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Question-1
If some gain and some lose as the result of a proposed change and it can be demonstrated that the value of the gains would exceed the value of the losses, then the change is said to be:
(A)
Unequivocally Pareto optimal.
(B)
Potentially efficient.
(C)
Inefficient.
(D)
Technically efficient.
Question-2
If social marginal costs are _____________ private marginal costs, the level of output will be ____________ the socially optimal level.
(A)
Equal to, equal to
(B)
Greater than, higher than
(C)
Less than, lower than
(D)
All of the above
Question-3
All of the following statements are incorrect except:
(A)
When marginal social benefits are lower than marginal private benefits, output is at its optimal level
(B)
Loud music is an example of negative benefit externality
(C)
Marginal social benefits can never be larger than private social benefits
(D)
When marginal social benefits are greater than marginal private benefits, there is a negative externality
Question-4
All of the following statements are correct about the Kuznets curve except:
(A)
China and India have reached the peak of the curve
(B)
The United States are not at the peak of the curve yet
(C)
It suggests that additional greenhouse gases from developing economies can be balanced by a reduction in pollution from highly developed economies
(D)
It describes an ‘n’ shaped relationship between income inequality and GDP per capita
Question-5
If a large number of individuals are affected by an external benefit, private bargaining will not work because of:
(A)
The Coase theorem.
(B)
The fallacy of composition.
(C)
The free-rider problem.
(D)
Non-rivalry.
Question-6
Which of the following would meet an economist's definition of a public good?
(A)
An elementary school
(B)
A hospital
(C)
A university
(D)
National defense
Question-7
Market failure occurs when
(A)
Society chooses the optimal mix of output
(B)
When market prices signal what to produce
(C)
When a society does not vote on what should be produced
(D)
The market mechanism does not produce the optimal outcome
Question-8
All of the following statements are correct except:
(A)
When marginal social costs are greater than marginal private costs, there is a negative externality
(B)
When marginal social benefits are higher than marginal private benefits, governments should subsidize production
(C)
When marginal social costs are higher than marginal private costs, governments should tax production
(D)
When marginal private costs are equal to marginal private benefits, the level of output is socially optimal
Question-9
The social demand minus the externalities represents:
(A)
The difference in price
(B)
The level of public goods
(C)
The optimal mix of output
(D)
The market demand
Question-10
All of the following statements are wrong except:
(A)
A monopoly will always be Pareto efficient
(B)
A perfectly competitive market is not always Pareto efficient
(C)
Redistribution of income from producers to consumers can restore Pareto efficiency
(D)
The presence of externalities will preclude Pareto efficiency
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Cambridge Secondary Grade 10
IGCSE
Practice in Related Chapters
Demand-Side and Supply-Side Policies
Elasticities
Competitive Markets Demand and Supply
The Foundation of Economics
The Theory of the Firms Production, Costs, Revenue and Profits
The Theory of the Firm II Market Structures
The Level of Over All Economic Activity
Aggregate Demand and Aggregate Supply
Government Intervention
Macroeconomic Objectives I : Low Unemployment,Low and Stable Rate of Inflation
Macro Economic Objectives II : Economic Growth and Equity in the Distribution of Income
Market Failure
International Trade
Exchange Rates and the Balance of Payments
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