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George Washington University - ECONOMICS 1011 THE GEORGE WASHINGTON UNIVERSITY Department of Economics Economics 1011  Prof

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George Washington University - ECONOMICS 1011

THE GEORGE WASHINGTON UNIVERSITY

Department of Economics

Economics 1011  Prof. Steve Suranovic

Section 10 Spring 2013

1. Write the term or answer each question 1n the box provided on the right.

Each answer is worth | point (14 points total).

A. Adam Smith said that humans have a propensity to 

do the following: truck, barter and this. 

B. In the pure exchange model, the two traders

experience diminishing marginal utility in 

consumption. Is this an assumption or an implication

of the model?

C. In the pure exchange model, there are there are

only two goods. Is this assumption more likely to be 

consequential to the result or inconsequential?

D. If consumption of one candy bar gives a person

100 utils, two candy bars consumed gives a person

180 utils, and three candy bars consumed gives a

person 250 utils, what 1s the marginal utility of the

third candy bar?

E. Yes or No: If consumption of one candy bar gives

a person 500 utils, two candy bars consumed gives a

person 1000 utils, and three candy bars consumed 

gives a person 1500 utils, does consumption exhibit

diminishing marginal utility?

F. this type of cost of a college education includes the

income a student would have earned had she not gone 

to college

G. Adam Smith was describing this feature when he

described how production could be increased 1n a pin 

factory.

H. Pop rocks candy can be used to remind us that 

this will happen whenever a transaction between two 

people occurs. 

I. the dollar price of a bag of peanuts 1n dollars if 24

bags of peanuts trades for 4 glasses of beer and the

price of beer is $8 per glass

J. In the pure exchange model Smith and Jones are

almost surely happier after trade 1f exchange 1s 

for both of them.

K. this economic data 1s the primary signal that

influences economic consumption and production 

decisions

L. term used to refer to an allocation of goods

between two people when no welfare-improving trade 

is possible for both.

M. At a utility maximizing allocation of goods

between two people the terms of trade will be equal 

to the slope of these curves in an Edgeworth box

diagram.

N. In the pure exchange model, this assumption about

each individual 1s satisfied when in the final 

allocation the marginal rate of substitution equals the ty

terms of trade.