A cake is to be shared by two people. Both desire the largest piece possible. One of the two will cut the cake. Under which of the following situations will the cutter adopt a Rawlsian social welfare function? A) The person cutting the cake chooses the first piece. B) The person not cutting the cake […]
Date: September 9th, 2020
If the costs of labor and capital increase in the same proportion, the isocost line will A) stay the same. B) shift outward in a parallel fashion. C) rotate inward around the point where only capital is employed in production. D) shift inward in a parallel fashion. ANSWER B
Date: September 9th, 2020
What are the functions for MC and AC if TC = 20q + 10q2? A) MC = 20q; AC = 10q2 B) MC = 20 + 20q; AC = 20 + 10q C) MC = 20 + 10q; AC = 10 + 10q2 D) MC = 20 + 20q; AC = 10q ANSWER B […]
Date: September 9th, 2020
No clearly defined socially preferred outcome may result when majority voting on outcomes because A) often voters don’t understand the outcomes. B) voting may violate the independence of irrelevant alternatives. C) voting may lead to incomplete preferences. D) voting may lead to non-transitive preference. ANSWER D
Date: September 9th, 2020
A U.S. firm currently produces 200 units of output according to the production function q = L0.5K0.5 and faces input prices equal to wU.S. = rU.S = $11. Should the U.S. firm move their company abroad where they will face input prices equal to wabroad = $6.50 and rabroad = $15.00? A) Yes, because the […]
Date: September 9th, 2020
A change in relative factor prices will always result in A) a change in the slope of the isoquants. B) a tangency between the new isocost line and a new isoquant. C) a rotation of the isocost lines. D) All of the above. ANSWER C
Date: September 9th, 2020
Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people. What will be an ideal response? ANSWER One person, when she spends all of her time producing one good or the other, can produce […]
Date: September 9th, 2020
The production of cigarettes is highly automated; however, a worker is required to monitor each machine. Machines and workers do not interact with one another. Given this information, there are most likely A) economies of scale. B) economies of scope. C) constant returns to scale. D) increasing returns to scale. ANSWER C
Date: September 9th, 2020
Can consumption efficiency be achieved even if the efficient product mix is not achieved? What will be an ideal response? ANSWER Efficiency in consumption implies that all consumers have the same MRS. This can be achieved with any product mix. Thus, consumers can be as well off as possible for any given product mix. […]
Date: September 9th, 2020
If a production function is represented as q = LaKb, the long-run average cost curve will be horizontal as long as A) a + b = 0. B) a + b = 1. C) q > 0. D) L = K. ANSWER B
Date: September 9th, 2020
