Welfare economics - Exam
  • 1. Welfare economics is a branch of economics that focuses on the optimal allocation of resources and goods to maximize social welfare. It seeks to evaluate and improve the well-being of individuals and society as a whole by analyzing market outcomes and policies. Welfare economists study how various factors such as income distribution, externalities, public goods, and market failures impact overall social welfare. Their aim is to design efficient and equitable policies that enhance societal welfare and promote economic prosperity while considering trade-offs and ethical considerations.

    Who introduced the concept of Pareto efficiency in welfare economics?
A) John Maynard Keynes
B) Adam Smith
C) Milton Friedman
D) Vilfredo Pareto
  • 2. Which approach in welfare economics focuses on improving social welfare by maximizing utility?
A) Laissez-faire
B) Utilitarianism
C) Keynesian economics
D) Monetarism
  • 3. What does the term 'market failure' refer to in welfare economics?
A) Excessive government regulation in the market
B) Successful coordination of supply and demand
C) Economic prosperity reached through competition
D) When markets do not allocate resources efficiently
  • 4. What distinguishes positive externalities in welfare economics?
A) Negative impacts on market efficiency
B) Direct financial gains from market exchanges
C) Benefits received by individuals not directly involved in a market transaction
D) Costs borne by those who did not benefit from a transaction
  • 5. Which of the following is an example of a regressive tax?
A) Progressive tax
B) Value-added tax
C) Income tax
D) Sales tax
  • 6. What does the term 'consumer surplus' represent in welfare economics?
A) Total cost of production for a given product
B) Tax revenue generated from consumer spending
C) Profit margin for producers
D) The difference between what consumers are willing to pay for a good/service and what they actually pay
  • 7. What is the basis of utilitarianism in welfare economics?
A) Minimizing government intervention in economic activities
B) Encouraging competition for market efficiency
C) Maximizing overall happiness or utility in society
D) Promoting individual rights and liberties
  • 8. Which of the following is an example of a public good in welfare economics?
A) Fast food
B) National defense
C) Luxury cars
D) Designer clothing
  • 9. Which economic school of thought emphasizes the importance of consumer surplus in welfare economics?
A) Keynesian economics
B) Neoclassical economics
C) Austrian economics
D) Marxist economics
  • 10. Which of the following is not a reason for market failure according to welfare economics?
A) Perfect competition
B) Information asymmetry
C) Externalities
D) Public goods
  • 11. What is the Gini coefficient used to measure in the context of welfare economics?
A) Income inequality
B) Inflation rate
C) Labor force participation
D) Market demand
  • 12. What is meant by the term 'Pareto improvement' in welfare economics?
A) Government intervention to redistribute wealth
B) Any policy change that reduces taxes
C) A strategy to increase overall market competition
D) A change that benefits at least one person without making anyone else worse off
  • 13. If a market is perfectly competitive and there are no externalities, which outcome is most likely to result according to welfare economics?
A) Regulatory capture
B) Monopoly pricing
C) Market failure
D) Pareto efficiency
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