Question 1

Suppose that a competitive firm's marginal cost of producing output q is given by MC=5+2q.Assume that the market price of the firm's product is $27.
A)What level of output will the firm produce?
B)What is the firm's producer surplus?

Accepted Answer

The answer of Suppose that a competitive firm's marginal cost...

Question 2

A utility possibilities frontier need not incorporate the utility of every individual.

Accepted Answer

A utility possibilities frontier illustrates the maximum level of overall utility that can be achieved given the available resources and technology. It does not necessarily take into account the specific utility levels of every individual in the economy.

Question 3

Why might asymmetric information contribute to the problem of a market failure?

Accepted Answer

The answer of Why might asymmetric information contribute to the...

Question 4

Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods.Can Pareto equilibrium be derived?

Accepted Answer

The answer of Consider a simple exchange economy where the...

Question 5

Pareto improvement can be a reallocation of resources that makes more than one person better off.

Accepted Answer

Pareto improvement is defined as a change in allocation of resources that makes at least one individual better off without making any other individual worse off. However, it is possible for a Pareto improvement to make more than one person better off as well.

Question 6

Merit goods have received considerable attention toward the end of this chapter.Can concerts and other publicly provided services be rationalized using these ideas?

Accepted Answer

The answer of Merit goods have received considerable attention toward...

Question 7

If James has a utility curve characterized by the function of U = 2X³Y²,what is his marginal rate of substitution between goods X and Y?

Accepted Answer

The answer of If James has a utility curve characterized...

Question 8

Consider an Edgeworth economy where there are two citizens,Mr.Cortopassi and Ms.Thomas.There are only two goods to be consumed in the economy,Beer and Pretzels.The total amount of Beer is 12 units.The total amount of Pretzels is 12 units.Answer the following: Suppose Mr.Cortopassi has utility for the two goods characterized as U_C(B,P)=B+P.Ms.Thomas's utility function is U_T(B,P)=B+P.Identify the points that are Pareto efficient.

Accepted Answer

The answer of Consider an Edgeworth economy where there are...

Question 9

Marginal cost of a product is the incremental cost of one additional unit of input.

Accepted Answer

Marginal cost is defined as the additional cost incurred in production of one additional unit of output. Therefore, the statement "Marginal cost of a product is the incremental cost of one additional unit of input" is true.

Question 10

In equilibrium,the MRT should not equal the MRS of all individuals.

Accepted Answer

In equilibrium, the Marginal Rate of Transformation (MRT) should equal the Marginal Rate of Substitution (MRS) for all individuals to ensure that resources are allocated efficiently and consumer preferences are satisfied.

Question 11

Social welfare functions can be formed in many ways.They can be additive,meaning that the all utilities curves are added together.They incorporate the idea of least-best,meaning that the utility of the person with the least is maximized.If you were a central planner for an economy,what type of social welfare function would you create?

Accepted Answer

The answer of Social welfare functions can be formed in...

Question 12

Imagine a simple economy with only two people,Leroy and Percy.If the Social Welfare Function is W = U_L + U_P,and the Utility Possibilities Frontier is UPF = U_L + 2U_P,what will be the societal optimum?

Accepted Answer

The answer of Imagine a simple economy with only two...

Quiz 3: Tools of Normative Analysis

Suppose that a competitive firm's marginal cost of producing output q is given by MC=5+2q.Assume that the market price of the firm's product is $27. A)What level of output will the firm produce? B)What is the firm's producer surplus?