31. Utilitarianism:
A. is both process- and outcome-oriented.
32. According to the principle of utilitarianism:
D. equal division of society’s resources among all members of the population is the most
equitable outcome.
33. According to the principle of Rawlsianism:
D. equal division of society’s resources among all members of the population is the most
equitable outcome.
34. According to the principle of egalitarianism:
A. society should place equal weight on the well-being of every individual.
35. Each of the following statements is true regarding the social welfare function EXCEPT:
A. it summarizes judgments about resource allocations.
36. In an exchange economy:
D. people trade goods, but do not own them or produce them.
37. An endowment:
D. is the bundle of goods and individual donates.
38. The Edgeworth box:
D. shows the most worthy outcomes at the edges.
39. The first welfare theorem:
D. is also the only welfare theorem.
40. The exchange efficiency condition holds:
D. if every pair of individuals have the same level of utility.
41. The contract curve:
A. shows the unique Pareto efficient allocation of a pair of goods in an Edgeworth box.
42. Input efficiency:
D. is the same as efficient efficiency.
43. The production contract curve:
D. passes through the intersections between all pairs of indifference curves in an Edgeworth box.
44. The input efficiency condition:
D. holds if every pair of firms share the same marginal rate of substitution between two goods.
45. A point inside the production possibility frontier is:
C. efficient.
D. optimal.
46. A point along the production possibility frontier is:
A. inefficient.
47. A point outside of the production possibility frontier is:
D. on the contract curve.
48. The marginal rate of transformation from good X to good Y:
D. is the difference between a firm’s marginal products.
49. An allocation satisfies the output efficiency condition if:
D. only applies for consumers that consume the same goods.
50. A market failure:
D. is a theoretical proposition that has never been proven to exist.
51. The idea that every Pareto efficient allocation is the competitive equilibrium for some
initial allocation of resources is known as:
D. the exchange efficiency condition.
52. A society can use competitive markets to achieve efficiency without sacrificing equity if it
can:
A. derive its social welfare function.
53. One consequence of the second welfare theorem is the fact that the allocation of goods
achieved through competitive markets:
D. is free of market failures.
54. Lump sum transfers ________ because they _______.
A. compromise efficiency; distort choices
55. Each of the following is a challenge that society’s would face in trying to use the second
welfare theorem to achieve equity without sacrificing efficiency EXCEPT:
A. endowments aren’t always easily observable.
Essay Questions
56. Compare and contrast the principles of utilitarianism, Rawlsianism and egalitarianism.
Discuss the assumptions of each and the difficulties societies might face while trying to conform
to them.
57. Discuss the second welfare theorem. How can societies use competitive markets to
achieve both efficiency and equity?
