If firms are producing efficiently, but consumers can reallocate goods amongst themselves, A) the equilibrium is not efficient. B) the equilibrium is efficient. C) the consumers are behaving irrationally. D) the firms are too greedy. ANSWER A
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
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 […]
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 […]
Employers in a city must pay a specific tax of $t per hour worked by their employees while employers in the suburbs of the city do not have an employment tax. What does a general equilibrium approach predict regarding the wages and employment of both the city and suburban workers if the city decides to […]
Assume Congress holds a hearing on the impact of gasoline prices on the price of corn. Most likely, this hearing will be A) a partial equilibrium analysis. B) a general equilibrium analysis. C) about consumer rather than producer surplus. D) an analysis of efficiency. ANSWER A
Your company makes copper pipes. Over the years, you have collected a large inventory of raw copper. The production process involves melting the copper and shaping it into pipes. You also have a large stockpile of pennies. Suppose the price of copper rises so much that the copper in the penny becomes worth more than […]
Why might a police officer not pull over someone speeding two miles over the speed limit? A) The explicit costs of stopping the driver over are too high. B) The opportunity costs of stopping the driver are too high. C) The opportunity costs of topping he driver are too low. D) The explicit costs of […]
The saying “What’s that got to do with the price of tea?” reflects A) two markets where general equilibrium analysis would be most useful. B) two markets where general equilibrium analysis likely won’t be very useful. C) two markets where the products are clearly closely related. D) two markets where firms are incredibly greedy. […]
The cost of waiting two months for health care to address a debilitating problem in Canada is most accurately described as A) an explicit cost. B) an accounting cost. C) no real cost. D) an opportunity cost. ANSWER D