If the excess demand function does not intersect the vertical price axis at any one price, then

this situation
is related to the ___________ problem of equilibrium.
A. Existence
B. Stability
C. Uniqueness
D. None of these
ANSWER: A

Equilibrium of production means efficient allocation of resources among __________.

A. Consumers
B. Firms
C. Labour
D. Capital
ANSWER: B

Equilibrium of consumption means efficient distribution of commodities produced between _______.

A. Consumers
B. Labour
C. Producers
D. None of these
ANSWER: B

The firm is said to be in equilibrium if it chooses the factor combination which minimizes its cost Thus the
equilibrium of the firm requires.
A. Slope of Isoquant = Slope of Isocost
B. Slope of Isoquant for X commodity = Slope of Isoquant for Y commodity
C. Marginal Rate of Product Transformation = Marginal Rate of Technical Substitution
D. None of these
ANSWER: A

Each point of the Edgeworth Box in production shows a specific allocation of ______ and ______ in the
production of commodities X and Y.
A. Inputs and Outputs
B. Labour and Capital
C. Firms and Labour
D. All of these
ANSWER: B

Since the Edgeworth contract curve of production is the locus of points where.
A. Slope of Isoquant = Slope of Isocost
B. Slope of Isoquant for X commodity = Slope of Isoquant for Y commodity
C. Marginal Rate of Product Transformation = Marginal Rate of Technical Substitution
D. None of these
ANSWER: B

The general equilibrium of production occurs at a point where the _________ is the same for all the firms,
that is, at a point which satisfies the Pareto Optimality criterion of efficiency in factor substitution.
A. Marginal Rate of Substitution
B. Marginal Rate of Product Transformation
C. Marginal Rate of Technical Substitution
D. None of these
ANSWER: C

The production possibility curve of an economy is the locus of all _________ outputs, given the resource
endowment and the state of technology.
A. Pareto-efficient
B. Pareto-inefficient
C. Pareto-indifferent
D. None of these
ANSWER: A

The economic meaning of the transformation curve between X and Y is the rate at which a commodity
can be transformed into another, and is known as_________ .
𝑑𝑌
A. MRPT = -𝑑𝑋
𝑑𝑌
B. MRTS = -𝑑𝑋
𝑑𝑌
C. MRS = -𝑑𝑋
D. All of these
ANSWER: A

The condition for the consumer equilibrium is.

𝑃
A. MRPT = 𝑃𝑥
𝑦
𝑃𝑥
B. MRTS =
𝑃𝑦
𝑃
C. MRS = 𝑃𝑥
𝑦
D. All of these
ANSWER: C

At each point of Edgeworth contract curve of consumption with consumers A and B for good X and Y,
following condition should be fulfilled.
𝐴 𝐵
A. 𝑀𝑅𝑆𝑋,𝑌 = 𝑀𝑅𝑆𝑋,𝑌
𝐴 𝐵
B. 𝑀𝑅𝑇𝑆𝑋,𝑌 = 𝑀𝑅𝑇𝑆𝑋,𝑌
𝐴 𝐵
C. 𝑀𝑅𝑃𝑆𝑋,𝑌 = 𝑀𝑅𝑃𝑆𝑋,𝑌
D. None of these
ANSWER: A

Welfare economics is concerned with the evaluation of alternative economic situations from the point of
view of the society’s _________ .
A. Human Capital
B. Production Capacity
C. Well-Being
D. International Trade
ANSWER: C
__________ implicitly pose the growth of wealth of a society that is GNP growth as a welfare criterion.
A. Alfred Marshal
B. Adam Smith
C. Arthur Lewis
D. John Maynard Keynes
ANSWER: B

“Welfare is improved when the greatest good is secured for the greatest numbers”- This notion of Welfare
measure is given by.
A. Bentham’s Criterion
B. Cardinalist Criterion
C. Pareto Optimality Criterion
D. Kaldor-Hicks Compensation Criterion
ANSWER: A

“Law of Diminishing Marginal Utility” as the base for Welfare is the criterion of Welfare given by.
A. Bentham’s Criterion
B. Cardinalist Criterion
C. Pareto Optimality Criterion
D. Kaldor-Hicks Compensation Criterion
ANSWER: B

Any change that makes at least one individual better off and no one worse off is an improvement in social
welfare, such criterion is known as _______ .
A. Bentham’s Criterion
B. Cardinalist Criterion
C. Pareto Optimality Criterion
D. Kaldor-Hicks Compensation Criterion
ANSWER: C

A change in economy will benefit some and hurts others - Ask gainers to pay for change and losers to
prevent change - If the amount paid by gainers is greater than amount paid by losers, than the change
constitutes an improvement in social welfare- This criterion of Welfare measure is known as ________ .
A. Bentham’s Criterion
B. Cardinalist Criterion
C. Pareto Optimality Criterion
D. Kaldor-Hicks Compensation Criterion
ANSWER: D

Efficiency is a necessary condition but not ________ condition to guarantee the maximization of social
welfare.
A. Sufficient
B. Valid
C. Invalid
D. Simultaneous
ANSWER: A
__________ approach to social welfare has a serious flaw that it assumes that all individuals have identical
utility functions for money.
A. Bentham’s Criterion
B. Cardinalist Criterion
C. Pareto Optimality Criterion
D. Kaldor-Hicks Compensation Criterion
ANSWER: B

The Marginal condition for a Pareto-optimal or efficient distribution of commodities among consumers
requires that the MRS between two goods ________ for all consumers.
A. Be equal
B. Not to be equal
C. Is equal to MRTS
D. None of these
ANSWER: A

The marginal condition for a Pareto-optimal or efficient composition of output requires that the MRPT
between any two commodities be equal to the ________ between the same two goods.
A. MRTS
B. MRS
C. Marginal Cost
D. Marginal Revenue
ANSWER: B

A situation may be Pareto-optimal without maximizing social welfare and the welfare maximization is
attained only at a situation ______________ .
A. With Pareto Optimality
B. Without Pareto Optimality
C. With Maximized Growth
D. Without Maximized Growth
ANSWER: A

__________ suggests the use of an explicit set of value judgements in the form of social welfare function.
A. Bentham
B. Bergson
C. Cardinalist
D. Kaldor Hicks
ANSWER: B

Social Indifference Contour is the locus of combination of _______ of A and B which yield the same level
of social welfare.
A. Commodities
B. Productions
C. Utilities
D. None of these
ANSWER: C
In Bergson criterion social welfare is maximized at the point of tangency of envelope utility possibility
frontier with the highest possible ____________ .
A. Social Indifference Contour
B. Indifference Curve
C. Isoquant
D. None of these
ANSWER: A

The point where social welfare is maximized in Bergson criterion, is known as.
A. Minimized Point
B. Bliss Point
C. Social Indifference Contour
D. All of these
ANSWER: B

It is important to note that bliss point depends only on __________ relations.

A. Social Welfare
B. Consumer
C. Technological
D. All of these
ANSWER: C

The bliss point is attained by equalizing slopes of isoquants, slopes of indifference curves, and slopes of
_________ .
A. Production Possibility Curves
B. Contract Curve of Edgeworth Box of Consumption
C. Contract Curve of Edgeworth Box of Production
D. Social Indifference Contours
ANSWER: A

The social welfare maximization does not depend on _______.

A. Outputs
B. Utilities
C. Prices
D. None of these
ANSWER: C

A firm in a perfectly competitive market maximizes its profits by setting its marginal cost equal to
_________ of the commodity.
A. Output
B. Market price
C. Average cost
D. All of these
ANSWER: B

When contract curve lies outside the Edgeworth box then _________ solution could be utilized.
A. Outer
B. Constant
C. Corner
D. Absolute
ANSWER: C

In an Edgeworth box for a corner solution to occur the concave isoquant must cut convex isoquant
________.
A. From below
B. From Above
C. Twice
D. None of these
ANSWER: A

The bliss point, where the social welfare function was maximized, was defined in __________ space.
A. Product
B. Utility
C. Commodity
D. Welfare
ANSWER: B

The utility maximization position of an individual consumer is determined in __________ space.

A. Utility
B. Product
C. Output
D. Commodity
ANSWER: C

The social welfare contours are not ______ indifference curves.

A. Community
B. Convex
C. Downward sloping
D. None of these
ANSWER: A

Community indifference curves are widely used in ______________ theory.

A. Monetary Economics
B. International Trade
C. Agricultural Economics
D. None of these
ANSWER: B

Bator believes that the ranking of the society based on _____________ curves is more objective than that
of any arbitrary ethic standard adopted subjectively by policy makers.
A. Consumer Indifference Curves
B. Producer Isoquant
C. Community Indifference Curves
D. Community Isoquant
ANSWER: C
When assumption of given quantities of factors is relaxed then supply of factors can be expressed as a
function of prices- In this case concept of price _____________ of supply of factors will be introduced in
the Maximization of Social Welfare model.
A. Elasticity
B. Ratio
C. Measure
D. None of these
ANSWER: A

One important assumption of Maximization of Social Welfare model is that all products are ________
products.
A. Intermediate
B. Joint
C. Final
D. All of these
ANSWER: C

Traditionally decreasing returns to scale are attributed to managerial ___________ arising from the
entrepreneurial factor which is scarce even in the long run.
A. Economies
B. Diseconomies
C. Efficiencies
D. Skill
ANSWER: B

In any case ________ problems arise by assuming decreasing returns to scale in the Maximization of Social
Welfare model.
A. No serious
B. Serious
C. Efficiency
D. Equity
ANSWER: A

In Maximization of Social Welfare model, it is assumed that there is _________ between private and social
costs and benefits.
A. No convergence
B. No divergence
C. Divergence
D. None of these
ANSWER: B

When the action of an economic decision maker creates benefits for others, for which he is not paid, there
occur an ___________ for the others.
A. Internal economy
B. Internal diseconomy
C. External economy
D. External diseconomy
ANSWER: C
If externalities exist then Maximization of Social Welfare model breaks down because Pareto optimality
conditions are ____________.
A. Violated
B. Followed
C. Introduced in the mode
D. None of these
ANSWER: A

In case of externalities the constant embedded in the system lose their significance as prices because they
do not __________ all the costs and benefits.
A. Occur
B. Reflect
C. Observe
D. All of these
ANSWER: B

When the private cost is smaller than the social cost then in presence of the rule that MC =P, productions
of the firms will ________.
A. Increase
B. Decrease
C. Remain the same
D. None of these
ANSWER: A

When externalities exist, the condition for socially optimal production (Maximization of Social Welfare
model) will be the ______________ of marginal social cost (MSC) and marginal social benefit (MSB).
A. Inequality
B. Equality
C. Divergence
D. None of these
ANSWER: B

A new highway reduces the transport cost of individual firms- This is the _________.
A. External economy
B. External diseconomy
C. Internal economy
D. Internal diseconomy
ANSWER: A

Pollution of lakes, rivers and the sea by firms reduces the fish population- This is the ______.
A. External economy
B. External diseconomy
C. Internal economy
D. Internal diseconomy
ANSWER: B
If a honey producer expands his beehives the production of oranges of the owner of a near-by orange
grove will increase- This is the _____________.
A. External economy
B. External diseconomy
C. Internal economy
D. Internal diseconomy
ANSWER: A