Question 1

If allocation x is Pareto optimal and allocation y is not,then everyone is at least as well off with x as with y,and someone is better off with x than with y.

Accepted Answer

A) True 
 B)False  False

Question 2

In a pure exchange economy if the initial allocation is Pareto optimal,then competitive equilibrium is fair.

Accepted Answer

A) True 
 B)False  False

Question 3

The utility possibilities frontier is the boundary of the production possibilities set.

Accepted Answer

A) True 
 B)False  False

Question 4

Hatfield and McCoy burn with hatred for each other.They both consume corn whisky.Hatfield's utility function is U = WH -W 2M / 40 and McCoy's utility is U = WM -W 2H / 40,where WH is Hatfield's whisky consumption and WM is McCoy's whisky consumption,measured in gallons.The sheriff has a total of 60 gallons of confiscated whisky which he could give back to them.For some reason,the sheriff wants them both to be as happy as possible and he wants to treat them equally.The sheriff should give them each

Accepted Answer

A)  30 gallons. 
B)  20 gallons and spill 20 gallons in the creek. 
C)  24 gallons and spill the rest in the creek. 
D)  10 gallons and spill 40 gallons in the creek. 
E)  5 gallons and spill the rest in the creek. 
A)  30 gallons. 
B)  20 gallons and spill 20 gallons in the creek. 
C)  24 gallons and spill the rest in the creek. 
D)  10 gallons and spill 40 gallons in the creek. 
E)  5 gallons and spill the rest in the creek.

Question 5

Suppose that Paul and David have utility functions U = 4A P + O P and U = A D+ 3O D,respectively,where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and oranges.The total supply of apples and oranges to be divided between them is 18 apples and 18 oranges.The fair allocations consist of all allocations satisfying the following conditions.

Accepted Answer

A)  AD + AP and OD + OP. 
B)  8AP + 2OP is at least 90 and 2AD +6OD is at least 72. 
C)  4AP +OP is at least 90 and 2AD +3OD is at least 72. 
D)  AD + OD is at least 18 and AS +OS is at least 18. 
E)  4AP + OP is at least AD +3OD and AD +3OD is at least 4AP + OP. 
A)  AD + AP and OD + OP. 
B)  8AP + 2OP is at least 90 and 2AD +6OD is at least 72. 
C)  4AP +OP is at least 90 and 2AD +3OD is at least 72. 
D)  AD + OD is at least 18 and AS +OS is at least 18. 
E)  4AP + OP is at least AD +3OD and AD +3OD is at least 4AP + OP.

Question 6

In a pure exchange economy,if an allocation is Pareto efficient,it is impossible to have two people who prefer each other's consumption bundles to their own.

Accepted Answer

A) True 
 B)False

Question 7

Hatfield and McCoy burn with hatred for each other.They both consume corn whisky.Hatfield's utility function is U =WH-W 2M / 8 and McCoy's utility is U =WM - W 2H / 8,where WH is Hatfield's whisky consumption and WM is McCoy's whisky consumption,measured in gallons.The sheriff has a total of 28 gallons of confiscated whisky which he could give back to them.For some reason,the sheriff wants them both to be as happy as possible and he wants to treat them equally.The sheriff should give them each

Accepted Answer

A)  14 gallons. 
B)  4 gallons and spill 20 gallons in the creek. 
C)  2 gallons and spill 24 gallons in the creek. 
D)  8 gallons and spill the rest in the creek. 
E)  1 gallon and spill the rest in the creek. 
A)  14 gallons. 
B)  4 gallons and spill 20 gallons in the creek. 
C)  2 gallons and spill 24 gallons in the creek. 
D)  8 gallons and spill the rest in the creek. 
E)  1 gallon and spill the rest in the creek.

Question 8

A Borda count is used to decide an election between 3 candidates,x,y,and z,where a score of 1 is awarded to a first choice,2 to a second choice,and 3 to a third choice.There are 29 voters.10 voters rank the candidates x first,y second,and z third;3 voters rank the candidates x first,z second,and y third;8 voters rank the candidates z first,y second,and x third;8 voters rank the candidates y first,z second,and x third.Which candidate wins?

Accepted Answer

A)  Candidate x. 
B)  Candidate y. 
C)  Candidate z. 
D)  There is a tie between x and y,with z coming in third. 
E)  There is a tie between y and z,with x coming in third. 
A)  Candidate x. 
B)  Candidate y. 
C)  Candidate z. 
D)  There is a tie between x and y,with z coming in third. 
E)  There is a tie between y and z,with x coming in third.

Question 9

A parent has two children living in cities with different costs of living.The cost of living in city B is 3 times the cost of living in city A.The child in city A has an income of $2,000 and the child in city B has an income of $6,000.The parent wants to give a total of $2,000 to her two children.Her utility function is U(C A,C B)= C A C B,where C A and C B are the consumptions of the children living in cities A and B respectively.She will choose to give

Accepted Answer

A)  each child $1,000,even though this will buy less goods for the child in city B. 
B)  the child in city B 3 times as much money as the child in city A. 
C)  the child in city B 1.50 times as much money as the child in city A. 
D)  the child in city A 3 times as much money as the child in city B. 
E)  the child in city A 1.50 times as much money as the child in city B. 
A)  each child $1,000,even though this will buy less goods for the child in city B. 
B)  the child in city B 3 times as much money as the child in city A. 
C)  the child in city B 1.50 times as much money as the child in city A. 
D)  the child in city A 3 times as much money as the child in city B. 
E)  the child in city A 1.50 times as much money as the child in city B.

Question 10

If a social welfare function is an increasing function of each person's utility,then every allocation that maximizes this social welfare function must be a Pareto optimum.

Accepted Answer

A) True 
 B)False

Question 11

Hatfield and McCoy burn with hatred for each other.They both consume corn whisky.Hatfield's utility function is U =WH - W 2M / 8 and McCoy's utility is U = WM - W 2H / 8,where WH is Hatfield's whisky consumption and WM is McCoy's whisky consumption,measured in gallons.The sheriff has a total of 58 gallons of confiscated whisky which he could give back to them.For some reason,the sheriff wants them both to be as happy as possible and he wants to treat them equally.The sheriff should give them each

Accepted Answer

A)  2 gallons and spill 54 gallons in the creek. 
B)  4 gallons and spill 50 gallons in the creek. 
C)  29 gallons. 
D)  8 gallons and spill the rest in the creek. 
E)  1 gallon and spill the rest in the creek. 
A)  2 gallons and spill 54 gallons in the creek. 
B)  4 gallons and spill 50 gallons in the creek. 
C)  29 gallons. 
D)  8 gallons and spill the rest in the creek. 
E)  1 gallon and spill the rest in the creek.

Question 12

Mr.Angst has two children,Dick and Jane.Dick is a slow learner and Jane is very bright.If Mr.Angst spends $X per month on Dicks education,Dick will score a total of X/2 points on his SAT tests.If Mr.Angst spends $Y per month on Janes education,she will score a total of 2Y on her SAT tests.Mr.Angst has a utility function U(D,J)=min{D,J},where D is Dicks SAT score and J is Janes SAT score.To maximize his utility,he will spend

Accepted Answer

A)  equal amounts of money on the two children. 
B)  4 times as much money on Dick's education as on Jane's. 
C)  4 times as much money on Jane's education as on Dick's. 
D)  between 1 and 2 times as much money on Dick's education as on Jane's. 
E)  between 1 and 2 times as much money on Jane's education as on Dick's. 
A)  equal amounts of money on the two children. 
B)  4 times as much money on Dick's education as on Jane's. 
C)  4 times as much money on Jane's education as on Dick's. 
D)  between 1 and 2 times as much money on Dick's education as on Jane's. 
E)  between 1 and 2 times as much money on Jane's education as on Dick's.

Question 13

A Borda count is used to decide an election between 3 candidates,x,y,and z,where a score of 1 is awarded to a first choice,2 to a second choice,and 3 to a third choice.There are 28 voters.5 voters rank the candidates x first,y second,and z third;10 voters rank the candidates x first,z second,and y third;4 voters rank the candidates z first,y second,and x third;9 voters rank the candidates y first,z second,and x third.Which candidate wins?

Accepted Answer

A)  Candidate y. 
B)  Candidate z. 
C)  There is a tie between x and y,with z coming in third. 
D)  Candidate x. 
E)  There is a tie between y and z,with x coming in third. 
A)  Candidate y. 
B)  Candidate z. 
C)  There is a tie between x and y,with z coming in third. 
D)  Candidate x. 
E)  There is a tie between y and z,with x coming in third.

Question 14

In a competitive equilibrium,no matter how different their preferences may be,no two people with the same income will envy each other's consumption bundles.

Accepted Answer

A) True 
 B)False

Question 15

A Borda count is used to decide an election between 3 candidates,x,y,and z,where a score of 1 is awarded to a first choice,2 to a second choice,and 3 to a third choice.There are 14 voters.6 voters rank the candidates x first,y second,and z third;3 voters rank the candidates x first,z second,and y third;3 voters rank the candidates z first,y second,and x third;2 voters rank the candidates y first,z second,and x third.Which candidate wins?

Accepted Answer

A)  There is a tie between x and y,with z coming in third. 
B)  Candidate y. 
C)  Candidate x. 
D)  Candidate z. 
E)  There is a tie between y and z,with x coming in third. 
A)  There is a tie between x and y,with z coming in third. 
B)  Candidate y. 
C)  Candidate x. 
D)  Candidate z. 
E)  There is a tie between y and z,with x coming in third.

Question 16

Suppose that Romeo has the utility function U = S 7RS3J and Juliet has the utility function U= S 3RS7J,where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 60 units of spaghetti to divide between them.

Accepted Answer

A)  Romeo would want to give Juliet some spaghetti if he had more than 30 units of spaghetti. 
B)  Romeo would want to give Juliet some spaghetti if he had more than 38 units of spaghetti. 
C)  Romeo and Juliet would never disagree about how to divide the spaghetti. 
D)  Juliet would want to give Romeo some spaghetti if she had more than 40 units. 
E)  Juliet would want to give Romeo some spaghetti if she had more than 42 units of spaghetti. 
A)  Romeo would want to give Juliet some spaghetti if he had more than 30 units of spaghetti. 
B)  Romeo would want to give Juliet some spaghetti if he had more than 38 units of spaghetti. 
C)  Romeo and Juliet would never disagree about how to divide the spaghetti. 
D)  Juliet would want to give Romeo some spaghetti if she had more than 40 units. 
E)  Juliet would want to give Romeo some spaghetti if she had more than 42 units of spaghetti.

Question 17

Suppose that Paul and David have utility functions U = 4A P + O P and U = A D + 5O D,respectively,where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and orange.The total supply of apples and oranges to be divided between them is 20 apples and 14 oranges.The "fair" allocations consist of all allocations satisfying the following conditions.

Accepted Answer

A)  4AP+OP is at least 94 and 2AD+5OD is at least 90. 
B)  AD + OD is at least 17 and AS +OS is at least 17. 
C)  AD + AP and OD + OP. 
D)  8AP + 2OP is at least 94 and 2AD +10OD is at least 90. 
E)  4AP +OP is at least AD+ 5OD and AD+ 5OD is at least 4AP + OP. 
A)  4AP+OP is at least 94 and 2AD+5OD is at least 90. 
B)  AD + OD is at least 17 and AS +OS is at least 17. 
C)  AD + AP and OD + OP. 
D)  8AP + 2OP is at least 94 and 2AD +10OD is at least 90. 
E)  4AP +OP is at least AD+ 5OD and AD+ 5OD is at least 4AP + OP.

Question 18

Suppose that Paul and David have utility functions U = 4A P + O P and U = A D + 4O D,respectively,where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and oranges.The total supply of apples and oranges to be divided between them is 20 apples and 12 oranges.The fair allocations consist of all allocations satisfying the following conditions.

Accepted Answer

A)  AD +AP and OD + OP. 
B)  8AP + 2OP is at least 92 and 2AD +8OD is at least 68. 
C)  4AP + OP is at least 92 and 2AD +4OD is at least 68. 
D)  AD + OD is at least 16 and AS +OS is at least 16. 
E)  4AP + OP is at least AD + 4OD and AD +4OD is at least 4AP+ OP. 
A)  AD +AP and OD + OP. 
B)  8AP + 2OP is at least 92 and 2AD +8OD is at least 68. 
C)  4AP + OP is at least 92 and 2AD +4OD is at least 68. 
D)  AD + OD is at least 16 and AS +OS is at least 16. 
E)  4AP + OP is at least AD + 4OD and AD +4OD is at least 4AP+ OP.

Question 19

Suppose that Romeo has the utility function U = S 5RS1J and Juliet has the utility function U=S1RS5J,where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 48 units of spaghetti to divide between them.

Accepted Answer

A)  Juliet would want to give Romeo some spaghetti if she had more than 38 units. 
B)  Romeo would want to give Juliet some spaghetti if he had more than 24 units of spaghetti. 
C)  Romeo and Juliet would never disagree about how to divide the spaghetti. 
D)  Romeo would want to give Juliet some spaghetti if he had more than 36 units of spaghetti. 
E)  Juliet would want to give Romeo some spaghetti if she had more than 40 units of spaghetti. 
A)  Juliet would want to give Romeo some spaghetti if she had more than 38 units. 
B)  Romeo would want to give Juliet some spaghetti if he had more than 24 units of spaghetti. 
C)  Romeo and Juliet would never disagree about how to divide the spaghetti. 
D)  Romeo would want to give Juliet some spaghetti if he had more than 36 units of spaghetti. 
E)  Juliet would want to give Romeo some spaghetti if she had more than 40 units of spaghetti.

Question 20

An allocation is fair if whenever one person envies another,the envied person does not envy the envier.

Accepted Answer

A) True 
 B)False

Exam 34:Welfare-Part A

If allocation x is Pareto optimal and allocation y is not,then everyone is at least as well off with x as with y,and someone is better off with x than with y.

In a pure exchange economy if the initial allocation is Pareto optimal,then competitive equilibrium is fair.

The utility possibilities frontier is the boundary of the production possibilities set.

In a pure exchange economy,if an allocation is Pareto efficient,it is impossible to have two people who prefer each other's consumption bundles to their own.

If a social welfare function is an increasing function of each person's utility,then every allocation that maximizes this social welfare function must be a Pareto optimum.

In a competitive equilibrium,no matter how different their preferences may be,no two people with the same income will envy each other's consumption bundles.

Suppose that Romeo has the utility function U = S 7RS3J and Juliet has the utility function U= S 3RS7J,where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 60 units of spaghetti to divide between them.

Suppose that Romeo has the utility function U = S 5RS1J and Juliet has the utility function U=S1RS5J,where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 48 units of spaghetti to divide between them.

An allocation is fair if whenever one person envies another,the envied person does not envy the envier.

Demand-Part A

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics-Part A

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

Suppose that Romeo has the utility function U = S ⁷_RS³_J and Juliet has the utility function U= S ³_RS⁷_J,where S_R is Romeo's spaghetti consumption and S_J is Juliet's.They have 60 units of spaghetti to divide between them.

Suppose that Romeo has the utility function U = S ⁵_RS¹_J and Juliet has the utility function U=S¹_RS⁵_J,where S_R is Romeo's spaghetti consumption and S_J is Juliet's.They have 48 units of spaghetti to divide between them.