Question 1

A Pareto optimum

Accepted Answer

A)   can be found in a closed and open economy.
B)   is found where the budget line is tangent to the indifference curve.
C)   is the same as a competitive equilibrium.
D)   is where the consumption line is tangent to the PPF.
E)   is the slope of the PPF.F) A) and B)
G) None of the above

Question 2

A competitive equilibrium is a state of affairs in which

Accepted Answer

A)   markets clear, and output is maximized.
B)   output is maximized, and all agents are equally well-off.
C)   all agents are equally well-off and agents are price-takers.
D)   agents are price-takers, and markets clear.
E)   output and total factor productivity are maximized.F) A) and B)
G) D) and E)

Question 3

In an economic model, an endogenous variable is

Accepted Answer

A)   a stand-in for more complicated variables.
B)   determined by the model itself.
C)   determined outside the model.
D)   a variable that has no effect on the workings of the model.
E)   closely linked to a closed economy.F) None of the above
G) A) and D)

Question 4

Immunization from communicable diseases generate

Accepted Answer

A)   overproduction.
B)   a Pareto optimum.
C)   the provision of public goods.
D)   negative externalities.
E)   positive externalities.F) A) and E)
G) A) and D)

Question 5

In the basic one-period model in Chapter 5, government spending is modelled as the acquisition of goods by the government, with the government simply throwing the goods away. Is this an accurate way to capture what the government does? If so, in what ways? If not, in what ways could we alter the model to make it capture the role of the government more accurately?

Accepted Answer

For some types of government spending, t...

Question 6

An increase in total factor productivity shifts the production function

Accepted Answer

A)   upward, but does not change its slope.
B)   upward, and also changes its slope.
C)   downward, but does not change its slope.
D)   downward, and also changes its slope.
E)   upward, but reduces the marginal product of labour.F) C) and D)
G) A) and E)

Question 7

The production possibilities frontier in the one-period model is a

Accepted Answer

A)   behavioural relationship between consumption and leisure.
B)   behavioural relationship between consumption and government spending.
C)   technological relationship between consumption and leisure.
D)   technological relationship between consumption and government spending.
E)   technological relationship between consumption and the capital stock.F) B) and D)
G) A) and B)

Question 8

Examples of exogenous variables include

Accepted Answer

A)   real wages, consumption, and taxes.
B)   real wages, aggregate output, and labour demand.
C)   government spending, total factor productivity, and capital stock.
D)   labour supply and labour demand.
E)   consumption, government spending and capital stock.F) D) and E)
G) A) and B)

Question 9

A Pareto optimum is a point that

Accepted Answer

A)   a malevolent dictator would choose.
B)   a cooperative coalition of some altruistic consumers would choose.
C)   a cooperative coalition of some socially responsible firms would choose.
D)   a social planner would choose.
E)   is experienced at competitive equilibrium.F) C) and D)
G) A) and B)

Question 10

The presence of a distorting tax on wage income can result in

Accepted Answer

A)   MPn 
B)   MRTl,c 
C)   MPn 
D)   MRSl,c 
E)   MRSl,c = MPn.F) B) and D)
G) None of the above

Question 11

A competitive equilibrium may fail to be Pareto-optimal due to

Accepted Answer

A)   inequality.
B)   externalities.
C)   social efficiency.
D)   profit maximizing firms.
E)   government intervention.F) A) and B)
G) A) and C)

Question 12

The second fundamental theorem of welfare economics states that

Accepted Answer

A)   under certain conditions, a competitive equilibrium is Pareto-optimal.
B)   a competitive equilibrium is always Pareto-optimal.
C)   under certain conditions, a Pareto optimum is a competitive equilibrium.
D)   a Pareto optimum is always a competitive equilibrium.
E)   a Pareto optimum does not have to be a competitive equilibrium.F) A) and B)
G) A) and C)

Question 13

In a one-period economic model, the government budget constraint requires that government spending

Accepted Answer

A)   = taxes + transfers.
B)   = taxes + borrowing.
C)   > 0.
D)   = taxes.
E)   taxes + transfers + borrowing.F) B) and D)
G) C) and E)

Question 14

In the one-period competitive model we have been studying,

Accepted Answer

A)   both consumption and total factor productivity are exogenous.
B)   consumption is exogenous and total factor productivity is endogenous.
C)   consumption is endogenous and total factor productivity is exogenous.
D)   both consumption and total factor productivity are endogenous.
E)   consumption and taxes are exogenous.F) B) and D)
G) B) and C)

Question 15

Fiscal policy refers to a government's choices over its

Accepted Answer

A)   expenditures, taxes, transfers, and borrowing.
B)   expenditures, taxes, issuance of money, and borrowing.
C)   expenditures, foreign affairs, issuance of money, and borrowing.
D)   issuance of money, taxes, environmental regulations, and foreign affairs.
E)   changing the money supply, defense, and borrowing.F) A) and B)
G) C) and E)

Question 16

The rate at which one good can be converted technologically into another is called

Accepted Answer

A)   the marginal rate of transformation.
B)   the marginal rate of substitution.
C)   the marginal product of labour.
D)   rate of conversion.
E)   the marginal product of capital.F) A) and D)
G) B) and D)

Question 17

An increase in total factor productivity shifts the production function

Accepted Answer

A)   upward and reduces the marginal product of labour.
B)   upwards and increases the marginal product of labour.
C)   downward and reduces the marginal product of labour.
D)   downward and increases the marginal product of labour.
E)   downward and also reduces its slope.F) C) and D)
G) A) and B)

Question 18

Goods and services provided by the government are called

Accepted Answer

A)   government goods.
B)   public goods.
C)   free goods.
D)   social goods.
E)   national goods.F) None of the above
G) A) and C)

Question 19

The substitution effect that results from a decrease in total factor productivity

Accepted Answer

A)   is a shift from the labour input to the capital input.
B)   involves substitution of government spending for consumption.
C)   substitutes lump sum taxes for taxes on firms.
D)   is zero.
E)   is the substitution of consumption for leisure.F) A) and B)
G) C) and E)

Question 20

An externality is any activity for which an individual firm or consumer does not take into account all

Accepted Answer

A)   of the ramifications of its actions on others.
B)   associated costs.
C)   associated benefits.
D)   associated costs and benefits.
E)   negative impacts on the economy.F) C) and E)
G) All of the above

Exam 5: A Closed-Economy One-Period Macroeconomic Model

An increase in total factor productivity shifts the production function

Correct Answer
verified

Fiscal policy refers to a government's choices over its

Correct Answer
verified

The production possibilities frontier in the one-period model is a

Correct Answer
verified

A Pareto optimum

Correct Answer
verified

The presence of a distorting tax on wage income can result in

Correct Answer
verified

In an economic model, an endogenous variable is

Correct Answer
verified

Goods and services provided by the government are called

Correct Answer
verified

Examples of exogenous variables include

Correct Answer
verified

The rate at which one good can be converted technologically into another is called

Correct Answer
verified

An increase in total factor productivity shifts the production function

Correct Answer
verified

The substitution effect that results from a decrease in total factor productivity

Correct Answer
verified

A competitive equilibrium may fail to be Pareto-optimal due to

Correct Answer
verified

A Pareto optimum is a point that

Correct Answer
verified

The second fundamental theorem of welfare economics states that

Correct Answer
verified

In the one-period competitive model we have been studying,

Correct Answer
verified

In a one-period economic model, the government budget constraint requires that government spending

Correct Answer
verified

Immunization from communicable diseases generate

Correct Answer
verified

An externality is any activity for which an individual firm or consumer does not take into account all

Correct Answer
verified

Correct Answer
verified
For some types of government spending, t...
View Answer

A competitive equilibrium is a state of affairs in which

Correct Answer
verified

Exam 5: A Closed-Economy One-Period Macroeconomic Model

An increase in total factor productivity shifts the production function

Correct AnswerverifiedShow Answer

Fiscal policy refers to a government's choices over its

Correct AnswerverifiedShow Answer

The production possibilities frontier in the one-period model is a

Correct AnswerverifiedShow Answer

A Pareto optimum

Correct AnswerverifiedShow Answer

The presence of a distorting tax on wage income can result in

Correct AnswerverifiedShow Answer

In an economic model, an endogenous variable is

Correct AnswerverifiedShow Answer

Goods and services provided by the government are called

Correct AnswerverifiedShow Answer

Examples of exogenous variables include

Correct AnswerverifiedShow Answer

The rate at which one good can be converted technologically into another is called

Correct AnswerverifiedShow Answer

An increase in total factor productivity shifts the production function

Correct AnswerverifiedShow Answer

The substitution effect that results from a decrease in total factor productivity

Correct AnswerverifiedShow Answer

A competitive equilibrium may fail to be Pareto-optimal due to

Correct AnswerverifiedShow Answer

A Pareto optimum is a point that

Correct AnswerverifiedShow Answer

The second fundamental theorem of welfare economics states that

Correct AnswerverifiedShow Answer

In the one-period competitive model we have been studying,

Correct AnswerverifiedShow Answer

In a one-period economic model, the government budget constraint requires that government spending

Correct AnswerverifiedShow Answer

Immunization from communicable diseases generate

Correct AnswerverifiedShow Answer

An externality is any activity for which an individual firm or consumer does not take into account all

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFor some types of government spending, t...View AnswerShow Answer

A competitive equilibrium is a state of affairs in which

Correct AnswerverifiedShow Answer

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For some types of government spending, t...
View Answer

Correct Answer
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