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Unformatted text preview: ources must be based on the
existing reality rather than some hypothetical alternative reality. 30 Answer Key 1.
D 31 Economics 113
Introduction to Economics for Policy Analysis
1. “The equilibrium of a perfectly competitive market economy is independent of the
underlying distribution of wealth”. True of false?
2. Which of the following is not generally regarded as a cause of the failure of centrally
planned economies (like the former Soviet Union)?
A. overwhelming informational requirements
B. excessive competition among producers
C. poor incentives to innovate
D. corruption associated with the concentration of power
3. The second welfare theorem states that
A. the equilibrium of a perfectly competitive market economy is Pareto efficient.
B. any Pareto efficient allocation can be supported as an equilibrium of a perfectly
competitive market economy with appropriate “lump-...
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- Spring '14