Question 1

Suppose that a competitive firm's marginal cost of producing output q is given by MC = 5 + 2q. Assume that the market price of the firm's product is $27. What level of output will the firm produce?

Accepted Answer

MC = P so ...

Question 2

Market failure can occur when

Accepted Answer

A)  individuals can influence prices.
B)  a market for a commodity does not exist.
C)  some firms have market power.
D)  all of these answers are correct.E) C) and D)
F) A) and C)

Question 3

An example of an activity that generates an externality is pursuing a graduate degree in economics.

Accepted Answer

A)  True
B)  False
C)  UncertainD) A) and C)
E) A) and B)

Question 4

The contract curve is the collection of points where indifference curves are tangent in the Edgeworth box.

Accepted Answer

A)  True
B)  False
C)  UncertainD) A) and B)
E) A) and C)

Question 5

Welfare economics

Accepted Answer

A)  only looks at the poorest parts of the economy.
B)  examines the social desirability of alternative economic states.
C)  does not depend on market interactions.
D)  uses only concepts of efficiency to evaluate the alternatives.E) B) and C)
F) All of the above

Question 6

Pareto efficient points in the Edgeworth Box are

Accepted Answer

A)  found when indifference curves are tangent.
B)  found when one person cannot be made better off without making another person worse off.
C)  found when MRS are equal.
D)  all of these answers are correct.E) A) and D)
F) A) and C)

Question 7

The First Fundamental Theorem of Welfare Economics requires

Accepted Answer

A)  that no one has any market power.
B)  producers and consumers to act as perfect competitors.
C)  that a market exists for each and every commodity.
D)  all of these answers are correct.E) B) and C)
F) C) and D)

Question 8

If James has an indifference curve characterized by the function of U = 2X3 Y2, what is his marginal rate of substitution between goods X and Y?

Accepted Answer

To find the MRSs, take the partial derivative of the function with respect to X and divide it by the partial derivative with respect to Y, which yields (3/2)* (Y/X).

Question 9

A utility possibilities curve need not incorporate the utility of every individual.

Accepted Answer

A)  True
B)  False
C)  UncertainD) None of the above
E) B) and C)

Question 10

Social indifference curves are the same as a social welfare function.

Accepted Answer

A)  True
B)  False
C)  UncertainD) All of the above
E) A) and B) A

Question 11

Imagine a simple economy with only two people, Leroy and Percy. If the social welfare function is W = UL + UP, and the utility possibilities curve is UPF = UL + 2UP, what will be the societal optimum?

Accepted Answer

The optimum would be a corner ...

Question 12

Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will

Accepted Answer

A)  increase the utility of at least one individual, but may decrease the level of utility of another person.
B)  decrease the utility of all individuals.
C)  increase the utility of one individual, but cannot decrease the utility of any individual.
D)  increase the utility of all individuals.E) All of the above
F) A) and D)

Question 13

When the First Fundamental Theorem of Welfare Economics doesn't hold, there is a market failure.

Accepted Answer

A)  True
B)  False
C)  UncertainD) None of the above
E) All of the above

Question 14

According to the Second Fundamental Theorem of Welfare Economics,

Accepted Answer

A)  society can attain any Pareto efficient allocation of resources.
B)  production must be twice as large as consumption.
C)  equity cannot be achieved without inhibiting efficiency.
D)  not all points along the utility possibilities curve are attainable.E) A) and B)
F) A) and C)

Question 15

Welfare economics is concerned with individual desirability of alternative economic states.

Accepted Answer

A)  True
B)  False
C)  UncertainD) A) and B)
E) B) and C)

Question 16

The government must intervene in markets in order to move the economy to the welfare maximizing point.

Accepted Answer

A)  True
B)  False
C)  UncertainD) B) and C)
E) None of the above B

Question 17

Merit goods

Accepted Answer

A)  should be provided even if there is no demand for them.
B)  increase in costs as demand increases.
C)  are provided for those who are well behaved and earn them.
D)  none of these answers is correct.E) B) and D)
F) B) and C)

Question 18

Consider an Edgeworth economy where there are two citizens, Mr. Cortopassi and Ms. Thomas. There are only two goods to be consumed in the economy, Beer and Pretzels. The total amount of Beer is 12 units. The total amount of Pretzels is 12 units. Answer the following: Suppose Mr. Cortopassi has utility for the two goods characterized as UC(B,P)= B + P. Ms. Thomas's utility function is UT(B,P)= B + P. Identify the points that are Pareto efficient.

Accepted Answer

Since the MRSs of the two are ...

Question 19

Pareto improvement can be a reallocation of resources that makes more than one person better off.

Accepted Answer

A)  True
B)  False
C)  UncertainD) All of the above
E) B) and C)

Question 20

The absolute value of the slope of the production possibilities curve is the

Accepted Answer

A)  contract curve.
B)  marginal rate of transformation.
C)  marginal rate of substitution.
D)  offer curve.E) A) and D)
F) A) and C)

Exam 2: Fundamentals of Welfare Economics

Suppose that a competitive firm's marginal cost of producing output q is given by MC = 5 + 2q. Assume that the market price of the firm's product is $27. What level of output will the firm produce?

Correct Answer
verified
MC = P so ...
View Answer

Market failure can occur when

Correct Answer
verified

An example of an activity that generates an externality is pursuing a graduate degree in economics.

Correct Answer
verified

The contract curve is the collection of points where indifference curves are tangent in the Edgeworth box.

Correct Answer
verified

Welfare economics

Correct Answer
verified

Pareto efficient points in the Edgeworth Box are

Correct Answer
verified

The First Fundamental Theorem of Welfare Economics requires

Correct Answer
verified

If James has an indifference curve characterized by the function of U = 2X3 Y2, what is his marginal rate of substitution between goods X and Y?

Correct Answer
verified
To find the MRSs, take the partial derivative of the function with respect to X and divide it by the partial derivative with respect to Y, which yields (3/2)* (Y/X).

A utility possibilities curve need not incorporate the utility of every individual.

Correct Answer
verified

Social indifference curves are the same as a social welfare function.

Correct Answer
verified
A

Imagine a simple economy with only two people, Leroy and Percy. If the social welfare function is W = UL + UP, and the utility possibilities curve is UPF = UL + 2UP, what will be the societal optimum?

Correct Answer
verified
The optimum would be a corner ...
View Answer

Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will

Correct Answer
verified

When the First Fundamental Theorem of Welfare Economics doesn't hold, there is a market failure.

Correct Answer
verified

According to the Second Fundamental Theorem of Welfare Economics,

Correct Answer
verified

Welfare economics is concerned with individual desirability of alternative economic states.

Correct Answer
verified

The government must intervene in markets in order to move the economy to the welfare maximizing point.

Correct Answer
verified
B

Merit goods

Correct Answer
verified

Correct Answer
verified
Since the MRSs of the two are ...
View Answer

Pareto improvement can be a reallocation of resources that makes more than one person better off.

Correct Answer
verified

The absolute value of the slope of the production possibilities curve is the

Correct Answer
verified

Exam 2: Fundamentals of Welfare Economics

Suppose that a competitive firm's marginal cost of producing output q is given by MC = 5 + 2q. Assume that the market price of the firm's product is $27. What level of output will the firm produce?

Correct AnswerverifiedMC = P so ...View AnswerShow Answer

Market failure can occur when

Correct AnswerverifiedShow Answer

An example of an activity that generates an externality is pursuing a graduate degree in economics.

Correct AnswerverifiedShow Answer

The contract curve is the collection of points where indifference curves are tangent in the Edgeworth box.

Correct AnswerverifiedShow Answer

Welfare economics

Correct AnswerverifiedShow Answer

Pareto efficient points in the Edgeworth Box are

Correct AnswerverifiedShow Answer

The First Fundamental Theorem of Welfare Economics requires

Correct AnswerverifiedShow Answer

If James has an indifference curve characterized by the function of U = 2X3 Y2, what is his marginal rate of substitution between goods X and Y?

Correct AnswerverifiedTo find the MRSs, take the partial derivative of the function with respect to X and divide it by the partial derivative with respect to Y, which yields (3/2)* (Y/X).

A utility possibilities curve need not incorporate the utility of every individual.

Correct AnswerverifiedShow Answer

Social indifference curves are the same as a social welfare function.

Correct AnswerverifiedA

Imagine a simple economy with only two people, Leroy and Percy. If the social welfare function is W = UL + UP, and the utility possibilities curve is UPF = UL + 2UP, what will be the societal optimum?

Correct AnswerverifiedThe optimum would be a corner ...View AnswerShow Answer

Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will

Correct AnswerverifiedShow Answer

When the First Fundamental Theorem of Welfare Economics doesn't hold, there is a market failure.

Correct AnswerverifiedShow Answer

According to the Second Fundamental Theorem of Welfare Economics,

Correct AnswerverifiedShow Answer

Welfare economics is concerned with individual desirability of alternative economic states.

Correct AnswerverifiedShow Answer

The government must intervene in markets in order to move the economy to the welfare maximizing point.

Correct AnswerverifiedB

Merit goods

Correct AnswerverifiedShow Answer

Correct AnswerverifiedSince the MRSs of the two are ...View AnswerShow Answer

Pareto improvement can be a reallocation of resources that makes more than one person better off.

Correct AnswerverifiedShow Answer

The absolute value of the slope of the production possibilities curve is the

Correct AnswerverifiedShow Answer

Correct Answer
verified
MC = P so ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
To find the MRSs, take the partial derivative of the function with respect to X and divide it by the partial derivative with respect to Y, which yields (3/2)* (Y/X).

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
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The optimum would be a corner ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Correct Answer
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Since the MRSs of the two are ...
View Answer

Correct Answer
verified

Correct Answer
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