Questions for Review without Answers
Chapter 22. Equilibrium and General Equilibrium Theory.
Welfare Economics. The Invisible Hand
I. Equilibrium and the Standard Supply-Demand Graph
1) Economists distinguish three kinds of equilibrium. Please name them.
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II. General Equilibrium
2) Walrasian equilibrium is based on the application of simultaneous equations. Please explain.
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3) What is tatonnement?
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III. Welfare Economics
4) Name the conditions for productive and allocative efficiency.
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5) What is Pareto optimality?
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6) What condition must be fulfilled for income distribution to be efficient?
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7) What does the second fundamental theorem of welfare economics state?
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8) And what does the compensation principle state?
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9) Define inefficiency.
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IV. The Invisible Hand
10) In case you do not believe that God had the free-enterprise economy in mind when He created man, what else do you think accounts for the merits of capitalist economies?
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V. An Excursus on the Historical Roots of Equilibrium, Welfare Economics
and the Invisible Hand
11) Can you conceive any sensible reason why economics should be modelled on physics?
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12) Why does laissez-faire necessarily go hand in hand with increased controls but also with greater freedom?
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13) How would you describe the relationship between economic self-interest and the public interest?
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