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) Milton Friedman
C) Adam Smith
D) John Maynard Keynes
  • 2. Which approach in welfare economics focuses on improving social welfare by maximizing utility?
A) Utilitarianism
B) Keynesian economics
C) Monetarism
D) Laissez-faire
  • 3. What does the term 'market failure' refer to in welfare economics?
A) Successful coordination of supply and demand
B) When markets do not allocate resources efficiently
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) Benefits received by individuals not directly involved in a market transaction
C) Costs borne by those who did not benefit from a transaction
D) Negative impacts on market efficiency
  • 5. Which of the following is an example of a regressive tax?
A) Sales tax
B) Progressive tax
C) Value-added tax
D) Income tax
  • 6. What is the basis of utilitarianism in welfare economics?
A) Minimizing government intervention in economic activities
B) Promoting individual rights and liberties
C) Encouraging competition for market efficiency
D) Maximizing overall happiness or utility in society
  • 7. Which of the following is an example of a public good in welfare economics?
A) National defense
B) Luxury cars
C) Designer clothing
D) Fast food
  • 8. What does the term 'consumer surplus' represent in welfare economics?
A) Tax revenue generated from consumer spending
B) The difference between what consumers are willing to pay for a good/service and what they actually pay
C) Profit margin for producers
D) Total cost of production for a given product
  • 9. If a market is perfectly competitive and there are no externalities, which outcome is most likely to result according to welfare economics?
A) Market failure
B) Regulatory capture
C) Pareto efficiency
D) Monopoly pricing
  • 10. 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
  • 11. Which of the following is not a reason for market failure according to welfare economics?
A) Public goods
B) Externalities
C) Perfect competition
D) Information asymmetry
  • 12. What is the Gini coefficient used to measure in the context of welfare economics?
A) Income inequality
B) Inflation rate
C) Market demand
D) Labor force participation
  • 13. Which economic school of thought emphasizes the importance of consumer surplus in welfare economics?
A) Keynesian economics
B) Austrian economics
C) Marxist economics
D) Neoclassical economics
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