Unit 5

Question 1

institutions?

Answer 1

written and underwritten rules that govern how people interact, and how rents are distributed

Question 2

power?

Answer 2

ability for individuals to get what they want in interactions with others

bargaining power is lower with multiple responders

monopolist have power over consumers

Question 3

director’s game?

Answer 3

no power tp say no
eg slavery, human/ drug trafficking

Question 4

owners have bargaining power when?

Answer 4

• set the terms of the exchange (ultimatum game)
• bargain with multiple workers ( >1 responder)
• impose/ threaten to impose cost (terminate contract)

Question 5

allocation?

Answer 5

outcome of economic interaction

Question 6

we evaluate institutions based on?

Answer 6

fairness and efficiency

Question 7

pareto efficient?

Answer 7

if there is no other allocation that makes at least one person better off and no person worse off

Question 8

how unequal outcomes look?

Answer 8

substantive judgements:
- income
- well-being
- freedom to act without socially-imposed limits

Question 9

how outcomes came about?

Answer 9

procedural judgements:
- voluntary echange of procate property by legititmate means ( fraud/ force used)
- deservingness based on efforts or ethics
- equal opportunity for economuc advantage (discriminiation)

Question 10

need to know for substantive judgement?

Answer 10

only allocation

Question 11

need to know for procedural judgement?

Answer 11

rules and factors that lead to allocation

Question 12

John Rowls?

Answer 12

• recognise that fairness applies to all people
• imagine a veil of ignorence
• make judgement about fairness

Question 13

economics can clarify?

Answer 13

• how dimensions of unfairness may be connected
• trade-offs between the dimensions of fairness
• public policies to address concern about unfairness

Question 14

MRS vs MRT?

Answer 14

MRS: trade-off willing to make
MRT: trade-off contrained to make

Question 15

biological constraint?

Answer 15

points below are biologically infeasible
points above feasible frontier are technically infeasible

Question 16

economic rent maximised?

Answer 16

when MRT = MRS

Question 17

private property?

Answer 17

the right to use and exclude others form the use of something, as well as the right to sell it

Question 18

coercion?

Answer 18

allocation chosen is where the slope of the biological constraint equals the slope of the feasible frontier

without coercion, joint surplus is maximised where the slope of the reservation indifference curve equals the slope of hte feasible frontier

Question 19

quasi-linear?

Answer 19

same slope at any level