Chapter 12: Efficiency Exchange and Welfare Economics

Question 1

Analysis of other markets and how the dynamics of one market can actually affect other markets simultaneously.

Answer 1

General Equilibrium Analysis

Question 2

Study of how group of individuals in a market gain from different arrangements of economic activities and allocations of resources.

Answer 2

Welfare Economics

Question 3

The Edgeworth box was postulated by

Answer 3

Francis Ysidro Edgeworth

Question 4

A graphical illustration on how two individuals can benefit from voluntary exchange.

Answer 4

Edgeworth box

Question 5

It represents locus of points of all efficient Allocations

Answer 5

Contract Curve

Question 6

The equilibrium conditions on a specific market answering a particular question on how price can affect demand and supply.

Answer 6

Partial Equilibrium analysis.

Question 7

It is in this region in the Edgeworth Box that both parties agreed to conduct a voluntary exchange.

Answer 7

Region of Mutual Advantage

Question 8

A pareto efficient allocation is achieved when

Answer 8

1. There is no way to make all market participants better-off
2. There is no way to make some participants in the market better -off without making other participants worse-off
3. All benefits from the exchange have been exhausted
4. There are no more mutually advantageous exchanges to be made.

Question 9

When the amount being sold is equal to the amount being demanded by each party, and vice versa it is called

Answer 9

Competitive Equilibrium

Question 10

When all possible gains form trade are exhausted.

Answer 10

Efficient Exchange under a perfect equilibrium

Question 11

Efficient Exchange Under a perfect equilibrium is also known as

Answer 11

Invisible Hand theorem

Question 12

Invisible Hand theorem is also known as the

Answer 12

First theorem of Welfare Economics

Question 13

First Theorem of Welfare Economics States

Answer 13

The Perfectly Competitive Equilibrium is a Pareto-optimal allocation.

Question 14

The Second Theorem of Welfare Economics States

Answer 14

Any allocation on the contract curve can be achieved by a competitive Equilibrium

Question 15

If inputs are combined in different ways to achieve a higher level of output.

Answer 15

Technical Efficiency

Question 16

Is the case that no individual can be made better-off without another being made worse-off.

Answer 16

Pareto Efficient

Question 17

A nineteenth century Italian Economist who developed the implications of mutual beneficial exchange.

Answer 17

Vilfredo Pareto

Question 18

He had substantial contribution on the theory of competitive market.

Answer 18

Adam Smith