Question 1

Which of the following is not true of Edgeworth Box Diagrams?

Accepted Answer

A) Smooth convex indifference curves indicate Pareto optimalities. 
B) Indifference curves are convex to the appropriate origin. 
C) Their dimensions reflect the available quantities of two goods. 
D) Each point indicates a consumption bundle. 
A) Smooth convex indifference curves indicate Pareto optimalities. 
B) Indifference curves are convex to the appropriate origin. 
C) Their dimensions reflect the available quantities of two goods. 
D) Each point indicates a consumption bundle. A

Question 2

Walrus Law states that:

Accepted Answer

A) supply creates its own demand. 
B) if n- 1 markets are in equilibrium, then the last market is in equilibrium. 
C) all markets will reach an equilibrium called general equilibrium. 
D) equilibrium is where supply equals demand. 
A) supply creates its own demand. 
B) if n- 1 markets are in equilibrium, then the last market is in equilibrium. 
C) all markets will reach an equilibrium called general equilibrium. 
D) equilibrium is where supply equals demand. B

Question 3

Which of the following conditions is not necessary for the attainment of efficiency in general equilibrium?

Accepted Answer

A) The economy's marginal rate of transformation must be equal to each consumer's marginal rate of substitution. 
B) Consumers must have identical incomes. 
C) Marginal rates of technical substitution must be equal for all firms. 
D) Marginal rates of substitution must be equal for all consumers. 
A) The economy's marginal rate of transformation must be equal to each consumer's marginal rate of substitution. 
B) Consumers must have identical incomes. 
C) Marginal rates of technical substitution must be equal for all firms. 
D) Marginal rates of substitution must be equal for all consumers. B

Question 4

Whenever the economy operates below the production possibility frontier in a general equilibrium with production:

Accepted Answer

A) the MRS are for the produced goods are not equal. 
B) the allocation in the production Edgeword box is Pareto efficient. 
C) the allocation in the production Edgeworth box is off the contract curve. 
D) the fairness is an issue in this economy. 
A) the MRS are for the produced goods are not equal. 
B) the allocation in the production Edgeword box is Pareto efficient. 
C) the allocation in the production Edgeworth box is off the contract curve. 
D) the fairness is an issue in this economy.

Question 5

Which of the following assumptions does not apply to Edgeworth Box discussions of general equilibrium?

Accepted Answer

A) Indifference curves are smooth and convex to the appropriate origin. 
B) Both goods are essential for all consumers. 
C) Economic well being is determined only by the quantities consumed. 
D) All Edgeworth Box allocations are Pareto optimal. 
A) Indifference curves are smooth and convex to the appropriate origin. 
B) Both goods are essential for all consumers. 
C) Economic well being is determined only by the quantities consumed. 
D) All Edgeworth Box allocations are Pareto optimal.

Question 6

The size of the Edgeworth box for consumption is determined by:

Accepted Answer

A) the productivity of the economy. 
B) the presence of externalities in consumption. 
C) the available quantities of the two goods. 
D) the sum of the MRS of the two indifference curves. 
A) the productivity of the economy. 
B) the presence of externalities in consumption. 
C) the available quantities of the two goods. 
D) the sum of the MRS of the two indifference curves.

Question 7

What are the main sources of inefficiency in allocating resources in the context of general equilibrium?

Accepted Answer

There are two sources: market power and

Question 8

Which of the following is not illustrated in Edgeworth box.

Accepted Answer

A) endowments 
B) consumer tastes 
C) contract curve 
D) production possibilities 
A) endowments 
B) consumer tastes 
C) contract curve 
D) production possibilities

Question 9

Net demand is:

Accepted Answer

A) the difference between what consumer A demands and what everyone else demands. 
B) the difference between what consumer A demands and what he owns. 
C) the inverse of net supply. 
D) the difference between what consumer A demands and what consumer B demands. 
A) the difference between what consumer A demands and what everyone else demands. 
B) the difference between what consumer A demands and what he owns. 
C) the inverse of net supply. 
D) the difference between what consumer A demands and what consumer B demands.

Question 10

Which of the following is not a production assumption for competitive general equilibrium models?

Accepted Answer

A) Isoquants are smooth. 
B) Isoquants are positively sloped. 
C) Production involves no externalities. 
D) Isoquants are convex. 
A) Isoquants are smooth. 
B) Isoquants are positively sloped. 
C) Production involves no externalities. 
D) Isoquants are convex.

Question 11

Marvin's utility function is Um(x1,x2)= x1m + 2x2m, where x1m and x2m are quantities of goods x1 and x2 he chooses. Similarly, Shelly's utility function is Us(x1,x2)= 2x1s + x2s. In total they have 10 units of x1 and 10 units of x2. Suppose the initial allocation is such that Marvin has all 10 units of good x1 and Shelly has all 10 units of good x2. Relative to the initial allocation, the allocation in which each of them has 5 units of each good:

Accepted Answer

A) is a Pareto- improvement, and also Pareto optimal. 
B) is a Pareto improvement, and is not Pareto optimal. 
C) is not a Pareto- improvement. 
D) makes Marvin better- off and Shelly worse- off. 
A) is a Pareto- improvement, and also Pareto optimal. 
B) is a Pareto improvement, and is not Pareto optimal. 
C) is not a Pareto- improvement. 
D) makes Marvin better- off and Shelly worse- off.

Question 12

The Pareto criterion for efficiency states that the economy is efficient if:

Accepted Answer

A) no person can be made worse off. 
B) nobody can be made better off. 
C) a person can be made better off at the same time as another person is made better off. 
D) no person can be made better off without making another person worse off. 
A) no person can be made worse off. 
B) nobody can be made better off. 
C) a person can be made better off at the same time as another person is made better off. 
D) no person can be made better off without making another person worse off.

Question 13

The necessary conditions for an efficient outcome in a general equilibrium model with productions include:

Accepted Answer

A) efficiency in consumption and production. 
B) efficiency of the production mix. 
C) efficiency of the product mix, together with efficiency in consumption and production. 
D) efficiency in production. 
A) efficiency in consumption and production. 
B) efficiency of the production mix. 
C) efficiency of the product mix, together with efficiency in consumption and production. 
D) efficiency in production.

Question 14

The doctrine of natural identity of interests:

Accepted Answer

A) does not hold true under any conditions. 
B) holds true under restrictive conditions. 
C) holds true under very weak restrictions. 
D) always holds true. 
A) does not hold true under any conditions. 
B) holds true under restrictive conditions. 
C) holds true under very weak restrictions. 
D) always holds true.

Question 15

In the Edgeworth box, the contract curve must:

Accepted Answer

A) be concave. 
B) pass through the endowment point. 
C) be a straight line. 
D) pass through the points where the two indifference curves are tangent to each other. 
A) be concave. 
B) pass through the endowment point. 
C) be a straight line. 
D) pass through the points where the two indifference curves are tangent to each other.

Question 16

The doctrine of the natural identity of interests:

Accepted Answer

A) was first introduced by F. Y. Edgeworth. 
B) says that selfish behaviour can never improve society's welfare. 
C) is also known as the visible hand theory. 
D) was first proposed by Adam Smith in "The Wealth of Nations." 
A) was first introduced by F. Y. Edgeworth. 
B) says that selfish behaviour can never improve society's welfare. 
C) is also known as the visible hand theory. 
D) was first proposed by Adam Smith in "The Wealth of Nations."

Question 17

Efficiency in general equilibrium requires that:

Accepted Answer

A) the allocation of output between firms is Pareto- optimal. 
B) marginal rates of technical substitution are equal for all firms. 
C) marginal rates of transformation are equal for all output levels. 
D) all MRSs are identical. 
A) the allocation of output between firms is Pareto- optimal. 
B) marginal rates of technical substitution are equal for all firms. 
C) marginal rates of transformation are equal for all output levels. 
D) all MRSs are identical.

Question 18

When relative prices change in an exchange economy, an individual's budget line:

Accepted Answer

A) pivots at its intercept with an axis. 
B) shifts in the direction opposite the price change. 
C) pivots around her initial endowment. 
D) shifts in the direction of the price change. 
A) pivots at its intercept with an axis. 
B) shifts in the direction opposite the price change. 
C) pivots around her initial endowment. 
D) shifts in the direction of the price change.

Question 19

In a two good economy the statement that the equilibrium price in one market occurs where supply equals demand implies that supply equals demand in the other market is referred to as:

Accepted Answer

A) the law of demand. 
B) the first theorem of welfare economics. 
C) Walras' law. 
D) the second theorem of welfare economics. 
A) the law of demand. 
B) the first theorem of welfare economics. 
C) Walras' law. 
D) the second theorem of welfare economics.

Question 20

Consider an economy with no production. The economy is endowed with 50 bushels of alfalfa X and 50 bushels of barley Y. Two individuals, Tom and Harry, live in this economy. Tom has an initial endowment of (XET,YET)
= (50, 20)and Harry has an initial endowment of (XEH, YEH)= (10, 100). Tom and Harry have the following utility functions: UT(XT,YT)= XT^2*YT and U(XH,YH)= XH*YH^2
a)At the endowment point, what are the marginal rates of substitution between X and Y for Tom? For Harry?
b)Calculate the equilibrium price that you would obtain if Tom and Harry were to trade under perfectly competitive conditions.
c)Is the allocation of resources achieved above Pareto optimal? Explain.

Accepted Answer

a)MRST = 4/5, MRSH = 5;
b)p =

Which of the following is not true of Edgeworth Box Diagrams?

Walrus Law states that:

Which of the following conditions is not necessary for the attainment of efficiency in general equilibrium?

Whenever the economy operates below the production possibility frontier in a general equilibrium with production:

Which of the following assumptions does not apply to Edgeworth Box discussions of general equilibrium?

The size of the Edgeworth box for consumption is determined by:

What are the main sources of inefficiency in allocating resources in the context of general equilibrium?

Which of the following is not illustrated in Edgeworth box.

Net demand is:

Which of the following is not a production assumption for competitive general equilibrium models?

The Pareto criterion for efficiency states that the economy is efficient if:

The necessary conditions for an efficient outcome in a general equilibrium model with productions include:

The doctrine of natural identity of interests:

In the Edgeworth box, the contract curve must:

The doctrine of the natural identity of interests:

Efficiency in general equilibrium requires that:

When relative prices change in an exchange economy, an individual's budget line:

In a two good economy the statement that the equilibrium price in one market occurs where supply equals demand implies that supply equals demand in the other market is referred to as:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

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Exam 13: Competitive General Equilibrium

Which of the following is not true of Edgeworth Box Diagrams?

Walrus Law states that:

Which of the following conditions is not necessary for the attainment of efficiency in general equilibrium?

Whenever the economy operates below the production possibility frontier in a general equilibrium with production:

Which of the following assumptions does not apply to Edgeworth Box discussions of general equilibrium?

The size of the Edgeworth box for consumption is determined by:

What are the main sources of inefficiency in allocating resources in the context of general equilibrium?

Which of the following is not illustrated in Edgeworth box.

Net demand is:

Which of the following is not a production assumption for competitive general equilibrium models?

The Pareto criterion for efficiency states that the economy is efficient if:

The necessary conditions for an efficient outcome in a general equilibrium model with productions include:

The doctrine of natural identity of interests:

In the Edgeworth box, the contract curve must:

The doctrine of the natural identity of interests:

Efficiency in general equilibrium requires that:

When relative prices change in an exchange economy, an individual's budget line:

In a two good economy the statement that the equilibrium price in one market occurs where supply equals demand implies that supply equals demand in the other market is referred to as:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters