Question

QUESTION 16

In general equilibrium, the contract curve:

A) Connects all possible Pareto efficient allocations

B) Illustrates all possible contracts which are incentive compatible

C) Always goes through the midpoint of the Edgeworth box

D) None of the above

QUESTION 17

Monopoly, negative externalities, high transaction costs, asymmetric information are all:

A) Reasons for a tax on goods for which demand is inelastic

B) The result of partial equilibrium not being sustainable

C) Situations where the first fundamental theorem of welfare economics no longer applies

D) None of the above

Answer 1

IS No. 16 Ans! (A) Contract curve connect all possible pareto efficient allocation. IS. No. 17 Ans: (C) first fundamental theonem of welfare economics faids when monopoly, negative externalities of asymmetric Infornnation exist in the markil. these forces cause the market failure.