Deck 5: Welfare Economics and Efficiency Allocation

Question 1

Bergson's name is associated with

A)Social welfare function
B)Pareto Optimality criterion
C)Compensation criterion
D)Welfare maximization criterion

Answer 1

Social welfare function

Question 2

Which among the following is NOT a correct statement?

A)Welfare economics is based on value judgments.
B)Welfare economics is also called 'economics with a heart'.
C)Welfare economics focuses on questions about equity as well as efficiency.
D)The founder of Welfare economics was Alfred Marshall.

Answer 2

The founder of Welfare economics was Alfred Marshall.

Question 3

When the allocation of resources is Pareto efficient

A)society is providing the greatest good to the greatest number.
B)no consumer would prefer someone else's consumption bundle to his or her own.
C)it is not feasible to make someone better off without making someone worse off.
D)it is feasible to make someone better off without making someone worse off.

Answer 3

it is not feasible to make someone better off without making someone worse off.

Question 4

If some allocation of resources is Pareto efficient, then that allocation satisfies:

A)allocative efficiency and productive efficiency.
B)allocative efficiency and distributive efficiency.
C)productive efficiency and distributive efficiency.
D)allocative efficiency, productive efficiency, and distributive efficiency.

Question 5

When two commodities X and Y must be allocated among consumers, a necessary condition for distributive efficiency is that:

A)all firms be price takers.
B)all firms minimize cost.
C)commodity X must be allocated to the consumers with the largest values of MRSXY
D)the marginal rates of substitution MRSXY for all consumers must be equal.

Question 6

The necessary condition for allocative efficiency is that each commodity be produced in an amount that makes the marginal benefit to society of the last unit produced equal to the marginal cost to society of that last unit. The satisfaction of this condition in a market economy relies on the assumptions of:

A)utility maximization, profit maximization, and perfect competition.
B)utility maximization and profit maximization, but not perfect competition.
C)profit maximization and perfect competition, but not utility maximization.
D)utility maximization and perfect competition, but not profit maximization.

Question 7

The Fundamental Theorem of Welfare Economics:

A)shows that the allocation of resources generated by a complete system of perfectly competitive markets results in all consumers attaining the same utility level.
B)refers to the biblical observation that "the poor ye shall always have with you."
C)implies that no intervention in the workings of markets can be justified on efficiency grounds.
D)holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.

Question 8

If an economy operates on its production possibility curve, then the allocation of resources in that economy satisfies:

A)allocative efficiency.
B)distributive efficiency.
C)Pareto efficiency.
D)productive efficiency.

Question 9

If a brother and sister return home from trick-or-treating on Christmas and engage in a series of voluntary trades of candy, we can conclude that:

A)the initial allocation of candy between them was distributively inefficient.
B)the initial allocation of candy between them was distributively efficient.
C)their preferences must be different.
D)the candy they collected around the neighborhood must have been different.

Question 10

Growth of GNP as A Criterion of Welfare was advocated by

A)Kaldor-Hicks
B)Adam Smith
C)A. C. Pigou
D)Prof . Bergson

Question 11

Welfare is improved when 'the greatest good (is secured) for the greatest number' is a statement given by

A)Kaldor-Hicks
B)Adam Smith
C)Jeremy Bentham
D)Prof . Bergson

Question 12

A situation in which it is impossible to make anyone better-off without making someone worse-off is said to be

A)bentham Optimal
B)Pareto-optimal
C)Hicks Optimal
D)Bergson Optimal

Question 13

The concept of 'Social Welfare Function' was propounded by A. Bergson in his article 'A Reformulation of Certain Aspects of Welfare Economics' published in the year 1938

A)1932
B)1935
C)1938
D)1942

Question 14

The locus of the various physically attainable utility combinations of two persons when the factor endowments, state of technology and preference orders of the individuals are given.

A)grand utility possibility frontier
B)Maximum utility frontier
C)Pareto Optimality frontier
D)Hicks Utility Frontier

Question 15

A famous welfare economics book called, "Economics of Welfare" was written by

A)Kaldor-Hicks
B)Adam Smith
C)A. C. Pigou
D)Prof . Bergson

Question 16

Who defines economic welfare as "that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money."

A)Kaldor-Hicks
B)A. C. Pigou
C)Pareto
D)Prof . Bergson

Question 17

Kaldor-Hicks compensation principle can be explained with the help of

A)Utility possibility curve
B)Indifference curve
C)Equal product curve
D)Kuznet's curve

Question 18

Welfare Economics is generally accepted as

A)Positive science
B)Normative science
C)Both of the above
D)None of the ab

Question 19

According to AC Pigou, any reorganization of the economy which increases the share of the poor without reducing the national income is also considered an

A)decrease in social welfare
B)reduction in social welfare
C)improvement in social welfare
D)None of the above

Question 20

In Pareto welfare economics, Efficiency of distribution of commodities among consumers is related to

A)efficiency in production
B)efficiency in exchange
C)efficiency in product-mix
D)All of the above

Question 21

In Pareto welfare economics, Efficiency in the allocation of factors among commodities is related to

A)efficiency in production
B)efficiency in exchange
C)efficiency in product-mix
D)All of the above

Question 22

In Pareto welfare economics, Efficiency of the allocation of factors among firms is related to

A)efficiency in production
B)efficiency in exchange
C)efficiency in product-mix
D)All of the above

Question 23

The marginal condition for a Pareto-optimal allocation of factors requires that the ________ between labour and capital be equal for all commodities produced by different firms.

A)MRS
B)MRTS
C)DMR
D)MC

Question 24

The marginal condition for a Pareto-optimal or -efficient distribution of commodities among consumers requires that the MRS between ______ be equal for all consumers.

A)Two factors
B)Two goods
C)Two consumers
D)Two producers