reading

Question 1

FTWE

Answer 1

In the case of a pure exchange economy, a competitive equilibrium is pareto efficient. A competitive market equilibrium exhausts all the gains from trade.

Question 2

edgeworth box

Answer 2

models the exchange between two individuals. Models preferences and endowments

Question 3

amount of externality

Answer 3

Depends on the distribution of property rights

Question 4

factors that distort ability of market to reach a competitive equilibrium

Answer 4

Externalities
Public goods - free rider problem
Imperfect information - uncertainty surrounding prices
Imperfect competition - individuals have price making power

Question 5

important features of STWE

Answer 5

A more equitable outcome does not result in a loss of efficiency. Distributional issues should be resolved by manipulating the endowments, not the relative prices.

Question 6

Common property

Answer 6

Assigning property rights to one individual gets rid of inefficiency.

Question 7

Common ownership assumptions

Answer 7

Assume no barriers to entry thus profits are 0 in the LR…. overgrazing

Question 8

public good

Answer 8

Everyone must consume the same amount of a public good. Public good: agent’s actions affects everyone

Question 9

public good - quasi linear preferences

Answer 9

distribution of wealth is irrelevant in the provision of the good