Question 1

In a perfectly competitive equilibrium with production and trade, which of the following results occur(s)?

Accepted Answer

In a perfectly competitive equilibrium with production and trade, all of the above results occur. This means that the outcome is Pareto-efficient, the First Welfare Theorem is satisfied, and there is efficiency in production.

Question 2

Economic growth can be depicted as

Accepted Answer

Economic growth is an increase in the country's capacity to produce goods and services. This increase in capacity is reflected in the shifting of the production possibilities frontier to the right, indicating that more goods and services can be produced with the same resources. Hence, choice C is the correct option. Choices A and B refer to changes in the country's trade-offs, which are not necessarily related to economic growth. Choice D indicates a decrease in the country's production capacity, which is the opposite of economic growth.

Question 3

Suppose an economy with two goods (candy and desk)and two identical agents that is in a competitive equilibrium. The marginal cost of a piece of candy is given by MC_c = 3Q_c and the marginal cost of a desk is MC_d = 2 + 2Q_d. The current production level of candy is 6 pieces. What is the marginal rate of substitution (MRS)?

Accepted Answer

The MRS cannot be determined without information about the marginal utility of each good to the agents.

Question 4

Economic growth can be depicted as a

Accepted Answer

Economic growth refers to the increase in a country's production output over time, typically measured by the Gross Domestic Product (GDP). This increase in production output means that the dimensions of the Edgeworth box, which represents the possible distribution of goods and services between two individuals or groups, will change due to the increase in overall production. Therefore, option B is the correct answer. A shift in the contract curve represents a change in relative prices, not economic growth. Changes in individual preference curves or the number of people in the Edgeworth box do not directly relate to economic growth.

Question 5

Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people.

Accepted Answer

The answer of Explain how it is possible for one...

Question 6

How does competition ensure that the efficient product mix is attained?

Accepted Answer

The answer of How does competition ensure that the efficient...

Question 7

Suppose the marginal cost of a piece of candy is given by MC_c = 2Q_c and the marginal cost of a desk is MC_d = 4 + 4Q_d. The current production levels are 20 pieces of candy and 4 desks. The marginal rate of transformation (MRT)is

Accepted Answer

The MRT is the rate at which one good can be produced in exchange for a unit of another good, while keeping the level of total production constant. MRT = (MC_d)/(MC_c) MRT = (4+4(4))/(2(20)) MRT = 2 Since we are producing desks and candy, we have to divide the marginal cost of desks by the marginal cost of candy. Therefore, the MRT is 2. This means that to produce one additional desk, we need to give up the production of two units of candy. Since the MRT is positive, we are not operating at the production possibilities frontier and we could increase production of one or both goods. However, if we want to produce more desks, we have to give up candy.

Question 8

A two-good economy is in a competitive equilibrium. The price of a piece of candy is $2 and the price of a desk is $12. The marginal cost of candy is given by MC_c = 2Q_c and the marginal cost of a desk is MC_d = 4 + 4Q_d. The current production level of candy is one piece. What is the output of desks?

Accepted Answer

In a competitive equilibrium, the price of a good equals its marginal cost. For desks, the price is $12. Using the marginal cost formula for desks, MC_d = 4 + 4Q_d, and setting it equal to the price, we get 12 = 4 + 4Q_d. Solving for Q_d gives Q_d = 2.

Question 9

-The above figure shows a production possibility frontier for a society with two members, Al and Bruce. If point "a" is the efficient product mix, draw a possible Edgeworth box and indifference curves.

Accepted Answer

The answer of 
-The above figure shows a production possibility...

Question 10

By saying that MRS = MRT, an economist means that

Accepted Answer

MRS (Marginal Rate of Substitution) = MRT (Marginal Rate of Transformation) implies that the value society places on the last unit produced (MRS) equals the cost of making that unit (MRT), indicating an efficient allocation of resources.

Question 11

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any linear combination)and Canada can produce 6 units of food and 3 units of clothing (or any linear combination). What type of trade will occur between these two countries? Explain.

Accepted Answer

The answer of Suppose the U.S. can produce 10 units...

Question 12

If MRS's are equal across all consumers, then the efficient product mix has been achieved.

Accepted Answer

Consumption efficiency has been achieved for the given product mix, but the given product mix is efficient only if MRT equals the MRS for all pairs of goods.

Question 13

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination)and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade occurs between these two countries, which should produce more food and which more clothing?

Accepted Answer

The answer of Suppose the U.S. can produce 10 units...

Question 14

Suppose a society's PPF for food (F)and clothing (C)can be written as 25 = F² + C². If all consumers have the same endowment and the same utility function U_i = F_i ∗ C_i, what is the efficient product mix of food and clothing?

Accepted Answer

The answer of Suppose a society's PPF for food (F)and...

Question 15

Suppose an economy with two goods (candy and desk)and two identical agents that is in a competitive equilibrium. The marginal cost of a piece of candy is given by MC_c = 4Q_c and the marginal cost of a desk is MC_d = 2 + Q_d. The current production level of candy (Q_c)is 4 pieces and of desks (Q_d)is 30. What can be said about the marginal utility of candy (MU_c)and the Marginal utility of desks (MU_d)?

Accepted Answer

The answer of Suppose an economy with two goods (candy...

Question 16

At the competitive equilibrium quantity supplied equals quantity demanded in all markets.

Accepted Answer

When the MRS = MRT = ratio of prices, the optimal product mix is produced efficiently and firms sell at marginal cost.

Question 17

Competition results in the efficient product mix because

Accepted Answer

Competition results in the efficient product mix because in a competitive market, producers strive to minimize their costs and maximize their profits, which leads to them setting their Marginal Rate of Technical Substitution (MRT) equal to minus the price ratio. On the other hand, consumers aim to maximize their utility within their budget constraints, which leads them to set their Marginal Rate of Substitution (MRS) equal to minus the price ratio. When both MRT and MRS are equal to minus the price ratio, the equilibrium is Pareto efficient, as no one can be made better off without making someone else worse off. Therefore, choice (A) is the best answer.

Question 18

Suppose that productivity-enhancing technological progress affected more the production of chairs than the production of tables. This can be depicted using a production possibilities frontier in which

Accepted Answer

Technological progress in chair production increases the maximum output of chairs without affecting the maximum output of tables, shifting the production possibilities frontier outward more for chairs than for tables. This means both intercepts increase, but the increase is greater for chairs, reflecting the productivity improvement in chair production.

Question 19

Can consumption efficiency be achieved even if the efficient product mix is not achieved?

Accepted Answer

The answer of Can consumption efficiency be achieved even if...

Question 20

Economic growth can be obtained

Accepted Answer

Economic growth can be obtained through a combination of increasing the level of inputs (such as increasing the labor force or capital stock) and improving technology (such as developing new techniques or products). Government legislation can certainly influence economic growth, but it is not the only factor. Conflicts and conquests are not necessary for economic growth, and may even hinder it. Similarly, while advances in technology have certainly contributed to the growth of the United States, changes in inputs (such as immigration and industrialization) have also played a significant role.

Quiz 10: General Equilibrium and Economic Welfare

In a perfectly competitive equilibrium with production and trade, which of the following results occur(s) ?

Economic growth can be depicted as

Economic growth can be depicted as a

Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people.

How does competition ensure that the efficient product mix is attained?

Suppose the marginal cost of a piece of candy is given by MC_c = 2Q_c and the marginal cost of a desk is MC_d = 4 + 4Q_d. The current production levels are 20 pieces of candy and 4 desks. The marginal rate of transformation (MRT) is

-The above figure shows a production possibility frontier for a society with two members, Al and Bruce. If point "a" is the efficient product mix, draw a possible Edgeworth box and indifference curves.

By saying that MRS = MRT, an economist means that

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any linear combination)and Canada can produce 6 units of food and 3 units of clothing (or any linear combination). What type of trade will occur between these two countries? Explain.

If MRS's are equal across all consumers, then the efficient product mix has been achieved.

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination)and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade occurs between these two countries, which should produce more food and which more clothing?

Suppose a society's PPF for food (F)and clothing (C)can be written as 25 = F² + C². If all consumers have the same endowment and the same utility function U_i = F_i ∗ C_i, what is the efficient product mix of food and clothing?

At the competitive equilibrium quantity supplied equals quantity demanded in all markets.

Competition results in the efficient product mix because

Suppose that productivity-enhancing technological progress affected more the production of chairs than the production of tables. This can be depicted using a production possibilities frontier in which

Can consumption efficiency be achieved even if the efficient product mix is not achieved?

Economic growth can be obtained

Quiz 10: General Equilibrium and Economic Welfare

In a perfectly competitive equilibrium with production and trade, which of the following results occur(s) ?

Economic growth can be depicted as

Economic growth can be depicted as a

Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people.

How does competition ensure that the efficient product mix is attained?

Suppose the marginal cost of a piece of candy is given by MCc = 2Qc and the marginal cost of a desk is MCd = 4 + 4Qd. The current production levels are 20 pieces of candy and 4 desks. The marginal rate of transformation (MRT) is

A two-good economy is in a competitive equilibrium. The price of a piece of candy is $2 and the price of a desk is $12. The marginal cost of candy is given by MCc = 2Qc and the marginal cost of a desk is MCd = 4 + 4Qd. The current production level of candy is one piece. What is the output of desks?

-The above figure shows a production possibility frontier for a society with two members, Al and Bruce. If point "a" is the efficient product mix, draw a possible Edgeworth box and indifference curves.

By saying that MRS = MRT, an economist means that

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any linear combination)and Canada can produce 6 units of food and 3 units of clothing (or any linear combination). What type of trade will occur between these two countries? Explain.

If MRS's are equal across all consumers, then the efficient product mix has been achieved.

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination)and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade occurs between these two countries, which should produce more food and which more clothing?

Suppose a society's PPF for food (F)and clothing (C)can be written as 25 = F2 + C2. If all consumers have the same endowment and the same utility function Ui = Fi ∗ Ci, what is the efficient product mix of food and clothing?

At the competitive equilibrium quantity supplied equals quantity demanded in all markets.

Competition results in the efficient product mix because

Suppose that productivity-enhancing technological progress affected more the production of chairs than the production of tables. This can be depicted using a production possibilities frontier in which

Can consumption efficiency be achieved even if the efficient product mix is not achieved?

Economic growth can be obtained

Suppose the marginal cost of a piece of candy is given by MC_c = 2Q_c and the marginal cost of a desk is MC_d = 4 + 4Q_d. The current production levels are 20 pieces of candy and 4 desks. The marginal rate of transformation (MRT) is

Suppose a society's PPF for food (F)and clothing (C)can be written as 25 = F² + C². If all consumers have the same endowment and the same utility function U_i = F_i ∗ C_i, what is the efficient product mix of food and clothing?