 units of labor yields an output level of 160 units. Viewing these input-output Relationships, an economist would say that, in its production process, this firm Experiences

Two indifference curves for an individual consumer __________ intersect; two Community indifference curves for a country __________.

In the following table of production possibilities for a country, Good X Good Y 0 units 13 units 1 unit 10 units 2 units 6 units 3 units 0 units There are __________ opportunity costs in the production of good X, and there are __________ opportunity costs in the production of good Y.

"If constant returns to scale exist for a firm, then a 10 percent rise in all factor prices will lead to a 10 percent decline in the equilibrium quantity of output for a given budget. However, if increasing returns to scale exist, a 10 percent rise in all factor prices will lead to a less than 10 percent decline in the equilibrium quantity of output for a given budget."Assess the validity of this statement.

The equilibrium condition for producers (i.e., the condition that exists when the isocost Line is tangent to an isoquant) is __________.

Which one of the following sequences of specifications of relative preferences for bundles of goods A, B, and C by a consumer indicates the property of transitivity (where ">" indicates that the preferred bundle is on the left, "<" indicates that the preferred bundle is on the right, and "=" means indifference between the bundles)?

Suppose that, from an initial individual consumer equilibrium position in the indifference curve-budget line diagram, the prices of both goods rise by 10 percent. What happens to the position and slope of the budget line? Why does the consumer's level of satisfaction from a given money income fall? Illustrate and explain. Would it be acceptable for an economist to say that the level of satisfaction of the consumer fell by exactly 10 percent? Why or why not?

In the following graph showing an isoquant and an isocost line, at point X, MPP_L/MPP_K is __________ w/r and the producer has an incentive to use relatively more__________ in producing the given output.

Suppose that, from an initial individual consumer equilibrium position in the indifference curve-budget line diagram, the price of good X rises while the price of good Y falls. What will happen to the relative consumption of the two goods by the consumer and why? Can it be specified whether the consumer's level of satisfaction has increased or decreased because of this change in absolute and relative prices? Why or why not? Could the satisfaction level of some consumers increase and the satisfaction level of other consumers decrease because of the price changes? Explain.

The equilibrium condition for consumer behavior pertaining to goods A and B is __________.

In the following table of production possibilities for a country, Good X Good Y 400 units 0 units 300 units 100 units 200 units 180 units 100 units 240 units 0 units 280 units There are __________ opportunity costs when moving to greater production of good X And __________ when moving to greater production of good Y.

In the Edgeworth box diagram in production with two goods and two factors of production,

Explain why any point on an economy's PPF must be associated with a point on the production efficiency locus in the Edgeworth box diagram.

The curve in the following diagram is called an __________, and its slope (ignoring the Negative sign) indicates the ratio __________.

Explain, using the isoquant-isocost diagram, why a rise in the rental rate of capital coupled with no change in the wage rate will lead to a rise in the price of the capital-intensive good relative to the price of the labor-intensive good.

A production isoquant shows the various combinations

In the Edgeworth box diagram for production,

You are given the following two possible community indifference curve maps for a country, where curves S₁ and S'₁ pertain to income distribution #1 and curves S₂ and S'₂ pertain to income distribution #2. The differing shapes of the curves in these two maps could reflect the fact that in income distribution #2, in comparison with income distribution #1, a greater share of total income is held by individuals who value __________. In addition, in this diagram, point B is preferred to point A __________.

In the diagram in Question #7 above, a movement from point S to point T will lead to __________ in the capital/labor ratio used in the production of good A and __________ In the capital/labor ratio used in the production of good B.