MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.


Which of the following is true?  Partial equilibrium analysis will   work well when demanders and suppliers are different sets of people, so that demand can shift independently of supply

A) True

B)False

Answer:  A

In a problem involving exchange, the contract curve shows  

A) all exchanges that make both parties better off.

B) the one exchange that makes both parties better off.

C) all possible allocations of goods between both parties.

D) all possible efficient allocations between both parties.

Answer:  D

Scenario 1:

Irrespective of the amount of cheese doodles and pretzels that Sam consumes, his marginal rate of substitution of cheese doodles for pretzels is 2.  Also, irrespective of the amount of cheese doodles and pretzels that Sally consumes, her marginal rate of substitution of cheese doodles for pretzels is 3.

3) Refer to Scenario 1.  Initially Sam and Sally are allocated 10 cheese doodles and 10 pretzels each. Which of the following statements are TRUE?

A) The initial allocation is Pareto optimal as it is equitable.

B) The initial allocation is Pareto optimal as Sally and Sam have equal amounts of both goods.

C) The allocation is not Pareto optimal.  An allocation that gave Sam all of the cheese doodles and Sally all of the pretzels would make both of them better off.

D) The allocation is not Pareto optimal.  An allocation that gave Sam four of the cheese doodles and sixteen of the pretzels (leaving Sally the rest) would make both of them better off.

Answer:  C

An allocation in which one person can be made better off only by making someone else worse off is

A) inefficient.

B) efficient.

C) a partial equilibrium.

D) a general equilibrium.

Answer:  B

Scenario 1:

Irrespective of the amount of cheese doodles and pretzels that Sam consumes, his marginal rate of substitution of cheese doodles for pretzels is 2.  Also, irrespective of the amount of cheese doodles and pretzels that Sally consumes, her marginal rate of substitution of cheese doodles for pretzels is 3.

 Refer to Scenario 1.  Suppose instead that Sam is initially allocated 3 cheese doodles and 3 pretzels, whereas Sally is initially allocated 6 cheese doodles and 10 pretzels.  Which of the following statements is TRUE?  

A) This allocation is Pareto optimal.

B) This allocation is not Pareto optimal as Sally and Sam have unequal amounts of each good.

C) The allocation is not Pareto optimal as Sally would be willing to exchange two pretzels for one cheese doodle and be better off, without making Sam worse off.

D) The allocation is not Pareto optimal as Sam would willing exchange one pretzel for two cheese doodles and be better off, without making Sally worse off.

Answer:  C

Хариу үлдээх

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