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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.

E) All of the above
F) C) and D)

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As opposed to general equilibrium analysis,partial equilibrium analysis looks


A) at an equilibrium and changes to it in a single, isolated market.
B) at how changes in all other markets effect a particular market.
C) at how equilibrium is determined in all markets simultaneously.
D) at either price or quantity movements.

E) B) and C)
F) A) and D)

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A

-The above figure depicts the Edgeworth box for two consumers,Al and Bruce.Explain why point a cannot be a competitive equilibrium. -The above figure depicts the Edgeworth box for two consumers,Al and Bruce.Explain why point "a" cannot be a competitive equilibrium.

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Point "a" cannot be a competitive equili...

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Gains from trade can only occur when


A) marginal rates of substitutions differ across people.
B) marginal rates of substitution are equal across people.
C) indifference curves are convex.
D) people find themselves on the contract curve.

E) None of the above
F) All of the above

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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.

E) B) and C)
F) A) and C)

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Every point on the joint production possibilities frontier represents


A) an initial endowment.
B) inefficient production.
C) the marginal rate of substitution of goods for each producer.
D) at least one producer specializing in production.

E) A) and C)
F) C) and D)

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-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Measuring food on the horizontal axis,the joint production possibility frontier A) will have a slope of -3/4 over the entire frontier. B) will have a slope of -2 when less than 20 units of food are produced. C) will have a slope of -1 when less than 20 units of food are produced. D) will have a slope of -1/2 when less than 20 units of food are produced. -Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Measuring food on the horizontal axis,the joint production possibility frontier


A) will have a slope of -3/4 over the entire frontier.
B) will have a slope of -2 when less than 20 units of food are produced.
C) will have a slope of -1 when less than 20 units of food are produced.
D) will have a slope of -1/2 when less than 20 units of food are produced.

E) B) and C)
F) All of the above

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For a given set of prices,two consumers choose bundles that are off the contract curve.In a competitive market,


A) prices will adjust until the consumers choose bundles that are on the contract curve.
B) the indifference curves will shift back to the contract curve.
C) the contract curve will shift to connect these bundles.
D) no adjustments need to be made.

E) All of the above
F) A) and B)

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If a society relies on competitive markets to allocate goods,then


A) an equitable distribution is assured.
B) an equitable distribution is certain to not occur.
C) the competitive equilibrium will be Pareto-superior to any other.
D) social welfare as measured by consumer surplus plus producer surplus will equal zero.

E) All of the above
F) A) and B)

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Suppose two people start with an initial endowment and trade until they obtain a Pareto-efficient allocation with the corresponding price line.What happens when more people who have the same tastes and endowments as the original two traders are included in the Edgeworth box analysis?


A) The price line does not change.
B) The price line becomes flatter.
C) The price line becomes steeper.
D) The price line shifts up or down depending upon how many of each type of trader is included in the analysis.

E) All of the above
F) A) and D)

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An initial allocation of goods is called a(n)


A) endowment.
B) inheritance.
C) pareto set.
D) general equilibrium goods set.

E) A) and C)
F) All of the above

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Explain why a government may select an inefficient allocation.

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A government may decide the eq...

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Only individuals A and B live on a desert island where no production is possible.A is endowed with 15 units of good X and 17 units of good Y.B is endowed with 13 units of good X and 23 units of good Y.In the Edgeworth box,good X is measured on the horizontal axis.Individual A's utility function is UA = 3XY so her MUX = 3Y and her MUY = 3X.Individual B's utility function is UB = 10 Only individuals A and B live on a desert island where no production is possible.A is endowed with 15 units of good X and 17 units of good Y.B is endowed with 13 units of good X and 23 units of good Y.In the Edgeworth box,good X is measured on the horizontal axis.Individual A's utility function is U<sub>A</sub> = 3XY so her MU<sub>X</sub> = 3Y and her MU<sub>Y</sub> = 3X.Individual B's utility function is UB = 10 so his and his MU<sub>Y</sub> = 5 . Which of the following allocations are on the contract curve? A) (X<sub>A</sub> = 14, Y<sub>A</sub> = 20) , (X<sub>B</sub> = 14, Y<sub>B</sub> = 20) B) (X<sub>A</sub> = 15, Y<sub>A</sub> = 17) , (X<sub>B</sub> = 13, Y<sub>B</sub> = 23) C) (X<sub>A</sub> = 18, Y<sub>A</sub> = 22) , (X<sub>B</sub> = 10, Y<sub>B</sub> = 18) D) None of the above. Only individuals A and B live on a desert island where no production is possible.A is endowed with 15 units of good X and 17 units of good Y.B is endowed with 13 units of good X and 23 units of good Y.In the Edgeworth box,good X is measured on the horizontal axis.Individual A's utility function is U<sub>A</sub> = 3XY so her MU<sub>X</sub> = 3Y and her MU<sub>Y</sub> = 3X.Individual B's utility function is UB = 10 so his and his MU<sub>Y</sub> = 5 . Which of the following allocations are on the contract curve? A) (X<sub>A</sub> = 14, Y<sub>A</sub> = 20) , (X<sub>B</sub> = 14, Y<sub>B</sub> = 20) B) (X<sub>A</sub> = 15, Y<sub>A</sub> = 17) , (X<sub>B</sub> = 13, Y<sub>B</sub> = 23) C) (X<sub>A</sub> = 18, Y<sub>A</sub> = 22) , (X<sub>B</sub> = 10, Y<sub>B</sub> = 18) D) None of the above. so his Only individuals A and B live on a desert island where no production is possible.A is endowed with 15 units of good X and 17 units of good Y.B is endowed with 13 units of good X and 23 units of good Y.In the Edgeworth box,good X is measured on the horizontal axis.Individual A's utility function is U<sub>A</sub> = 3XY so her MU<sub>X</sub> = 3Y and her MU<sub>Y</sub> = 3X.Individual B's utility function is UB = 10 so his and his MU<sub>Y</sub> = 5 . Which of the following allocations are on the contract curve? A) (X<sub>A</sub> = 14, Y<sub>A</sub> = 20) , (X<sub>B</sub> = 14, Y<sub>B</sub> = 20) B) (X<sub>A</sub> = 15, Y<sub>A</sub> = 17) , (X<sub>B</sub> = 13, Y<sub>B</sub> = 23) C) (X<sub>A</sub> = 18, Y<sub>A</sub> = 22) , (X<sub>B</sub> = 10, Y<sub>B</sub> = 18) D) None of the above. and his MUY = 5 Only individuals A and B live on a desert island where no production is possible.A is endowed with 15 units of good X and 17 units of good Y.B is endowed with 13 units of good X and 23 units of good Y.In the Edgeworth box,good X is measured on the horizontal axis.Individual A's utility function is U<sub>A</sub> = 3XY so her MU<sub>X</sub> = 3Y and her MU<sub>Y</sub> = 3X.Individual B's utility function is UB = 10 so his and his MU<sub>Y</sub> = 5 . Which of the following allocations are on the contract curve? A) (X<sub>A</sub> = 14, Y<sub>A</sub> = 20) , (X<sub>B</sub> = 14, Y<sub>B</sub> = 20) B) (X<sub>A</sub> = 15, Y<sub>A</sub> = 17) , (X<sub>B</sub> = 13, Y<sub>B</sub> = 23) C) (X<sub>A</sub> = 18, Y<sub>A</sub> = 22) , (X<sub>B</sub> = 10, Y<sub>B</sub> = 18) D) None of the above. . Which of the following allocations are on the contract curve?


A) (XA = 14, YA = 20) , (XB = 14, YB = 20)
B) (XA = 15, YA = 17) , (XB = 13, YB = 23)
C) (XA = 18, YA = 22) , (XB = 10, YB = 18)
D) None of the above.

E) B) and C)
F) A) and D)

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A

Explain why having different marginal rates of substitution is necessary for trade to occur.

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The marginal rate of substitution is the...

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Economic growth can be depicted as


A) a change in the country's MRS.
B) a change in the country's MRT.
C) a shift of the country's production possibilities frontier to the right.
D) a shift of the country's production possibilities frontier to the left.

E) A) and D)
F) B) and C)

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-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.Point c is Pareto efficient because A) the MRS's are equal. B) the indifference curves are tangent. C) no mutual gains from trade exist. D) All of the above. -The above figure depicts the Edgeworth box for two individuals,Al and Bruce.Point c is Pareto efficient because


A) the MRS's are equal.
B) the indifference curves are tangent.
C) no mutual gains from trade exist.
D) All of the above.

E) All of the above
F) C) and D)

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-The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a,and trade is possible,which of the following points are possible equilibria? A) a and b B) a and c C) b and d D) c and d -The above figure depicts the Edgeworth box for two individuals,Al and Bruce.If the endowment is at point a,and trade is possible,which of the following points are possible equilibria?


A) a and b
B) a and c
C) b and d
D) c and d

E) A) and C)
F) None of the above

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D

-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.If production occurs at the kink on the joint production possibility frontier, A) the U.S. will specialize in food and Canada will specialize in clothing. B) the U.S. will specialize in clothing and Canada will specialize in food. C) each country will devote half of its resources to each industry. D) joint output is minimized. -Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.If production occurs at the kink on the joint production possibility frontier,


A) the U.S. will specialize in food and Canada will specialize in clothing.
B) the U.S. will specialize in clothing and Canada will specialize in food.
C) each country will devote half of its resources to each industry.
D) joint output is minimized.

E) A) and D)
F) All of the above

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The ability to produce a good at a lower opportunity cost than someone else is called


A) competitive production.
B) comparative advantage.
C) selective advantage.
D) absolute advantage.

E) A) and D)
F) None of the above

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-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Once free trade is allowed,Canada will produce A) no clothing. B) 10 units of clothing. C) 20 units of clothing. D) 5 units of clothing. -Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Once free trade is allowed,Canada will produce


A) no clothing.
B) 10 units of clothing.
C) 20 units of clothing.
D) 5 units of clothing.

E) B) and D)
F) B) and C)

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