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| 1 | |
Welfare economics deals with _________ issues. |
| | A) | normative |
| | B) | positive |
| | C) | political |
| | D) | objective |
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| 2 | |
An allocation is Pareto-efficient if no reallocation of resources would make some people ____________ without making others ______________. |
| | A) | worse off, worse off |
| | B) | better off, better off |
| | C) | better off, worse off |
| | D) | equal, unequal |
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| 3 | |
__________equity is the identical treatment of identical people. ________ equity is the different treatment of different people. |
| | A) | vertical, horizontal |
| | B) | horizontal, vertical |
| | C) | fair, unfair |
| | D) | unfair, fair |
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| 4 | |
A resource allocation is a complete description of who does what and who gets what. |
| | A) | True |
| | B) | False |
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| 5 | |
Looking at a diagram of the efficiency frontier, Pareto-efficient points are _________ the frontier. |
| | A) | to the right of |
| | B) | to the left of |
| | C) | on the vertical axis of |
| | D) | on |
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| 6 | |
A competitive equilibrium is Pareto-efficient. |
| | A) | True |
| | B) | False |
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| 7 | |
A distortion exists if society’s _____________ of producing a good does not equal society’s ________________ from consuming that good. |
| | A) | marginal cost, marginal benefit |
| | B) | marginal cost, total benefit |
| | C) | average cost, average benefit |
| | D) | total cost, total benefit |
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| 8 | |
The second-best allocation has no distortions and is fully efficient. |
| | A) | True |
| | B) | False |
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| 9 | |
The __________ is the most efficient outcome that can be achieved conditional on being unable to remove some distortions. |
| | A) | first-best |
| | B) | second-best |
| | C) | compromise solution |
| | D) | equilibrium |
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| 10 | |
Property rights are the power of ________________, including the right to be ___________for externalities. |
| | A) | ownership, charged |
| | B) | ownership, compensated |
| | C) | residual control, compensated |
| | D) | residual control, charged |
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| 11 | |
A free-rider cannot to be excluded from consuming a good. |
| | A) | True |
| | B) | False |
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| 12 | |
For given resources and technology the economy has ___________ Pareto-efficient point(s). |
| | A) | a unique |
| | B) | an infinite number of |
| | C) | many |
| | D) | two |
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| 13 | |
We sometimes cannot say whether one allocation of resources is better than another allocation because: |
| | A) | some people cannot count. |
| | B) | some people may not be permanent residents. |
| | C) | not all economic activity is legal. |
| | D) | we cannot make value judgements to compare different people’s welfare. |
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| 14 | |
A competitive equilibrium is Pareto-efficient because: |
| | A) | producers are price takers. |
| | B) | consumers and producers face the same prices. |
| | C) | marginal costs and benefits are equal. |
| | D) | prices equal marginal cost and benefit. |
| | E) | all of the above. |
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| 15 | |
The allocation of resources is not efficient if: |
| | A) | the marginal cost of production does not equal society’s marginal benefit. |
| | B) | the distribution of income is inequitable. |
| | C) | economic growth is low. |
| | D) | unemployment is high. |
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| 16 | |
The second best allocation of resources removes all distortions in the economy on the second attempt. |
| | A) | True |
| | B) | False |
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| 17 | |
If my neighbour burns garden waste causing my house to fill with smoke this is an example of: |
| | A) | a production externality. |
| | B) | a second-best solution. |
| | C) | transaction costs. |
| | D) | a consumption externality. |
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| 18 | |
Externalities arise because there is a divergence between __________ and ___________. |
| | A) | private costs, private benefits |
| | B) | private costs, social costs or benefits |
| | C) | social costs, social benefit |
| | D) | insiders, outsiders |
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| 19 | |
Market failure may arise because of _________ . |
| | A) | imperfect competition |
| | B) | taxation |
| | C) | externalities |
| | D) | missing markets |
| | E) | all of the above |
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| 20 | |
Global warming ____________ . |
| | A) | means that world resources are allocated efficiently |
| | B) | is an inevitable consequence of globalization |
| | C) | is an example of a worldwide externality |
| | D) | is predicted by standard models of economic growth |
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