Consider three ways of allocating two goods in a two-person exchange economy. I. Both individuals take prices as given and equilibrium prices are established by an impartial auctioneer. II. One individual can act as a perfect price discriminator and force the other individual to pay a different price for each unit of a good that is traded. III. One individual is a monopolist and can charge the other individual a single, utility-maximizing price. Which of these situations is efficient?
a. None of them.
b. Only I.
c. I and II, but not III.
d. I and III, but not II.
Question 2
Under a perfectly competitive price system
a. an equitable allocation of the available resources will always result.
b. there is no opportunity for individuals to trade amongst themselves.
c. there is no reason to expect that voluntary trading will result in an equitable allocation of the available resources.
d. None of the above will result.
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In the summer of 1793, a yellow fever epidemic struck Philadelphia, killing nearly 4,000. Tens of th
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