Exam 12: General Equilibrium and the Efficiency of Perfect Competition

Scientists find that eating corn three times a day will prolong life. This leads to a shift in preferences away from wheat and toward corn. As we move from one equilibrium to another, we can predict that

A technological change in the production of cars will

Even if a market outcome is efficient, it may not be equitable.

Public goods are goods that we all agree are useful and therefore are all willing to pay for. This implies that there is no efficiency problem in the production of public goods.

Your next-door neighbor has a beautiful rose garden, but you are allergic to roses and cannot use your yard because of the rose pollen that drifts into your yard. In this case, the rose garden is an example of a

Assume that price underestimates the value that society places on the flu vaccine. If firms produce where P = MC, firms will be producing

An economist has estimated that the maintenance of a public park costs $25,000 a year and that the public park generates $30,000 a year in revenue for merchants near the park. From society's point of view, the maintenance of this park is

Under perfect competition, the efficient level of output is produced because

Marginal cost is a good measure of

Which of the following is an example of an external benefit?

Suppose there is a permanent shift of consumer preferences away from pretzels and toward potato chips. The most likely result would be

An externality exists when the cost or benefit resulting from some activity or transaction is experienced by parties external to the activity or transaction.

Pareto optimality is the condition in which

A condition in which no change is possible that will make some members of society better off without making some other members of society worse off is called

A ________ system is one in which all possible trades that make some societal members better off without making others worse off have been exhausted.

Efficiency is the condition in which the economy is producing what people want at the least possible cost.

One reason to require medical practitioners to be licensed is that

Suppose a new government policy will generate $5,000 of benefits for local businesses and $3,000 of costs. This policy can best be described as

When one market reaches a new equilibrium, the general equilibrium condition has been satisfied.

Which one of the following is NOT a source of market failure?