Endowments and Marginal Rates of Substitution Quiz
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Questions and Answers

An endowment refers to ____.

  • A set of property rights
  • A diversified portfolio
  • An initial distribution of goods
  • The bundle of resources a person has at the beginning of an exchange (correct)

    • Andrew's marginal rate of substitution of hamburgers for fish sticks is 6 while Betty's is 2. Both Andrew and Betty could be made better off if:

  • Andrew trades between two and six of his allotment of hamburgers with Betty for a fish stick (correct)
  • Andrew gives all of his hamburgers to Betty for all of her fish sticks
  • They do not trade and keep their present allotment of hamburger and fish sticks
  • Andrew trades between two and six of his allotment of fish sticks with Betty for a hamburger

    • In an Edgeworth box diagram, if the two consumers' indifference curves intersect at point A then:

  • Voluntary exchange will not change the distribution
  • The consumers' MRS's differ
  • There is no information to determine
  • Point A is on the contract curve (correct)

    • Which of the following is NOT a characteristic of an endowment?

    <p>A diversified portfolio</p> Signup and view all the answers

    If Andrew's marginal rate of substitution of hamburgers for fish sticks is 6 and Betty's is 2, which of the following statements is true?

    <p>Andrew values hamburgers more than fish sticks</p> Signup and view all the answers

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