When two people are on the contract curve, the allocation of goods A) cannot be improved. B) is Pareto efficient. C) is such that neither individual can be made better off without making the other worse off. D) All of the above. ANSWER D
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
Variable costs are A) a production expense that does not vary with output. B) a production expense that changes with the quantity of output produced. C) equal to total cost divided by the units of output produced. D) the amount by which a firm’s cost changes if the firm produces one more unit of output. […]
Date: September 9th, 2020
Gains from trade will be possible as long as A) people have different endowments. B) people place different values on some goods. C) marginal rates of substitution are equal across individuals. D) excess supply equals excess demand. ANSWER B
Date: September 9th, 2020
If Option A costs $40 and yields 20 units of output, and Option B costs $50 and yields 30 units of output, A) Option B and Option A are equally economically efficient. B) Option B is economically efficient relative to Option A. C) Option A is economically efficient relative to Option B. D) It is […]
Date: September 9th, 2020
When comparing partial equilibrium effects to general equilibrium effects one can conclude that A) general equilibrium effects are always larger. B) partial equilibrium effects are always larger. C) the effects are of equal size. D) one cannot determine before the fact which effect is greater. ANSWER D
Date: September 9th, 2020
The high cost of advertising during the Super Bowl will A) not affect the efficient level of output because advertising is a sunk cost. B) will affect the efficient level of output because profits will fall significantly. C) not affect the efficient level of output because advertising is a fixed cost. D) Not enough information […]
Date: September 9th, 2020
