Economic growth can be obtained A) by government legislation. B) by a change in the level of inputs or an improvement in technology. C) only through a change in the level of inputs, hence the desire for conquest throughout the history of the world. D) only through a change in technology, which explains the explosive […]
In a perfectly competitive equilibrium with production and trade, which of the following results occur(s)? A) Pareto-efficiency is obtained. B) The First Welfare Theorem is satisfied. C) There is efficiency in production. D) All of the above. ANSWER D
A consumer purchases a book by driving across town to a bookstore, standing in line for five minutes to pay the cashier, and then pays $5. The same book is purchased by another consumer who spends 2 minutes placing the order over the Internet for $10. The book necessarily cost the first consumer less. Indicate […]
True or false? The Edgeworth box version of interpersonal trade requires the individuals to be in close proximity of one another. A) True, that way they can see each other’s endowments and prices. B) False, being in close proximity is not required for mutually beneficial trade to occur in the Edgeworth box. C) True, the […]
In a two-agent and two-good economy, a competitive market equilibrium occurs when A) the agents’ indifference curves are tangent to the price line. B) the agents’ marginal rate of substitution are zero. C) the excess supply exceeds the excess demand. D) the agents’ indifference curves intersect the price line. ANSWER A
In the short run, a firm’s output level is 5 units. Its average cost is $40 and its fixed cost is $50. What is this firm’s variable cost of producing 5 units? A) VC = $50 B) VC = $100 C) VC = $150 D) VC = $175 ANSWER C
Explain why the marginal cost curve intersects a U-shaped average cost curve at its minimum point. What will be an ideal response? ANSWER At low quantities, the average cost curve declines as the quantity increases. The marginal cost is below the average cost. The marginal cost represents the cost of an additional unit of […]
The marginal cost curve intersects the average fixed cost curve at its minimum. Indicate whether the statement is true or false ANSWER False. Marginal cost intersects average variable cost (and average cost) at its minimum.
Every point on the joint production possibilities frontier represents A) an initial endowment. B) inefficient production. C) the marginal rate of substitution of goods for each producer. D) at least one producer specializing in production. ANSWER D
Suppose the current market wage rate (w) is $4. In the short run, a firm’s marginal cost at the current output level is $2. What is this firm’s marginal product of labor? A) MPL = 0.5 B) MPL = 1 C) MPL = 2 D) MPL = 8 ANSWER C
