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George Washington University - ECONOMICS 1011 THE GEORGE WASHINGTON UNIVERSITY Department of Economics Economics 1011 Prof
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.
Expert Solution
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.
answer. exchange
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?
answer. Assumption
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?
answer. 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?
answer. 250-180 =70 units
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?
answer. No
F. this type of cost of a college education includes the
income a student would have earned had she not gone
to college
answer. Opportunity
G. Adam Smith was describing this feature when he
described how production could be increased 1n a pin
factory.
answer. Division of labour
H. Pop rocks candy can be used to remind us that
this will happen whenever a transaction between two
people occurs.
answer. Happiness bursts for both or utility increase surplus value created etc.
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
answer.$1.33 or 4/3
J. In the pure exchange model Smith and Jones are
almost surely happier after trade 1f exchange 1s
for both of them.
answer. voluntary
K. this economic data 1s the primary signal that
influences economic consumption and production
decisions
answer. prices
L. term used to refer to an allocation of goods
between two people when no welfare-improving trade
is possible for both.
answer. pareto optimum
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.
answer.indifference
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.
answer. Utility maxmization
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