Quiz 2.1 ECON

True A Pareto-efficient allocation cannot be dominated by any other allocation, so it is impossible to make one person better off without making another person worse off.

(True or False) At a Pareto-efficient allocation, it is impossible to make one person better off without making another person worse off.

Depending on the shape of her indifference curves, Angela may prefer G to E, she may prefer E to G, or she may be indifferent between the two. If Angela's indifference curves (ICs) were steep then E would be on a higher IC than G, but if her ICs were flat then G would be on a higher IC. Finally, it is also possible that the same IC would pass through both points.

Based on the figure, which of the following statements are correct? a. Bruno receives more grain at allocation G than at allocation F. b. Angela prefers G to working 12 hours and consuming 10 bushels. c. Bruno prefers G to F. d. Depending on the shape of her indifference curves, Angela may prefer G to E, she may prefer E to G, or she may be indifferent between the two.

In a voluntary exchange where Bruno has all the bargaining power, if Bruno charges 4.5 bushels of rent for the use of his land, then Angela would choose to work 8 hours. The maximum distance between the feasible frontier and Angela's reservation indifference curve is CD, where Angela works 8 hours. If she is charged 4.5 bushels of rent, working any other number of hours would place her below her reservation indifference curve.

Based on the figure, which of the following statements is correct? a. If Bruno can use coercion then he would force Angela to work 21 hours to maximize total production. b. In a voluntary exchange where Bruno has all the bargaining power, B is the best choice for Bruno as it maximizes his rent. c. In a voluntary exchange where Bruno has all the bargaining power, if Bruno charges 4.5 bushels of rent for the use of his land, then Angela would choose to work 8 hours. d. If Angela owned the land herself, then she would choose A, where her rent is maximized.

F is not Pareto efficient because the marginal rate of substitution does not equal the marginal rate of transformation at this point. At point F, the MRS does not equal the MRT, so total surplus is not maximized. Moving from F to any point on the line HG will make either Angela or Bruno or both better off. Hence, F is Pareto inefficient.

Based on this information, which of the following statements is correct? a. Moving from F to any point on line CD is Pareto-improving. b. F is not Pareto efficient because the marginal rate of substitution does not equal the marginal rate of transformation at this point. c. Depending on the slope of the feasible frontier, both Bruno and Angela can be better off at F than at D. d. The relative bargaining power of Bruno and Angela determines the number of hours worked along the Pareto efficiency curve.

The Proposer

In a dictator game who has all the bargaining power?

the rules of the game. In economics, institutions are defined as the formal and informal rules of the game that specify who can do what, when they can do it, and how each player's actions determine their payoff.

In economics, institutions refer to

d

Of the four points depicted in the figure, which allocation Pareto dominates Z?

The economically feasible set is a subset of the technically feasible set. Any allocation between the biological survival constraint and the feasible frontier is technically feasible, but only allocations between the reservation indifference curve and the feasible frontier are economically feasible. Angela will only voluntarily agree to allocations in the economically feasible set when her reservation option is point Z.

Which of the following statements is correct? a. The economically feasible set is the area between Angela's biological survival constraint and the feasible frontier. b. Angela's reservation indifference curve can be below her biological survival constraint. c. Angela's reservation indifference curve may not necessarily go through Z. d. The economically feasible set is a subset of the technically feasible set.