Question 1

Discuss the second welfare theorem.How can societies use competitive markets to achieve both efficiency and equity?

Accepted Answer

The second welfare theorem tells us that

Question 2

Suppose milk and cereal are compliments and the demand for milk is   ,where   stands for millions of gallons of milk demanded,   stands for the price of milk and   stands for the price of cereal.The supply of milk is   ,where   stands for millions of gallons of milk supplied.The demand and supply of cereal are   and   ,respectively,where   stands for millions of boxes of cereal demanded and   stands for millions of boxes of cereal supplied.Solve for the general equilibrium quantity of milk.

Accepted Answer

A)  6.22 million gallons 
B)  1.48 million gallons 
C)  Zero 
D)  50.56 million gallons 
A)  6.22 million gallons 
B)  1.48 million gallons 
C)  Zero 
D)  50.56 million gallons

Question 3

The efficient efficiency condition holds

Accepted Answer

A)  If every pair of individuals have inverse marginal rates of substitution for every pair of goods 
B)  If every pair of individuals shares the same marginal rate of substitution for every pair of goods 
C)  If every pair of individuals consume the same quantities of every pair of goods 
D)  If every pair of individuals shares different marginal rate of substitution for every pair of goods 
A)  If every pair of individuals have inverse marginal rates of substitution for every pair of goods 
B)  If every pair of individuals shares the same marginal rate of substitution for every pair of goods 
C)  If every pair of individuals consume the same quantities of every pair of goods 
D)  If every pair of individuals shares different marginal rate of substitution for every pair of goods

Question 4

General equilibrium analysis

Accepted Answer

A)  Concerns competitive equilibrium only in the factor markets 
B)  Concerns competitive equilibrium only in the product markets 
C)  Concerns competitive equilibrium in a single market, considered in isolation 
D)  Is the study of competitive equilibrium in many markets at the same time 
A)  Concerns competitive equilibrium only in the factor markets 
B)  Concerns competitive equilibrium only in the product markets 
C)  Concerns competitive equilibrium in a single market, considered in isolation 
D)  Is the study of competitive equilibrium in many markets at the same time

Question 5

Outcome-oriented notions of equity

Accepted Answer

A)  Focus on the procedures used to arrive at an allocation rather than on the allocation of resources 
B)  Focus on whether the process used to allocate resources yields fair results 
C)  Include those that focus on the distribution of products 
D)  Focus on the procedures used to arrive at an allocation of resources rather than on the allocation itself 
A)  Focus on the procedures used to arrive at an allocation rather than on the allocation of resources 
B)  Focus on whether the process used to allocate resources yields fair results 
C)  Include those that focus on the distribution of products 
D)  Focus on the procedures used to arrive at an allocation of resources rather than on the allocation itself

Question 6

Suppose milk and cereal are compliments and the demand for milk is   ,where   stands for millions of gallons of milk demanded,   stands for the price of milk and   stands for the price of cereal.The supply of milk is   ,where   stands for millions of gallons of milk supplied.The demand and supply of cereal are   and   ,respectively,where   stands for millions of boxes of cereal demanded and   stands for millions of boxes of cereal supplied.Suppose the government imposes a $2.00 per gallon tax on milk.In the new general equilibrium

Accepted Answer

A)  Consumers purchase more milk and cereal 
B)  Consumers purchase less milk and cereal 
C)  Consumers purchase more milk and less cereal 
D)  Consumers purchase less milk and more cereal 
A)  Consumers purchase more milk and cereal 
B)  Consumers purchase less milk and cereal 
C)  Consumers purchase more milk and less cereal 
D)  Consumers purchase less milk and more cereal

Question 7

A point inside the production possibility frontier is

Accepted Answer

A)  Inefficient 
B)  Impossible 
C)  Efficient 
D)  Optimal 
A)  Inefficient 
B)  Impossible 
C)  Efficient 
D)  Optimal

Question 8

According to the principle of Rawlsianism

Accepted Answer

A)  Society should place equal weight on the well-being of every individual 
B)  Society should place all weight on the well-being of its worst-off member 
C)  Society should place all weight on the well-being of its best-off member 
D)  Equal division of society's resources among all members of the population is the most equitable outcome 
A)  Society should place equal weight on the well-being of every individual 
B)  Society should place all weight on the well-being of its worst-off member 
C)  Society should place all weight on the well-being of its best-off member 
D)  Equal division of society's resources among all members of the population is the most equitable outcome

Question 9

The father of general equilibrium theory is considered to be

Accepted Answer

A)  Kenneth Arrow 
B)  Gerard Debreu 
C)  Leon Walras 
D)  John Nash 
A)  Kenneth Arrow 
B)  Gerard Debreu 
C)  Leon Walras 
D)  John Nash

Question 10

An allocation satisfies the output efficiency condition if

Accepted Answer

A)  For every pair of goods, every input's marginal product equals the marginal rate of transformation 
B)  For every pair of goods, every consumer's marginal rate of substitution equals the marginal rate of transformation 
C)  Only applies for firms that produce the same product 
D)  Only applies for consumers that consume the same goods 
A)  For every pair of goods, every input's marginal product equals the marginal rate of transformation 
B)  For every pair of goods, every consumer's marginal rate of substitution equals the marginal rate of transformation 
C)  Only applies for firms that produce the same product 
D)  Only applies for consumers that consume the same goods

Question 11

Suppose milk and cereal are compliments and the demand for milk is   ,where   stands for millions of gallons of milk demanded,   stands for the price of milk and   stands for the price of cereal.The supply of milk is   ,where   stands for millions of gallons of milk supplied.The demand and supply of cereal are   and   ,respectively,where   stands for millions of boxes of cereal demanded and   stands for millions of boxes of cereal supplied.Solve for the general equilibrium price for cereal.

Accepted Answer

A)  $9.76 
B)  $6.10 
C)  $0 
D)  $11.25 
A)  $9.76 
B)  $6.10 
C)  $0 
D)  $11.25

Question 12

The principle of equal opportunity is an example of

Accepted Answer

A)  An outcome-oriented notion of equity 
B)  A process-oriented notion of equity 
C)  Utilitarianism 
D)  Rawlsianism 
A)  An outcome-oriented notion of equity 
B)  A process-oriented notion of equity 
C)  Utilitarianism 
D)  Rawlsianism

Question 13

Input efficiency

Accepted Answer

A)  Means that holding constant the total amount of each input used in the economy, there is no way to increase any firm's output without decreasing the output of another firm 
B)  Is a requirement of Pareto efficiency in a consumption economy 
C)  Exists when it is possible to produce more of one good and at least as much of every other good using the same inputs 
D)  Is a requirement of inefficiency in a production economy 
A)  Means that holding constant the total amount of each input used in the economy, there is no way to increase any firm's output without decreasing the output of another firm 
B)  Is a requirement of Pareto efficiency in a consumption economy 
C)  Exists when it is possible to produce more of one good and at least as much of every other good using the same inputs 
D)  Is a requirement of inefficiency in a production economy

Question 14

In an exchange economy

Accepted Answer

A)  People produce goods, but do not own or trade them 
B)  People own and trade goods, but no production takes place 
C)  People produce, own and trade goods 
D)  People trade goods, but do not own them or produce them 
A)  People produce goods, but do not own or trade them 
B)  People own and trade goods, but no production takes place 
C)  People produce, own and trade goods 
D)  People trade goods, but do not own them or produce them

Question 15

A point along the production possibility frontier is

Accepted Answer

A)  Inefficient 
B)  Impossible 
C)  Efficient 
D)  Inefficient and Impossible 
A)  Inefficient 
B)  Impossible 
C)  Efficient 
D)  Inefficient and Impossible

Question 16

Utilitarianism

Accepted Answer

A)  Was favored by Jeremy Bentham 
B)  Was favored by John Rawls 
C)  Is a process-oriented notion of equity 
D)  Was favored by John Nash 
A)  Was favored by Jeremy Bentham 
B)  Was favored by John Rawls 
C)  Is a process-oriented notion of equity 
D)  Was favored by John Nash

Question 17

The first welfare theorem

Accepted Answer

A)  Tells us that, in a general equilibrium with imperfect competition, the allocation of resources is Pareto efficient 
B)  Clarifies how the "invisible hand" of the market guides people toward privatly desirable choices 
C)  Tells us that a general equilibrium with perfect competition is not Pareto efficient 
D)  Tells us that, in a general equilibrium with perfect competition, the allocation of resources is Pareto efficient 
A)  Tells us that, in a general equilibrium with imperfect competition, the allocation of resources is Pareto efficient 
B)  Clarifies how the "invisible hand" of the market guides people toward privatly desirable choices 
C)  Tells us that a general equilibrium with perfect competition is not Pareto efficient 
D)  Tells us that, in a general equilibrium with perfect competition, the allocation of resources is Pareto efficient

Question 18

Suppose milk and cereal are compliments and the demand for milk is   ,where   stands for millions of gallons of milk demanded,   stands for the price of milk and   stands for the price of cereal.The supply of milk is   ,where   stands for millions of gallons of milk supplied.The demand and supply of cereal are   and   ,respectively,where   stands for millions of boxes of cereal demanded and   stands for millions of boxes of cereal supplied.Suppose the government imposes a $2.00 per gallon tax on milk.The new general equilibrium price of cereal is

Accepted Answer

A)  $9.66 
B)  $9.76 
C)  $7.76 
D)  $11.76 
A)  $9.66 
B)  $9.76 
C)  $7.76 
D)  $11.76

Question 19

The social welfare function

Accepted Answer

A)  Summarizes judgments about resource allocations 
B)  Assigns a number that indicates the overall level of social welfare 
C)  Was pioneered by Abram Bergson and Paul Samuelson 
D)  All of these 
A)  Summarizes judgments about resource allocations 
B)  Assigns a number that indicates the overall level of social welfare 
C)  Was pioneered by Abram Bergson and Paul Samuelson 
D)  All of these

Question 20

Suppose milk and cereal are compliments and the demand for milk is   ,where   stands for millions of gallons of milk demanded,   stands for the price of milk and   stands for the price of cereal.The supply of milk is   ,where   stands for millions of gallons of milk supplied.The demand and supply of cereal are   and   ,respectively,where   stands for millions of boxes of cereal demanded and   stands for millions of boxes of cereal supplied.Find the formula for the market-clearing curve for milk.

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Discuss the second welfare theorem.How can societies use competitive markets to achieve both efficiency and equity?

The efficient efficiency condition holds

General equilibrium analysis

Outcome-oriented notions of equity

A point inside the production possibility frontier is

According to the principle of Rawlsianism

The father of general equilibrium theory is considered to be

An allocation satisfies the output efficiency condition if

The principle of equal opportunity is an example of

Input efficiency

In an exchange economy

A point along the production possibility frontier is

Utilitarianism

The first welfare theorem

The social welfare function

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Filters

Exam 16: General Equilibrium, Efficiency, and Equity

Discuss the second welfare theorem.How can societies use competitive markets to achieve both efficiency and equity?

The efficient efficiency condition holds

General equilibrium analysis

Outcome-oriented notions of equity

A point inside the production possibility frontier is

According to the principle of Rawlsianism

The father of general equilibrium theory is considered to be

An allocation satisfies the output efficiency condition if

The principle of equal opportunity is an example of

Input efficiency

In an exchange economy

A point along the production possibility frontier is

Utilitarianism

The first welfare theorem

The social welfare function

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Filters