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1 | |
General equilibrium analysis seeks to understand the conditions under which: |
| | A) | all beneficial trades among all consumers are made. |
| | B) | the marginal rate of technical substitution of labour for capital is the same in all production processes. |
| | C) | the rate at which society would like to exchange one good for the other is the same as the rate at which society is able to exchange one good for the other. |
| | D) | all of the above are simultaneously achieved. |
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2 | |
The next three questions relate to the Edgeworth consumption box shown below. At point B we know there is an opportunity to improve the efficiency of resource allocation through exchange because:
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| | A) | Roberta is willing to give up a lot of clothing for a little more food, while Anita would give up a lot of food for a little more clothing.. |
| | B) | Roberta is willing to give up a lot of food for a little more clothing, while Anita would give up a lot of clothing for a little more food |
| | C) | Roberta has more clothing than Anita has. |
| | D) | the present distribution of clothing is unfair. |
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3 | |
A move from point B to point A |
| | A) | would be Pareto optimal, because it moves society to the contract curve. |
| | B) | would be a Pareto improvement, because it moves society to the contract curve. |
| | C) | would be voluntarily accepted by Roberta but not by Anita. |
| | D) | would be voluntarily accepted by Anita but not by Roberta. |
| | E) | would be voluntarily accepted by neither Anita nor Roberta, since each would be giving up something. |
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4 | |
Which statement is true of the Edgeworth box shown above? |
| | A) | If Anita and Roberta are on the contract curve, there is no possibility for any more voluntary exchanges between the two. |
| | B) | A move from point B to point D would achieve Pareto optimality even though Roberta has gained nothing in the move. |
| | C) | Which point on the contract curve is reached depends a great deal on the initial endowment of the commodities and the comparative bargaining power of the individuals involved. |
| | D) | All of the above are true. |
| | E) | None of the above are true. |
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5 | |
In the Edgeworth box shown below,
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| | A) | there is more food demanded than is available. |
| | B) | there is more clothing demanded than is available. |
| | C) | exchange equilibrium can be reached without any change in relative prices. |
| | D) | none of the above are true. |
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6 | |
In the Edgeworth box shown above for question 16-5, |
| | A) | the price for food is too low relative to the clothing price. |
| | B) | the price for food is too high relative to the clothing price. |
| | C) | the price is the correct one, but the consumers have not yet exhausted all beneficial market purchases and sales. |
| | D) | the indifference curves are inaccurately drawn, so that a Pareto optimal market position is impossible to show. |
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7 | |
Which statement is true of an Edgeworth production box for food and clothing? |
| | A) | On the contract curve, the marginal products of both inputs will be equal. |
| | B) | The contract curve provides the information necessary to determine the economy''s production possibilities curve. |
| | C) | The ideal point on the contract curve is the midpoint, where output of each good is the same. |
| | D) | More than one of the above is true. |
| | E) | None of the above is true. |
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8 | |
If the marginal cost of clothing divided by the marginal cost of food is greater than the price of clothing divided by the price of food, then we know that necessarily: |
| | A) | the economy is producing too much food and not enough clothing. |
| | B) | the economy is producing too much clothing and not enough food. |
| | C) | the economy is off its production possibility curve. |
| | D) | firms are producing where the marginal cost of food equals the price of food. |
| | E) | more than one of the above is true. |
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9 | |
Which statement is false? |
| | A) | Income taxes distort labour supply decisions. |
| | B) | A tax on goods produced in competitive markets will offset the underproduction inefficiency of monopoly priced goods. |
| | C) | A tax on goods whose production pollutes the air will reduce the overproduction tendency of such goods. |
| | D) | Pure public goods will usually be overproduced if their provision is left to the private sector. |
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2002 McGraw-Hill Higher Education