## Globale Microeconomics

Business

## Quiz 10 :

General Equilibrium and Economic Welfare

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Q11 Q11 Q11

There are two closely related crops, X and Y, with the following demand functions Q

_{X }= 180 - 2P_{X}+ P_{Y}and Q_{Y}= 150 + P_{X}- P_{Y}where Q_{X}is the quantity of X, P_{X}is the price of X, Q_{Y}is the quantity of Y, and P_{Y}is the price of Y. These two crops are grown in two widely separated countries so there is no interrelationship between the supply curves. The short-run perfectly inelastic supply for X is 150 while the short-run perfectly inelastic supply for Y is 100. In equilibrium, the prices areFree

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Multiple Choice

Q12 Q12 Q12

There are two closely related crops, X and Y, with the following demand functions Q

_{X }= 180 - 2P_{X}+ P_{Y}and Q_{Y}= 150 + P_{X}- P_{Y}where Q_{X}is the quantity of X, P_{X}is the price of X, Q_{Y}is the quantity of Y, and P_{Y}is the price of Y. These two crops are grown in two widely separated countries so there is no interrelationship between the supply curves. The short-run perfectly inelastic supply for X is 200 while the short-run perfectly inelastic supply for Y is 100. In equilibrium, the prices areFree

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Multiple Choice

Q13 Q13 Q13

Employers in a city must pay a specific tax of $t per hour worked by their employees while employers in the suburbs of the city do not have an employment tax. What does a general equilibrium approach predict regarding the wages and employment of both the city and suburban workers if the city decides to substantially reduce their employment tax rate?

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Multiple Choice

Q16 Q16 Q16

Suppose that the minimum wage covers all sectors of the economy; however, for unionized laborers, the minimum wage is ineffective. That is, the union wage is already above the minimum wage. Analyze the impact of an increase in the minimum wage on both the unionized and non-unionized labor markets. (Assume that the higher minimum wage is still ineffective in the unionized sector and that union and nonunion labor are substitutable.)

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Essay

Q29 Q29 Q29

Only individuals A and B live on a desert island where no production is possible. A is endowed with 12 units of good X and 18 units of good Y. B is endowed with 6 units of good X and 42 units of good Y. In the Edgeworth box, good X is measured on the horizontal axis. Individual A's utility function is U

_{A}= 3XY so her MU_{X}= 3Y and her MU_{Y}= 3X. Individual B's utility function is UB = 10 so his and his MU_{Y}= 5 . Which of the following allocations are on the contract curve?Free

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Multiple Choice

Q30 Q30 Q30

Only individuals A and B live on a desert island where no production is possible. A is endowed with 15 units of good X and 17 units of good Y. B is endowed with 13 units of good X and 23 units of good Y. In the Edgeworth box, good X is measured on the horizontal axis. Individual A's utility function is U

_{A}= 3XY so her MU_{X}= 3Y and her MU_{Y}= 3X. Individual B's utility function is UB = 10 so his and his MU_{Y}= 5 . Which of the following allocations are on the contract curve?Free

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Multiple Choice

Q43 Q43 Q43

Robinson starts out with 10 lobsters and 5 coconuts. Friday starts out with 10 lobsters and 15 coconuts. After trading, Robinson ends up with 8 lobsters and 10 coconuts. Robinson feels neither better nor worse off than when he started but cannot get Friday to agree to any more trades. Friday feels better off than when he started. Draw the Edgeworth box consistent with this story.

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Q46 Q46 Q46

Suppose two people start with an initial endowment and trade until they obtain a Pareto-efficient allocation with the corresponding price line. What happens when more people who have the same tastes and endowments as the original two traders are included in the Edgeworth box analysis?

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Multiple Choice

Q62 Q62 Q62

Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U = F ∗ C. The price of clothing is always $1. If the price of food is $3, does a competitive equilibrium exist? If not, what will happen to the price of food?

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Q88 Q88 Q88

A two-good economy is in a competitive equilibrium. The price of a piece of candy is $2 and the price of a desk is $12. The marginal cost of candy is given by MC

_{c}= 2Q_{c}and the marginal cost of a desk is MC_{d}= 4 + 4Q_{d}. The current production level of candy is one piece. What is the output of desks?Free

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Multiple Choice

Q89 Q89 Q89

Suppose an economy with two goods (candy and desk)and two identical agents that is in a competitive equilibrium. The marginal cost of a piece of candy is given by MC

_{c}= 3Q_{c}and the marginal cost of a desk is MC_{d}= 2 + 2Q_{d}. The current production level of candy is 6 pieces. What is the marginal rate of substitution (MRS)?Free

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Multiple Choice

Q90 Q90 Q90

Suppose an economy with two goods (candy and desk)and two identical agents that is in a competitive equilibrium. The marginal cost of a piece of candy is given by MC

_{c}= 4Q_{c}and the marginal cost of a desk is MC_{d}= 2 + Q_{d}. The current production level of candy (Q_{c})is 4 pieces and of desks (Q_{d})is 30. What can be said about the marginal utility of candy (MU_{c})and the Marginal utility of desks (MU_{d})?Free

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Multiple Choice

Q100 Q100 Q100

Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination)and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade occurs between these two countries, which should produce more food and which more clothing?

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Q121 Q121 Q121

If a market is controlled by one perfect price discriminator who is able to charge each consumer the highest price that consumer is willing to pay, the seller will produce output until the price paid by the last consumer is equal to the marginal cost of making the good. That is, the price of the last good equals the marginal cost of making the good. If welfare is measured as consumer surplus plus producer surplus, compare this market structure to a competitive market in terms of efficiency and equity.

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