The next three questions relate to the Edgeworth consumption box shown below.
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At point B we know there is opportunity to improve resource allocation through exchange because |
| | A) | Roberta is willing to give up a lot of food for a little more clothing while Anita would give up a lot of clothing for a little more food. |
| | B) | Roberta is willing to give up a lot of clothing for a little more food while Anita would give up a lot of food for a little more clothing. |
| | C) | Roberta has more clothing than Anita has. |
| | D) | the present distribution of clothing is unfair. |
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| 3 | |
A move from point B to point A |
| | A) | would be Pareto optimal because it moves the society to the contract curve. |
| | B) | would be voluntarily accepted by both Anita and Roberta. |
| | C) | would be voluntarily accepted by Roberta but not by Anita. |
| | D) | would be voluntarily accepted by neither Anita nor Roberta since each would be giving up something. |
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| 4 | |
Which statement is true of the Edgeworth box shown above? |
| | A) | If Anita and Roberta are on the contract curve there is no possibility for any more voluntary exchanges between the two. |
| | B) | A move from point B to point D would be Pareto optimal even though Roberta has gained nothing in the move. |
| | C) | The point on the contract curve where efficiency is reached depends a great deal on the initial endowment of the commodities and the comparative bargaining power of the individuals involved. |
| | D) | All of the above are true. |
| | E) | None of the above are true. |
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In the Edgeworth box shown below, <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078021693/236468/chap16_2.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>]]>
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| | A) | there is more food demanded than is available. |
| | B) | there is more clothing demanded than is available. |
| | C) | the relative prices shown will result in equilibrium without changing. |
| | D) | none of the above are true. |
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| 6 | |
In the Edgeworth box shown above for question 17-5, |
| | A) | the price for food is too low relative to the clothing price. |
| | B) | the price for food is too high relative to the clothing price. |
| | C) | the price is the correct one, but the consumers have not yet exhausted all beneficial market purchases and sales. |
| | D) | the indifference curves are inaccurately drawn so that a Pareto optimal market position is impossible to show. |
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| 7 | |
Which statement is true of an Edgeworth production box for food and clothing? |
| | A) | When on the contract curve the marginal product of each input will be identical. |
| | B) | The contract curve provides the information necessary to determine the economy’s production possibility curve. |
| | C) | The ideal point on the contract curve is the midpoint where output of each good is the same. |
| | D) | More than one of the above is true. |
| | E) | None of the above is true. |
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| 8 | |
If the marginal cost of clothing divided by the marginal cost of food is greater than the price of clothing divided by the price of food, then we know that |
| | A) | the economy is producing too much clothing and not enough food. |
| | B) | the economy is producing too much food and not enough clothing. |
| | C) | the economy is off its production possibility curve. |
| | D) | firms are producing where the marginal cost of food equals the price of food. |
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| 9 | |
Which statement is false? |
| | A) | Income taxes distort labor supply decisions. |
| | B) | A tax on goods produced in competitive markets will offset the underproduction inefficiency of monopoly priced goods. |
| | C) | A tax on goods whose production pollutes the air will reduce the overproduction tendency of such goods. |
| | D) | Pure public goods will usually be over produced if their provision is left to the private sector. |
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| 10 | |
Being on a production contract curve implies that |
| | A) | the ratio of the marginal products of the inputs is equal to the ratio of their respective prices. |
| | B) | all inputs in the production space are employed. |
| | C) | no more production of one commodity can be obtained without giving up some of the alternative commodity. |
| | D) | all of the above are true. |
| | E) | none of the above are true. |
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Refer to the Edgeworth box below for the following five questions.
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The graph above shows a production function for two firms producing different goods. Four output isoquants are depicted for each firm. At (w) in the graph, firm B is producing output 1 |
| | A) | with too much labor and not enough capital. |
| | B) | with too much capital and not enough labor. |
| | C) | with the right combination of capital and labor. |
| | D) | at a point where the marginal product of labor is too high for efficiency. |
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| 12 | |
At point w |
| | A) | firm A would be willing to trade some capital in exchange for some labor from firm B, but not at a price that firm B will accept. |
| | B) | firm B is also looking for more labor. |
| | C) | it is clear that Firm A is overproducing its product. |
| | D) | firm A and firm B both have gains to make if they exchange inputs. |
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| 13 | |
Which two points help to plot the production possibilities curve of oil and bread? |
| | A) | m and n |
| | B) | w and x |
| | C) | y and x |
| | D) | n and x |
| | E) | None are on the production possibility curve because it cannot be derived from the Edgeworth production box. |
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| 14 | |
Which statement is true about the Edgeworth production box as it is given here? |
| | A) | A point off the contract curve implies unemployment. |
| | B) | The model assumes a fixed supply of labor and capital. |
| | C) | Point x is preferred to point n. |
| | D) | Firm B is equally happy at points n and x. |
| | E) | None of the above is true. |
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| 15 | |
At point (m) in the Edgeworth box, society could have how many more loaves of bread for free? |
| | A) | 4 |
| | B) | 3 |
| | C) | 2 |
| | D) | 1 |
| | E) | None of the above because some oil must be given up in order to get more bread. |
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| 16 | |
In order for the right mix of goods to be produced efficiently in an economy, all of the following except which one must be true for a two person, two-commodity economy? |
| | A) | The marginal rate of transformation that exists in the production of two goods must equal the marginal rate of substitution that consumers have between those goods. |
| | B) | The ratio of the marginal products of both inputs in the production of each good must equal the ratio of the input prices. |
| | C) | The marginal rates of substitution between the two goods must be the same for both consumers |
| | D) | The marginal rate of substitution between the two goods for each consumer must be the same as the ratio of the marginal products of the inputs of production. |
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Answer the following two questions by referring to the graph below.
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