Any competitive equilibrium is Pareto efficient because, with a competitive equilibrium, A) the marginal rates of substitution are equal for all consumers. B) the price line is the contract curve. C) mutual gains from trade exist. D) the slope of the price line equals the ratio of the MRS for all consumers. ANSWER A […]
In a competitive market, prices adjust until all consumers find themselves A) maximizing utility. B) on the contract curve. C) happy with their original endowment. D) with many opportunities to gain from additional exchange. ANSWER B
A firm’s cost curve is determined by A) congressional laws. B) whether the firm hires engineers or not. C) natural laws. D) the firm’s production function. ANSWER D
Which of the following will cause the average fixed cost curve of making cigarettes to shift? A) a $5 million penalty charged to each cigarette maker B) a $1 per pack tax on cigarettes C) a $3 per hour wage increase D) an increase in the demand for cigarettes ANSWER A
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
A government policy of providing free public K-12 education is most consistent with A) Pareto-efficiency. B) the First Theorem of Welfare Economics. C) the Second Theorem of Welfare Economics. D) the contract curve. ANSWER C
Assume Congress decides that Social Security taxes must increase in order to fund the system. This would A) shift up the marginal cost curve for any firms that hire labor. B) guarantee a decrease in profits. C) shift up the average fixed cost curve for any firms that hire labor. D) guarantee an increase in […]
In the short run, marginal cost is minimized when A) MPL is maximized. B) MPL equals zero. C) APL is maximized. D) APL equals zero. ANSWER A
Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would A) shift the marginal cost curve up. B) shift the marginal cost curve down. C) shift the average fixed cost curve up. D) shift the average fixed cost curve down. […]
A specific tax of $1 per unit of output will affect a firm’s A) average total cost, average variable cost, average fixed cost, and marginal cost. B) average total cost, average variable cost, and average fixed cost. C) average total cost, average variable cost, and marginal cost. D) marginal cost only. ANSWER C
