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