When two people trade their initial endowments to a point on the contract curve, only the level of the endowments will determine the new allocation. Indicate whether the statement is true or false ANSWER False. The respective bargaining abilities will also play a role in determining the final allocation.
Date: September 9th, 2020
If average cost is positive, A) marginal cost equals average cost. B) marginal cost exceeds average cost. C) marginal cost is less average cost. D) Not enough information is given. ANSWER D
Date: September 9th, 2020
Suppose each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the short run, an increase in the price of shovels will result in A) fewer shovels being purchased. B) more workers being hired. C) a decrease in the firm’s output. D) no change in the firm’s […]
Date: September 9th, 2020
If average cost is decreasing, A) marginal cost equals average cost. B) marginal cost exceeds average cost. C) marginal cost is less than average cost. D) Not enough information is given. ANSWER C
Date: September 9th, 2020
Which of the following is (are) the typical assumption(s) used in the study of mutually beneficial trades? A) Each agent maximizes her utility. B) Agents have convex-shaped indifference curves. C) An agent’s utility is not interdependent of the other agents’ utilities. D) All of the above. ANSWER D
Date: September 9th, 2020
In a two-agent two-good economy, a Pareto-efficient allocation implies that A) no further mutually beneficial trades are possible. B) agents’ indifference curves intersect each other. C) agents’ marginal rate of substitution are different. D) agents’ marginal rate of transformation are different. ANSWER A
Date: September 9th, 2020
Joe and Rita each have some cookies and milk. Joe is willing to trade 2 cookies for an additional ounce of milk. Rita is willing to trade 4 cookies for an additional ounce of milk. If trading is possible, which of the following is most likely to occur? A) Joe will give some milk to […]
Date: September 9th, 2020
Employing a general equilibrium approach, describe the effect of a new law that prohibits steel imports. What will be an ideal response? ANSWER The initial effect is that the supply curve for steel shifts leftward. This raises the price of steel. The largest users of steel are the automobile industry, the construction industry, and […]
Date: September 9th, 2020
Joe and Rita each have some milk and cookies (Milk on the horizontal axis). Joe’s MRS of cookies for milk is 2. Rita’s MRS of cookies for milk is 4. Which of the following statements is TRUE? A) No gains from trade are possible. B) Both Rita and Joe can be made better off if […]
Date: September 9th, 2020
When considering trade of two goods between two people, if one person has all the endowment of both goods, this allocation A) is never on a contract curve. B) will result in trade so each person has all of one good. C) will result in trade to a equal division of goods between the two […]
Date: September 9th, 2020
