Question 1

The reason externalities distort the allocation of resources is that

Accepted Answer

A) too few goods are usually produced. 
B) firms often go out of business because of the externality. 
C) a firm's private costs do not reflect the social cost of production. 
D) regulating externalities uses scarce resources. 
A) too few goods are usually produced. 
B) firms often go out of business because of the externality. 
C) a firm's private costs do not reflect the social cost of production. 
D) regulating externalities uses scarce resources. C

Question 2

In volatile markets,"speculators" would be expected to provide some stability because

Accepted Answer

A) they will be required to do so by the government. 
B) they will use current price moves to predict future moves. 
C) they will buy when price is below equilibrium and sell when it is above equilibrium. 
D) they will buy when price is above equilibrium and sell when it is below equilibrium. 
A) they will be required to do so by the government. 
B) they will use current price moves to predict future moves. 
C) they will buy when price is below equilibrium and sell when it is above equilibrium. 
D) they will buy when price is above equilibrium and sell when it is below equilibrium. C

Question 3

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

Accepted Answer

A) the rate of technical substitution for corn divided by the rate of technical substitution for cloth. 
B) the rate of technical substitution for cloth divided by the rate of technical substitution for corn. 
C) the marginal cost of producing cloth divided by the marginal cost of producing corn. 
D) the marginal cost of producing corn divided by the marginal cost of producing cloth. 
A) the rate of technical substitution for corn divided by the rate of technical substitution for cloth. 
B) the rate of technical substitution for cloth divided by the rate of technical substitution for corn. 
C) the marginal cost of producing cloth divided by the marginal cost of producing corn. 
D) the marginal cost of producing corn divided by the marginal cost of producing cloth. D

Question 4

In order to assure allocative efficiency,

Accepted Answer

A) people's marginal rate of substitution must equal the economy's rate of product transformation. 
B) people's marginal rate of substitution must equal the firm's rate of technical substitution among inputs. 
C) a firm's rate of technical substitution must equal the economy's rate of product transformation. 
D) all of the other answers are correct. 
A) people's marginal rate of substitution must equal the economy's rate of product transformation. 
B) people's marginal rate of substitution must equal the firm's rate of technical substitution among inputs. 
C) a firm's rate of technical substitution must equal the economy's rate of product transformation. 
D) all of the other answers are correct.

Question 5

In a two-good world every allocation would be efficient only if

Accepted Answer

A) both individuals were identical. 
B) both individuals regard the two goods as perfect substitutes. 
C) both individuals were identical and regard the two goods as perfect complements. 
D) both individuals were identical and regard the two goods as perfect substitutes. 
A) both individuals were identical. 
B) both individuals regard the two goods as perfect substitutes. 
C) both individuals were identical and regard the two goods as perfect complements. 
D) both individuals were identical and regard the two goods as perfect substitutes.

Question 6

Consider three ways of allocating two goods in a two-person exchange economy. 
I.Both individuals take prices as given and equilibrium prices are established by an impartial auctioneer.
II.One individual can act as a perfect price discriminator and force the other individual to pay a different price for each unit of a good that is traded.
III.One individual is a monopolist and can charge the other individual a single,utility-maximizing price.
Which of these situations is efficient?

Accepted Answer

A) None of them. 
B) Only I. 
C) I and II,but not III. 
D) I and III,but not II. 
E) All of them. 
A) None of them. 
B) Only I. 
C) I and II,but not III. 
D) I and III,but not II. 
E) All of them.

Question 7

A market characterized by imperfect information will have an equilibrium price if at that price

Accepted Answer

A) quantity demanded equals quantity supplied when all participants have the same information. 
B) quantity demanded equals quantity supplied given prevailing information levels. 
C) quantity demanded equals quantity supplied under perfect information. 
D) quantity demanded exceeds quantity supplied if suppliers are better informed (and vice-versa). 
A) quantity demanded equals quantity supplied when all participants have the same information. 
B) quantity demanded equals quantity supplied given prevailing information levels. 
C) quantity demanded equals quantity supplied under perfect information. 
D) quantity demanded exceeds quantity supplied if suppliers are better informed (and vice-versa).

Question 8

The "Classical Dichotomy" refers to

Accepted Answer

A) a distinction between "value in use" and "value in exchange." 
B) separate theories of demand and supply. 
C) the possibility of Giffen's Paradox 
D) determination of relative prices independent of the nominal price level. 
A) a distinction between "value in use" and "value in exchange." 
B) separate theories of demand and supply. 
C) the possibility of Giffen's Paradox 
D) determination of relative prices independent of the nominal price level.

Question 9

Every allocation of goods in a one good world is efficient because

Accepted Answer

A) MRSs are equalized. 
B) there is enough to go around for everyone. 
C) no one can be made better off without making someone else worse off. 
D) it doesn't matter to whom an extra unit of the good is given. 
A) MRSs are equalized. 
B) there is enough to go around for everyone. 
C) no one can be made better off without making someone else worse off. 
D) it doesn't matter to whom an extra unit of the good is given.

Question 10

In a two-good exchange economy,A's utility is given by $U _ { A } = x ^ { 1 / 3 } y ^ { 2 / 3 }$ and B's utility by $U _ { B } = x ^ { 2 / 3 } y ^ { 1 / 3 }$ 
Along the contract curve x/y for B will be times x/y for A.

Accepted Answer

A) 4. 
B) 3. 
C) 2. 
D) 1. 
A) 4. 
B) 3. 
C) 2. 
D) 1.

Question 11

Under a perfectly competitive price system

Accepted Answer

A) an equitable allocation of the available resources will always result. 
B) there is no opportunity for individuals to trade amongst themselves. 
C) there is no reason to expect that voluntary trading will result in an equitable allocation of the available resources. 
D) none of these is correct. 
A) an equitable allocation of the available resources will always result. 
B) there is no opportunity for individuals to trade amongst themselves. 
C) there is no reason to expect that voluntary trading will result in an equitable allocation of the available resources. 
D) none of these is correct.

Question 12

The slope of the production possibility frontier shows

Accepted Answer

A) the marginal rate of substitution between the two goods. 
B) the relative marginal costs of the two goods. 
C) the efficient combination of outputs possible using fixed amounts of input. 
D) the relative marginal productivities of the two goods. 
A) the marginal rate of substitution between the two goods. 
B) the relative marginal costs of the two goods. 
C) the efficient combination of outputs possible using fixed amounts of input. 
D) the relative marginal productivities of the two goods.

Question 13

Each of the following factors might interfere with the efficiency of perfect competition except:

Accepted Answer

A) increasing returns to scale. 
B) imperfect price information. 
C) externalities. 
D) diminishing returns to scale. 
A) increasing returns to scale. 
B) imperfect price information. 
C) externalities. 
D) diminishing returns to scale.

Question 14

In general,non-equilibrium prices occur because

Accepted Answer

A) information is imperfect and adjustment is costly. 
B) supply curves shift along stationary demand curves. 
C) demand curves shift along stationary supply curves. 
D) monopolists charge prices above marginal cost. 
A) information is imperfect and adjustment is costly. 
B) supply curves shift along stationary demand curves. 
C) demand curves shift along stationary supply curves. 
D) monopolists charge prices above marginal cost.

Question 15

An efficient allocation of productive inputs requires that

Accepted Answer

A) each output has the same rate of technical substitution among inputs used. 
B) each output has the same marginal rate of substitution for consumers. 
C) each pair of outputs has the same rate of product transformation. 
D) each individual has the same marginal rate of substitution between outputs. 
A) each output has the same rate of technical substitution among inputs used. 
B) each output has the same marginal rate of substitution for consumers. 
C) each pair of outputs has the same rate of product transformation. 
D) each individual has the same marginal rate of substitution between outputs.

Question 16

If,in a given economy,production is taking place at a point inside the production possibility frontier,

Accepted Answer

A) resource allocation is technically and allocatively efficient. 
B) resource allocation is technically efficient but allocatively inefficient. 
C) resource allocation is technically inefficient and allocatively efficient. 
D) resource allocation is technically and allocatively inefficient. 
A) resource allocation is technically and allocatively efficient. 
B) resource allocation is technically efficient but allocatively inefficient. 
C) resource allocation is technically inefficient and allocatively efficient. 
D) resource allocation is technically and allocatively inefficient.

Question 17

An allocation of resources is technically efficient if

Accepted Answer

A) it is impossible to increase the output of a particular good. 
B) it is possible to increase the output of all goods. 
C) it is impossible to increase the output of one good without cutting back on the production of something else. 
D) it is possible to increase the output of one good. 
A) it is impossible to increase the output of a particular good. 
B) it is possible to increase the output of all goods. 
C) it is impossible to increase the output of one good without cutting back on the production of something else. 
D) it is possible to increase the output of one good.

Question 18

Suppose that the two persons in an exchange economy (A and B)have utility functions given by $\begin{array} { l } 
U _ { A } = x + 2 y \
U _ { B } = \sqrt { x y }
\end{array}$ Along the contract curve,B's ratio of Y to X will be

Accepted Answer

A) 2:1. 
B) 1:1. 
C) 1:2. 
D) between 1:1 and 1:2. 
A) 2:1. 
B) 1:1. 
C) 1:2. 
D) between 1:1 and 1:2.

Question 19

In an exchange economy A's utility is given by UA = x + y
And B's by
UB = min[x,2y].
The initial endowment for A is x = 10 y = 8 and for B,x = 8 y = 4.To reach the contact curve,these individuals must

Accepted Answer

A) Trade 1x for 1y. 
B) Trade 2x for 1 y. 
C) Trade 1x for 2y. 
D) Do nothing,since they are already on the contract curve. 
A) Trade 1x for 1y. 
B) Trade 2x for 1 y. 
C) Trade 1x for 2y. 
D) Do nothing,since they are already on the contract curve.

Question 20

Suppose two individuals in an exchange economy have identical utility functions given by $U ( x , y ) = \sqrt { x y }$ Person A has an endowment of x = 9 y = 8,person B has one of x = 16 y = 2.The price ratio that will prevail in equilibrium is

Accepted Answer

A) px / py= 2.5. 
B) px / py = 1.0. 
C) px / py = 0.4. 
D) px / py = 0.125. 
A) px / py= 2.5. 
B) px / py = 1.0. 
C) px / py = 0.4. 
D) px / py = 0.125.

The reason externalities distort the allocation of resources is that

In volatile markets,"speculators" would be expected to provide some stability because

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

In order to assure allocative efficiency,

In a two-good world every allocation would be efficient only if

A market characterized by imperfect information will have an equilibrium price if at that price

The "Classical Dichotomy" refers to

Every allocation of goods in a one good world is efficient because

In a two-good exchange economy,A's utility is given by $U _ { A } = x ^ { 1 / 3 } y ^ { 2 / 3 }$ and B's utility by $U _ { B } = x ^ { 2 / 3 } y ^ { 1 / 3 }$ Along the contract curve x/y for B will be times x/y for A.

Under a perfectly competitive price system

The slope of the production possibility frontier shows

Each of the following factors might interfere with the efficiency of perfect competition except:

In general,non-equilibrium prices occur because

An efficient allocation of productive inputs requires that

If,in a given economy,production is taking place at a point inside the production possibility frontier,

An allocation of resources is technically efficient if

Suppose that the two persons in an exchange economy (A and B)have utility functions given by =x+2y = Along the contract curve,B's ratio of Y to X will be

In an exchange economy A's utility is given by U_A = x + y And B's by U_B = min[x,2y]. The initial endowment for A is x = 10 y = 8 and for B,x = 8 y = 4.To reach the contact curve,these individuals must

Suppose two individuals in an exchange economy have identical utility functions given by $U ( x , y ) = \sqrt { x y }$ Person A has an endowment of x = 9 y = 8,person B has one of x = 16 y = 2.The price ratio that will prevail in equilibrium is

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty and Information

Strategy and Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 11: General Equilibrium and Welfare

The reason externalities distort the allocation of resources is that

In volatile markets,"speculators" would be expected to provide some stability because

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

In order to assure allocative efficiency,

In a two-good world every allocation would be efficient only if

A market characterized by imperfect information will have an equilibrium price if at that price

The "Classical Dichotomy" refers to

Every allocation of goods in a one good world is efficient because

In a two-good exchange economy,A's utility is given by UA=x1/3y2/3U _ { A } = x ^ { 1 / 3 } y ^ { 2 / 3 }UA​=x1/3y2/3 and B's utility by UB=x2/3y1/3U _ { B } = x ^ { 2 / 3 } y ^ { 1 / 3 }UB​=x2/3y1/3 Along the contract curve x/y for B will be times x/y for A.

Under a perfectly competitive price system

The slope of the production possibility frontier shows

Each of the following factors might interfere with the efficiency of perfect competition except:

In general,non-equilibrium prices occur because

An efficient allocation of productive inputs requires that

If,in a given economy,production is taking place at a point inside the production possibility frontier,

An allocation of resources is technically efficient if

Suppose that the two persons in an exchange economy (A and B)have utility functions given by =x+2y = Along the contract curve,B's ratio of Y to X will be

In an exchange economy A's utility is given by UA = x + y And B's by UB = min[x,2y]. The initial endowment for A is x = 10 y = 8 and for B,x = 8 y = 4.To reach the contact curve,these individuals must

Suppose two individuals in an exchange economy have identical utility functions given by U(x,y)=xyU ( x , y ) = \sqrt { x y }U(x,y)=xy​ Person A has an endowment of x = 9 y = 8,person B has one of x = 16 y = 2.The price ratio that will prevail in equilibrium is

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty and Information

Strategy and Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

In a two-good exchange economy,A's utility is given by $U _ { A } = x ^ { 1 / 3 } y ^ { 2 / 3 }$ and B's utility by $U _ { B } = x ^ { 2 / 3 } y ^ { 1 / 3 }$ Along the contract curve x/y for B will be times x/y for A.

In an exchange economy A's utility is given by U_A = x + y And B's by U_B = min[x,2y]. The initial endowment for A is x = 10 y = 8 and for B,x = 8 y = 4.To reach the contact curve,these individuals must

Suppose two individuals in an exchange economy have identical utility functions given by $U ( x , y ) = \sqrt { x y }$ Person A has an endowment of x = 9 y = 8,person B has one of x = 16 y = 2.The price ratio that will prevail in equilibrium is