In the short run, average variable costs are minimized when A) MPL equals APL. B) APL is maximized. C) MPL is maximized and APL is increasing. D) Both A and B. ANSWER D
Date: September 9th, 2020
Explain the logic behind the First Theorem of Welfare Economics. What will be an ideal response? ANSWER A competitive market allows all the voluntary trades desired by people who face the same price. No additional voluntary trades can occur so there is no way to make someone better off. Thus, a competitive equilibrium is […]
Date: September 9th, 2020
The “Law of Diminishing Marginal Returns” could also be termed the “Law of Increasing Marginal Costs.” Indicate whether the statement is true or false ANSWER True . Since MC = w/MPL in the short run, the fact that MPL eventually declines means that MC must eventually increase.
Date: September 9th, 2020
Explain why Robin Hood’s practice of stealing from the rich to give to the poor is never Pareto efficient. What will be an ideal response? ANSWER When Robin steals from the rich, those people are made worse off. This cannot be Pareto efficient.
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
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
Date: September 9th, 2020
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
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
The fact that any Pareto-efficient equilibrium can be achieved through competition by adjusting endowments is called A) the Second Welfare Theorem. B) the First Welfare Theorem. C) the Third Welfare Theorem. D) That is not possible. ANSWER A
Date: September 9th, 2020
