Question 1

General equilibrium analysis is more appropriate than partial equilibrium analysis when:

Accepted Answer

A) all product markets are in equilibrium. 
B) change in the price of one commodity does not affect the demand for other commodities. 
C) a change in condition affects many markets at the same time and in similar magnitudes. 
D) a change in condition affects primarily one market. 
A) all product markets are in equilibrium. 
B) change in the price of one commodity does not affect the demand for other commodities. 
C) a change in condition affects many markets at the same time and in similar magnitudes. 
D) a change in condition affects primarily one market. C

Question 2

Use the following figure to answer the question : Figure 19-1 : 
,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica.  
-Refer to Figure 19-1.Which of the following would represent a movement from an inefficient allocation of resources to an efficient allocation of resources?

Accepted Answer

A) A movement from point E to point A 
B) A movement from point C to point B 
C) A movement from point B to point D 
D) A movement from point A to point B 
A) A movement from point E to point A 
B) A movement from point C to point B 
C) A movement from point B to point D 
D) A movement from point A to point B B

Question 3

Partial equilibrium analysis tends to ignore:

Accepted Answer

A) the demand side of the product market. 
B) the relevance of diminishing returns to a factor used in production. 
C) the interrelationships among prices and markets. 
D) the supply side of the product market. 
A) the demand side of the product market. 
B) the relevance of diminishing returns to a factor used in production. 
C) the interrelationships among prices and markets. 
D) the supply side of the product market. C

Question 4

Which of the following is true of international trade?

Accepted Answer

A) Trade makes it possible to consume better quality goods at a high price. 
B) Trade makes the domestic producers of import substitutes better off. 
C) Trade makes it possible to consume outside of the production possibility frontier. 
D) In the absence of trade,a country always produces at a point below the production possibility frontier. 
A) Trade makes it possible to consume better quality goods at a high price. 
B) Trade makes the domestic producers of import substitutes better off. 
C) Trade makes it possible to consume outside of the production possibility frontier. 
D) In the absence of trade,a country always produces at a point below the production possibility frontier.

Question 5

Explain why economic efficiency cannot be achieved under certain circumstances.

Accepted Answer

Markets may fail to achieve Pareto optim

Question 6

Use the following figure to answer the question : Figure 19-1 : 
,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica.  
-In Figure 19-1,a movement from A to B would represent:

Accepted Answer

A) a movement from an efficient allocation of resources to an inefficient one. 
B) an improvement of Monica's welfare. 
C) a movement from an efficient to an inefficient resource allocation. 
D) an improvement in Hank's well-being. 
A) a movement from an efficient allocation of resources to an inefficient one. 
B) an improvement of Monica's welfare. 
C) a movement from an efficient to an inefficient resource allocation. 
D) an improvement in Hank's well-being.

Question 7

A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:

Accepted Answer

A) produce homogenous products. 
B) establish a single price for all goods. 
C) allow free entry and exit of firms. 
D) are controlled by the government. 
A) produce homogenous products. 
B) establish a single price for all goods. 
C) allow free entry and exit of firms. 
D) are controlled by the government.

Question 8

If there is a monopoly in the capital market,whereas the labor market is competitive then:

Accepted Answer

A) the rental rate of capital will be greater than the wage rate. 
B) the labor market will be in equilibrium,but there will be excess supply in the capital market. 
C) the marginal rate of technical substitution must be greater than the input price ratio. 
D) the capital market will be in equilibrium,but there will be excess demand in the labor market. 
A) the rental rate of capital will be greater than the wage rate. 
B) the labor market will be in equilibrium,but there will be excess supply in the capital market. 
C) the marginal rate of technical substitution must be greater than the input price ratio. 
D) the capital market will be in equilibrium,but there will be excess demand in the labor market.

Question 9

Use the following figure to answer the question : Figure 19-1 : 
,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica.  
-In Figure 19-1,point F represents a resource allocation that is:

Accepted Answer

A) is feasible but undesirable from the society's point of view. 
B) inefficient. 
C) desirable but not attainable. 
D) both undesirable and unattainable. 
A) is feasible but undesirable from the society's point of view. 
B) inefficient. 
C) desirable but not attainable. 
D) both undesirable and unattainable.

Question 10

Figure 19-3 illustrates the determination of an efficient output mix in a two good economy.The output combination is represented by point Z and the consumption point of a representative consumer is W.The slope of the line zz represents the marginal rate of transformation [MRT].  
Refer to Figure 19-3.Based on the information given in the figure,we can conclude that:

Accepted Answer

A) the allocation of inputs is inefficient. 
B) the allocation of the given output among the two consumers is efficient. 
C) the output mix between goods X and Y is inefficient. 
D) a redistribution of the goods will make both the consumers worse off. 
A) the allocation of inputs is inefficient. 
B) the allocation of the given output among the two consumers is efficient. 
C) the output mix between goods X and Y is inefficient. 
D) a redistribution of the goods will make both the consumers worse off.

Question 11

Which of the following is not one of the three fundamental economic problems facing an economy?

Accepted Answer

A) How much of each good to produce? 
B) How much of each input to use in producing each good? 
C) How to employ technology in the most efficient way? 
D) How to allocate goods and services among consumers? 
A) How much of each good to produce? 
B) How much of each input to use in producing each good? 
C) How to employ technology in the most efficient way? 
D) How to allocate goods and services among consumers?

Question 12

Use the following figure to answer the question : Figure 19-1 : 
,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica.  
-In Figure 19-1,the curve TT shows:

Accepted Answer

A) a single and unique distribution of resources that jointly maximizes Hank's and Monica's well-being. 
B) all the efficient resource allocations that are attainable. 
C) all the points where the marginal rates of substitution between goods are equal for both Hank and Monica. 
D) all the points that maximize the individual well-being of Hank and Monica. 
A) a single and unique distribution of resources that jointly maximizes Hank's and Monica's well-being. 
B) all the efficient resource allocations that are attainable. 
C) all the points where the marginal rates of substitution between goods are equal for both Hank and Monica. 
D) all the points that maximize the individual well-being of Hank and Monica.

Question 13

Two goods are said to be allocated efficiently between consumers when:

Accepted Answer

A) they are divided equally between them. 
B) the marginal rates of substitution between the two goods are the same for both consumers. 
C) further reallocations can make the consumers better off. 
D) the consumers derive the maximum marginal utility from the consumption of both the goods. 
A) they are divided equally between them. 
B) the marginal rates of substitution between the two goods are the same for both consumers. 
C) further reallocations can make the consumers better off. 
D) the consumers derive the maximum marginal utility from the consumption of both the goods.

Question 14

In which of the following situations would it be most important to use the general equilibrium analysis?

Accepted Answer

A) The impact of a price floor on the demand for corn 
B) The impact of a rent control on the supply of rental apartments in a city 
C) An increase in the tariff on imported automobiles 
D) An increase in the national sales tax imposed on all goods 
A) The impact of a price floor on the demand for corn 
B) The impact of a rent control on the supply of rental apartments in a city 
C) An increase in the tariff on imported automobiles 
D) An increase in the national sales tax imposed on all goods

Question 15

The marginal rate of transformation between wine and corn refers to:

Accepted Answer

A) the total units of wine that can be produced if nothing of corn is produced in the economy. 
B) the ratio between the per-unit cost of producing wine to the per-unit cost of producing corn. 
C) the opportunity cost of wine in terms of corn and vice versa. 
D) the ratio between the market price of wine and the market price of corn. 
A) the total units of wine that can be produced if nothing of corn is produced in the economy. 
B) the ratio between the per-unit cost of producing wine to the per-unit cost of producing corn. 
C) the opportunity cost of wine in terms of corn and vice versa. 
D) the ratio between the market price of wine and the market price of corn.

Question 16

Which of the following is true of the general equilibrium analysis?
a.It assumes that a change initiated in a market does not affect prices in other markets.
b.It determines changes in equilibrium price in a market assuming that all other markets are in equilibrium.
c.The ceteris paribus assumption is crucial in determining changes in price and quantity in general equilibrium analysis.
d.It is useful in determining price and quantity of goods and services when the markets mutually interdependent.

Accepted Answer

D
Section Reference:

Question 17

Answer the following:
a)Discuss the importance of information in achieving economic efficiency.
b)How is information available in the real world?
c)What role does the market play in making relevant information available?

Accepted Answer

a)Achieving an efficient allocation of r

Question 18

Which of the following assumptions are made in a partial equilibrium analysis?

Accepted Answer

A) Positive spillover and feedback effects 
B) Constant price level in all markets but one 
C) Mutual interdependence among markets 
D) Variable prices in each and every market 
A) Positive spillover and feedback effects 
B) Constant price level in all markets but one 
C) Mutual interdependence among markets 
D) Variable prices in each and every market

Question 19

Markets fail to satisfy the conditions of Pareto optimality when:

Accepted Answer

A) exchanges that would make at least one person better off and no one else worse off go unrealized. 
B) exchanges that would produce a more equitable distribution of goods go unrealized. 
C) market exchanges allow one party to acquire some of the surplus from the other party. 
D) none of the consumers are able to achieve the maximum utility from consumption. 
A) exchanges that would make at least one person better off and no one else worse off go unrealized. 
B) exchanges that would produce a more equitable distribution of goods go unrealized. 
C) market exchanges allow one party to acquire some of the surplus from the other party. 
D) none of the consumers are able to achieve the maximum utility from consumption.

Question 20

If the marginal rate of substitution between two goods is not equal for Jack and Jill it means that:

Accepted Answer

A) both could be made better off with a different distribution of goods between them. 
B) the efficient output mix is not being produced. 
C) inputs are being allocated inefficiently. 
D) the quantity supplied does not equal the quantity demanded. 
A) both could be made better off with a different distribution of goods between them. 
B) the efficient output mix is not being produced. 
C) inputs are being allocated inefficiently. 
D) the quantity supplied does not equal the quantity demanded.

General equilibrium analysis is more appropriate than partial equilibrium analysis when:

Partial equilibrium analysis tends to ignore:

Which of the following is true of international trade?

Explain why economic efficiency cannot be achieved under certain circumstances.

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,a movement from A to B would represent:

A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:

If there is a monopoly in the capital market,whereas the labor market is competitive then:

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,point F represents a resource allocation that is:

Which of the following is not one of the three fundamental economic problems facing an economy?

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,the curve TT shows:

Two goods are said to be allocated efficiently between consumers when:

In which of the following situations would it be most important to use the general equilibrium analysis?

The marginal rate of transformation between wine and corn refers to:

Answer the following: a)Discuss the importance of information in achieving economic efficiency. b)How is information available in the real world? c)What role does the market play in making relevant information available?

Which of the following assumptions are made in a partial equilibrium analysis?

Markets fail to satisfy the conditions of Pareto optimality when:

If the marginal rate of substitution between two goods is not equal for Jack and Jill it means that:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

Public Goods and Externalities

Filters

Exam 19: General Equilibrium Analysis and Economic Efficiency

General equilibrium analysis is more appropriate than partial equilibrium analysis when:

Partial equilibrium analysis tends to ignore:

Which of the following is true of international trade?

Explain why economic efficiency cannot be achieved under certain circumstances.

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,a movement from A to B would represent:

A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:

If there is a monopoly in the capital market,whereas the labor market is competitive then:

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,point F represents a resource allocation that is:

Which of the following is not one of the three fundamental economic problems facing an economy?

Use the following figure to answer the question : Figure 19-1 : ,the curve TT shows how the allocation of a resource affects the well-being of two individuals,Hank and Monica. -In Figure 19-1,the curve TT shows:

Two goods are said to be allocated efficiently between consumers when:

In which of the following situations would it be most important to use the general equilibrium analysis?

The marginal rate of transformation between wine and corn refers to:

Answer the following: a)Discuss the importance of information in achieving economic efficiency. b)How is information available in the real world? c)What role does the market play in making relevant information available?

Which of the following assumptions are made in a partial equilibrium analysis?

Markets fail to satisfy the conditions of Pareto optimality when:

If the marginal rate of substitution between two goods is not equal for Jack and Jill it means that:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

Public Goods and Externalities

Filters