Exam 2: Efficiency, Markets, and Government 

Compensation criteria are used to argue that changes in resource allocation should be made if the gains to some groups outweigh the losses to others, even though compensation for losses is not actually made.

It is possible for efficiency not to be attained even if all production is carried on without waste.

Which of the following is a normative statement?

Pareto efficiency between two consumers is achieved:

Eggs are sold in a perfectly competitive market.No persons other than the buyers and sellers of eggs are affected in any way when eggs are traded in the market.It then follows that:

A move from an inefficient resource allocation to an efficient one:

If the efficient output of a good is produced each week, then the:

If efficiency has been attained,

Government regulations that require airlines to serve routes for which the maximum price that pas?sengers are willing to pay for a trip fall short of the minimum price that sellers are willing to accept are likely to cause losses in efficiency.

When comparing the allocation of two goods relative to two consumers with individual utility functions, multiple points of Pareto efficiency can exist.

If the marginal social benefit of a good exceeds the marginal social cost at the current monthly output, then:

If the marginal social benefit of smoke detectors exceeds its marginal social cost, then additional net gains are possible from increased annual smoke detector production.

Monopoly power causes losses in efficiency because the marginal social benefit of output exceeds its marginal social cost at the monopoly output.

If it is not possible to make someone better off without harming another, then resource allocation is efficient.

If the marginal social cost of beer production exceeds its marginal social benefit, then more than the efficient amount of beer is being produced.

Normative economics:

A government-subsidized price for a commodity that is higher than the market-driven price results in oversupply relative to the efficient allocation.

Efficiency is attained when resources are used each year in such a way that no further net gain is possible.

Positive economics is:

Explain why points on a utility possibility curve represent efficient allocations of resources.Why must the utility possibility curve be downward sloping? Draw a utility possibility curve and show how it is possible to achieve efficiency by moving from a point within the curve and the axes to a point on the curve.