Question

Question 11 pts

In a Pareto efficient allocation,

Group of answer choices

there are gains from trade still not captured in the economy.

there is no way to make any person better off without making someone else worse off

Some people can be made better off without making others worse off, but there is no way to make most people better off without making some others worse off.

Total utility in society is maximized.

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Question 21 pts

The result that a perfectly competitive price system brings about an efficient allocation of resources is known as:

Group of answer choices

The First Theorem of Welfare Economics.

The Second Theorem of Welfare Economics

Gresham's Law.

The Principle of Market Failure.

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Question 31 pts

All of the following are considered to produce inefficiency in markets EXCEPT:

Group of answer choices

Public Goods

Externalities

Imperfect Competition

All of the above result in market failure.

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Question 41 pts

A model in which all markets in the economy clear simultaneously is a ___________ equilibrium model.

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Question 51 pts

A model which examines how one market in the economy clears is a _____________ equilibrium model.

Answer 1

Question 11

In a Pareto efficient allocation,

Ans: there is no way to make any person better off without making someone else worse off.

For e.g. consider an economy produces only one good which everyone likes. Then if a person desires for more (better off) then someone else will get less of it (worse off).

Question 21

The result that a perfectly competitive price system brings about an efficient allocation of resources is known as:

Ans: The Second Theorem of Welfare Economics

Question 31

All of the following are considered to produce inefficiency in markets EXCEPT:

Ans: All of the above result in market failure.

In imperfect competition, where competition is less, firms produce less comparatively and average costs are relatively higher. This leads to inefficiency in the market.

Public goods lead to inefficiency if consumers who don’t pay for it but use the good anyway.

Externalities lead to market failure because a product’s price does not accurately define its true costs and benefits.

Question 41

A model in which all markets in the economy clear simultaneously is a ___________ equilibrium model.

Ans: General

Question 51

A model which examines how one market in the economy clears is a _____________ equilibrium model.

Ans: Partial