Deck 4: Market Equilibrium and Welfare Economics

Question 1

If equilibrium price rises but equilibrium quantity remains unchanged, the cause is:

A)Supply and demand both decrease equally
B)Supply and demand both increase equally
C)Supply decreases and demand increases
D)Supply increases and demand decreases

Answer 1

Supply decreases and demand increases

Question 2

A decrease in demand causes the equilibrium price to:

A)Rise
B)Fall
C)Remain constant
D)Indeterminate

Answer 2

Fall

Question 3

Price of a product is determined in a free market:

A)By demand for the product
B)By supply of the product
C)By both demand and supply
D)By the government

Answer 3

By both demand and supply

Question 4

In market equilibrium, supply is vertical line. The downward sloping demand curve shifts to the rights. Then,

A)Price will rise
B)Quantity rises
C)Price remains same
D)Price will fall

Question 5

Every factor of production gets reward equal to:

A)Value of average product
B)Value of marginal product
C)Value of total product
D)Total revenue

Question 6

Under perfect competition, demand for a factor is its:

A)MRP curve
B)ARP curve
C)TRP curve
D)TR - TC

Question 7

We should employ units of a factor to a point where:

A)MR is negative
B)MP is equal to price of the factor
C)MP is positive
D)MP is rising

Question 8

If marginal product of labour rises because of new technology:

A)Wages will rise
B)Wages will fall
C)Wages will be unaffected
D)May rise or fall

Question 9

Increasing the minimum wage for workers will:

A)Sole the unemployment problem
B)Result in scarcity of workers
C)Cause a substitution of capital for labour
D)Decrease the MP of those workers

Question 10

The price of capital is

A)money
B)Interest
C)profits
D)wages

Question 11

If MRP > Price of the factor: firm should hire

A)less factors
B)more factors
C)the same factors
D)All of the above

Question 12

If MRP = Price of the factor: firm should _______ at the unit of factor

A)less factors
B)more factors
C)stop hiring more
D)All of the above

Question 13

If MRP < P of the factor, firm should hire

A)less factors
B)more factors
C)the same factors
D)All of the above

Question 14

The labor market equilibrium determines the wage rate and

A)market
B)employment
C)money
D)interest

Question 15

Union leaders are in a worse position to bargain for higher wages if demand for labour is

A)perfectly Elastic
B)perfectly Inelastic
C)Very large
D)Permanent

Question 16

The concept of social optimum was introduced in Welfare Economics by

A)Vilfredo Pareto
B)A. C. Pigou
C)Adam Smith
D)A. Marshall

Question 17

An ethical or value judgement must be made in order to derive the

A)Transformation curve
B)Grand utility possibly curve
C)Consumption contract curve
D)Social welfare function

Question 18

According to Kaldor-Hicks compensation criteria, the proposed change will increase the social welfare if

A)The gains are equal to the losses
B)The gains are greater than the losses
C)The losses are greater than the gains
D)None of the above

Question 19

The concept of Social Welfare function was firstly introduced by

A)Pareto
B)Kaldor
C)Bergson
D)Samuelson

Question 20

The first condition of which economist states that welfare is said to increase when national income increases

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

Question 21

Compensation criterion principle is associated with the name of

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

Question 22

Who proclaimed the 'doctrine of invisible hand'?

A)Adam Smith
B)A. C. Pigou
C)Kaldor-Hicks
D)V. Pareto

Question 23

Social Welfare function is a function of

A)All the individuals constituting the society
B)All consumers excluding producers
C)Only sample of individuals in society
D)None of the above

Question 24

"Social welfare increases when transfer of real income from the rich to poor increases" is a statement given by

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