ECN 212 Final Exam Questions with 100%
Correct Answers
a competitive market that is unregulated and has no externalities achieves the same
result as a benevolent social planner, free market allocation is pareto efficient (total
surplus is maximized in free market
First Welfare Theorem
Ei < 0
inferior good
Ei>0
normal good
Ed=1
unit elastic
0<Ei<1
necessity good
Ed >0
inelastic
Ed <0
elastic
it is feasible and there is no way to make someone better off without making someone
worse off
pareto efficient
, legal maximum on the price at which a good can be sold
price ceiling
price ceiling that is set below the equilibrium price is a ______ and creates a _________
binding price ceiling, shortage (excess demand)
price floor that is set above the equilibrium price is a ________ and creates a _________
binding price floor, surplus (excess supply)
legal minimum on the price at which a good can be sold at
price floor
if there is a binding price ceiling or binding price floor then surplus ......
can't be determined
if there is not a binding price ceiling or binding price floor then surplus
is calculated the same as the free market
binding price ceiling + perfectly inefficient
violates priniciple 1 and 3
binding price floor + perfectly inefficient
violates principle 2 and 3
private benefit is the
demand curve
social marginal benefit equals private marginal benefit when
there are no externalities
Correct Answers
a competitive market that is unregulated and has no externalities achieves the same
result as a benevolent social planner, free market allocation is pareto efficient (total
surplus is maximized in free market
First Welfare Theorem
Ei < 0
inferior good
Ei>0
normal good
Ed=1
unit elastic
0<Ei<1
necessity good
Ed >0
inelastic
Ed <0
elastic
it is feasible and there is no way to make someone better off without making someone
worse off
pareto efficient
, legal maximum on the price at which a good can be sold
price ceiling
price ceiling that is set below the equilibrium price is a ______ and creates a _________
binding price ceiling, shortage (excess demand)
price floor that is set above the equilibrium price is a ________ and creates a _________
binding price floor, surplus (excess supply)
legal minimum on the price at which a good can be sold at
price floor
if there is a binding price ceiling or binding price floor then surplus ......
can't be determined
if there is not a binding price ceiling or binding price floor then surplus
is calculated the same as the free market
binding price ceiling + perfectly inefficient
violates priniciple 1 and 3
binding price floor + perfectly inefficient
violates principle 2 and 3
private benefit is the
demand curve
social marginal benefit equals private marginal benefit when
there are no externalities
