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