Podcast
Questions and Answers
What is the primary issue with the production of goods like pest control and national defense?
What is the primary issue with the production of goods like pest control and national defense?
- They are not affected by the free-rider problem
- They are under-produced by the free market due to the free-rider problem (correct)
- They are over-produced by the free market
- They are only produced by the government
What is a characteristic of Pareto efficiency?
What is a characteristic of Pareto efficiency?
- It leads to the under-production of public goods
- It ensures fairness in the distribution of wealth
- It is only achieved through government intervention
- It ensures that no one can be made better off without making someone else worse off (correct)
What is a potential issue with attempts to improve distributional fairness?
What is a potential issue with attempts to improve distributional fairness?
- They always lead to desirable outcomes
- They have met with mixed success and had many undesirable side-effects (correct)
- They are only relevant in less developed countries
- They are unnecessary in a Pareto efficient economy
What is represented by point A in the diagram?
What is represented by point A in the diagram?
What is a characteristic of a Pareto efficient economy?
What is a characteristic of a Pareto efficient economy?
What is true about Smith and Jones at point A?
What is true about Smith and Jones at point A?
What is a result of the free-rider problem?
What is a result of the free-rider problem?
What is true about the distribution of benefits in the economy?
What is true about the distribution of benefits in the economy?
What is an example of a public good?
What is an example of a public good?
In a general equilibrium, firms and consumers choosing the same px/py ratio leads to excess demand for both goods.
In a general equilibrium, firms and consumers choosing the same px/py ratio leads to excess demand for both goods.
The ratio of marginal utilities (MUx/MUy) is always equal to the ratio of marginal costs (MCx/MCy) in a general equilibrium.
The ratio of marginal utilities (MUx/MUy) is always equal to the ratio of marginal costs (MCx/MCy) in a general equilibrium.
At point D in an Edgeworth Box, the marginal rate of substitution (MRS) and the marginal rate of transformation (RPT) are not equal.
At point D in an Edgeworth Box, the marginal rate of substitution (MRS) and the marginal rate of transformation (RPT) are not equal.
If px/py existed, firms would choose one point, and consumers would choose another, resulting in excess demand for one good and excess supply of another.
If px/py existed, firms would choose one point, and consumers would choose another, resulting in excess demand for one good and excess supply of another.
MRS = RPT = px/py does not represent an equilibrium condition for a two-good, two-input economy.
MRS = RPT = px/py does not represent an equilibrium condition for a two-good, two-input economy.
General equilibrium analysis is not applicable to economies with many goods, as it only works for two-good, two-input economies.
General equilibrium analysis is not applicable to economies with many goods, as it only works for two-good, two-input economies.
In a general equilibrium, markets clear through changes in supply and demand, not through changes in prices.
In a general equilibrium, markets clear through changes in supply and demand, not through changes in prices.
General equilibrium models assume that producers and consumers have different px/py ratios, leading to two separate analyses.
General equilibrium models assume that producers and consumers have different px/py ratios, leading to two separate analyses.
A general equilibrium is established at a point where the marginal rate of substitution is not equal to the marginal rate of transformation.
A general equilibrium is established at a point where the marginal rate of substitution is not equal to the marginal rate of transformation.
The marginal rate of transformation (RPT) changes with each point in the production possibility frontier (PPF) due to the opportunity cost.
The marginal rate of transformation (RPT) changes with each point in the production possibility frontier (PPF) due to the opportunity cost.
