Question 1

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 2

Economic growth can be depicted as

Accepted Answer

Economic growth refers to an increase in a country's ability to produce goods and services, which is reflected in the shifting of the production possibilities frontier to the right. This means that the country can now produce more of both goods and services with the same amount of resources than it previously could, indicating an increase in economic efficiency and output. Choices A and B are incorrect because changes in MRS (marginal rate of substitution) and MRT (marginal rate of transformation) reflect changes in an individual's or firm's production preferences, not the overall growth of a country's economy. Choice D is also incorrect as it would indicate a decrease in economic output and efficiency.

Question 3

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

Accepted Answer

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

Question 4

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 5

If everyone's utility is given equal weight and a change in resource allocation results in one person's gain exceeding another person's loss,we can say that the new allocation

Accepted Answer

When everyone's utility is given equal weight and a change in resource allocation results in one person's gain exceeding another person's loss, it implies an overall increase in social welfare. This is because the total utility across individuals has increased, assuming the gains and losses are measured on a comparable scale.

Question 6

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

Accepted Answer

In a competitive market, the competitive equilibrium is considered Pareto-superior because it is a situation where no individual or preference criterion can be better off without making at least one individual or preference criterion worse off. This does not guarantee an equitable distribution, but it does ensure that resources are allocated in a way that is efficient from the perspective of the market participants.

Question 7

If a society only cares about efficiency and not equity,then

Accepted Answer

When a society only cares about efficiency and not equity, it implies that their sole focus is on maximizing overall productivity and output without regard to the distribution of benefits or resources among individuals. In such a scenario, the only concern is achieving the highest possible level of social welfare, and any point on the contract curve would yield the same level of social welfare, making all points on the curve equally desirable. Hence, option A is the correct choice. Option B is incorrect because competitive markets would still be relied upon to allocate goods even if equity isn't a societal concern. Option C is incorrect because maximizing the utility of the worst-off member implies equitable considerations, which conflicts with the premise of a society that only cares about efficiency. Option D is also incorrect because equitable outcomes are still possible, although they aren't prioritized.

Question 8

-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 of...

Question 9

No clearly defined socially preferred outcome may result when majority voting on outcomes because

Accepted Answer

The answer of No clearly defined socially preferred outcome may...

Question 10

Any policy change that results in a Pareto-superior allocation

Accepted Answer

A Pareto-superior allocation means that at least one individual's welfare improves without making anyone else worse off, which inherently increases overall welfare.

Question 11

Suppose in a democratic society,all voters prefer choice G over choice B; however,when the two choices are presented along with a third choice,R,B wins the election.This violates the assumption of

Accepted Answer

This violates the assumption of independence of irrelevant alternatives as the addition of an irrelevant option (choice R) changed the outcome of the election from G (preferred by all voters) to B being chosen instead.

Question 12

A dictator is most likely to

Accepted Answer

A dictator is someone who holds complete and absolute power over a country or government. As such, they are likely to prioritize their own interests and maximize their own utility rather than considering the welfare or preferences of others. Therefore, choice B is the most likely option for a dictator.

Question 13

Economic growth can be obtained

Accepted Answer

Economic growth can be obtained through a change in the level of inputs, such as increasing capital, labor or resources, or through an improvement in technology. Government legislation can facilitate economic growth but cannot create it on its own. While conquest has been a historical method of acquiring resources and inputs, it is not necessary for economic growth. The explosive growth of the United States can largely be attributed to the country's advancements in technology. Therefore, the best choice is B.

Question 14

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 15

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 16

-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 of...

Question 17

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 18

-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 19

A cake is to be shared by two people.Both desire the largest piece possible.One of the two will cut the cake.Under which of the following situations will the cutter adopt a Rawlsian social welfare function?

Accepted Answer

The cutter will adopt a Rawlsian social welfare function in situation B, where the person not cutting the cake chooses the first piece. This ensures the cutter divides the cake as equally as possible to maximize the minimum payoff, aligning with Rawlsian principles of fairness.

Question 20

Economic growth can be depicted as a

Accepted Answer

Economic growth involves an increase in the production possibilities of an economy, which can be shown graphically by an outward shift of the production possibilities frontier (PPF). In the Edgeworth box diagram, the dimensions of the box represent the initial endowment of goods of two individuals, and economic growth refers to an increase in the total amount of goods available, which can be shown by an expansion of the box. The other choices are not relevant to the concept of economic growth.

Quiz 10: General Equilibrium and Economic Welfare

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?