2. Which among the following is NOT a correct statement?
Correct : D. The founder of Welfare economics was Alfred Marshall.
3. The statement "The unemployment rate for teens is higher than that for adults" is
Correct : B. A positive statement
4. When the allocation of resources is Pareto efficient
Correct : C. it is not feasible to make someone better off without making someone worse off.
5. If some allocation of resources is Pareto efficient, then that allocation satisfies:
Correct : D. allocative efficiency, productive efficiency, and distributive efficiency.
6. When two commodities X and Y must be allocated among consumers, a necessary condition for distributive efficiency is that:
Correct : D. the marginal rates of substitution MRSXY for all consumers must be equal.
7. The necessary condition for allocative efficiency is that each commodity be produced in an amount that makes the marginal benefit to society of the last unit produced equal to the marginal cost to society of that last unit. The satisfaction of this condition in a market economy relies on the assumptions of:
Correct : A. utility maximization, profit maximization, and perfect competition.
8. The Fundamental Theorem of Welfare Economics:
Correct : D. holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.
9. If an economy operates on its production possibility curve, then the allocation of resources in that economy satisfies:
Correct : D. productive efficiency.
10. If a brother and sister return home from trick-or-treating on Christmas and engage in a series of voluntary trades of candy, we can conclude that:
Correct : A. the initial allocation of candy between them was distributively inefficient.
11. Growth of GNP as A Criterion of Welfare was advocated by
Correct : B. Adam Smith
12. Welfare is improved when ‘the greatest good (is secured) for the greatest
number’ is a statement given by
Correct : C. Jeremy Bentham
13. A situation in which it is impossible to make anyone better-off without
making someone worse-off is said to be
Correct : B. Pareto-optimal
14. The concept of ‘Social Welfare Function’ was propounded by A. Bergson in his article ‘A Reformulation of Certain Aspects of Welfare Economics’ published in the year 1938
Correct : C. 1938
15. The locus of the various physically attainable utility combinations of two persons when the factor endowments, state of technology and preference orders of the individuals are given.
Correct : A. grand utility possibility frontier
16. A famous welfare economics book called, “Economics of Welfare” was
written by
Correct : C. A. C. Pigou
17. Who defines economic welfare as “that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money.”
Correct : B. A. C. Pigou
18. Kaldor-Hicks compensation principle can be explained with the help of
Correct : A. Utility possibility curve
19. Welfare Economics is generally accepted as
Correct : B. Normative science
20. According to AC Pigou, any reorganization of the economy which increases the share of the poor without reducing the national income is also considered an
Correct : C. improvement in social welfare
21. In Pareto welfare economics, Efficiency of distribution of commodities among consumers is related to
Correct : B. efficiency in exchange
22. In Pareto welfare economics, Efficiency in the allocation of factors among commodities is related to
Correct : C. efficiency in product-mix
23. In Pareto welfare economics, Efficiency of the allocation of factors among
firms is related to
Correct : A. efficiency in production
24. The marginal condition for a Pareto-optimal allocation of factors requires that the ________ between labour and capital be equal for all commodities produced by different firms.
Correct : B. MRTS
25. The marginal condition for a Pareto-optimal or -efficient distribution of commodities among consumers requires that the MRS between ______ be equal for all consumers.
Correct : B. Two goods
26. If any policy change benefits any one section of the society (gainers) to such an extent that it is better off even after the payment of compensation to the other sections of the society (losers) out of the benefits received, then that change leads to
Correct : C. increase in social welfare
27. Who among the following economist accepted growth of GNP as a
criterion of Social Welfare
Correct : B. Adam Smith
28. If inflation occurs, investment will be
Correct : B. Less profitable
29. Air pollution can be termed as a
Correct : B. Social cost
30. If the net present value is greater than zero, then the project is
Correct : A. Accepted
31. The period of time required to recover initial cost of investment is called
Correct : A. Payback period
32. The number of years required to recover initial cost of investment is
called
Correct : C. Payback period
33. Internal rate of return is also identified as the
Correct : A. Price and location criteria
34. In an investment project, the lower the rate of interest
Correct : C. The higher the present value of the project
35. The rate of discount which equilibrates the cost of capital good s and the
expected future returns from the capital good is known as
Correct : A. Internal rate of return
36. If the internal rate of return (IRR) is negative, then the investor
Correct : A. Loses money
37. If the net present value (NPV) is more than one, then the project may be
Correct : A. Accepted
38. If rate of interest is 10% the PV (present value) of Rs. 100 received in 1
years time is
Correct : B. 90.9
39. The reason that finding the present value of a future sum of money
requires us to discount it, is that:
Correct : D. Waiting deprives us of its use
40. If interest rates rise, the present value of any future earnings is bound to:
Correct : D. Fall
41. Projects with __________ are preferred
Correct : A. Lower payback period
42. ___________ on capital is called ‘Cost of capital’.
Correct : B. Normally expected return
43. The values of the future net incomes discounted by the cost of capital are
called
Correct : C. Net present values
44. Under Net present value criterion, a project is approved if
Correct : C. Both (A) and (B
45. The internal Rate of Return (IRR) criterion for project acceptance, under
theoretically infinite funds is: accept all projects which have
Correct : B. IRR greater than the cost of capital
46. Which of the following criterion is often preferred
Correct : A. Net present value
47. The project is accepted of
Correct : D. Both (B) and (C
48. Where capital availability is unlimited and the projects are not mutually
exclusive, for the same cost of capital, following criterion is used
Correct : D. All of the above
49. A project is accepted when
Correct : D. Any of the above
50. With limited finance and a number of project proposals at hand, select that package of projects which has
Correct : A. The maximum net present value
51. A project may be regarded as high risk project when
Correct : A. It has smaller variance of outcome but a high initial investment
52. What is the net present value?
Correct : D. the present value of a project’s cash flows minus its initial cost
53. Why are projects with negative net present values (NPVs) unacceptable to a firm?
Correct : A. Returns lower than the cost of capital result in firm failure.
54. The Internal Rate of Return is defined as
Correct : B. the discount rate which causes the NPV to equal zero.
55. Each of the following techniques use discounted cash flows to
incorporate the time value of money into their analysis except
Correct : A. payback method
56. A manager can presume that the project will enhance shareholder wealth
only if its NPV based on the risk adjusted rate is
Correct : D. positive.
57. The higher the interest rate
Correct : A. The more valuable revenue today is in comparison with revenue in the future.
58. The net present value
Correct : A. Is calculated by discounting all cash flows to present value and subtracting outflows from inflows
59. When using the net present value and the internal rate of return to evaluate capital projects:
Correct : C. The two techniques may give different answers if the initial costs of the projects differ.
60. If the internal rate of return (r) is less than the cost of capital,the project should be
Correct : B. rejected
61. The basis of trade between countries lies in the
Correct : C. Difference in resource endowment
62. One similarity between international trade and inter-regional trade is that in general both must overcome
Correct : C. Distance or space
63. The basis of trade between countries lies in the
Correct : D. All of the above
64. The absolute advantage theory of international trade is associated with
Correct : B. Adam Smith
65. Trade between nations occur due to
Correct : B. Difference in resource endowment
66. Adam Smith propounded the theory of
Correct : C. Absolute advantage in international trade
67. David Ricardo propounded theory of
Correct : C. Comparative theory of international trade
68. In Heckscher-Ohlin model, factor abundance have been defined in two terms. Those are
Correct : C. Price and physical criteria
69. The absolute advantage theory of international trade is associated with
Correct : B. Adam Smith
70. Trade among different regions within the same country is known as
Correct : B. Interregional trade
71. Heckscher-Ohlin theory of international trade is based on
Correct : C. Factor endowment differentials
72. The main objective of international trade is
Correct : A. To maximize production
73. Import quota implies
Correct : B. Physical limitation of quantities of goods traded from other countries
74. According to Heckscher-Ohlin theory as a result of international trade, the difference in factor price between nations
Correct : A. diminishes
75. The imposition of an import tariff by a nation usually
Correct : C. improves the nation’s terms of trade but reduces the volume of trade
76. If a nation has a comparative advantage in the production of a good,
Correct : A. it can produce that good at a lower opportunity cost than its trading partner
77. According to the principle of comparative advantage,
Correct : B. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.
78. Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade,
Correct : C. the domestic price of 1 ring is 1/3 of a watch.
79. Suppose the world consists of two countries: the UK and Spain. Further, suppose there are only two goods--food and clothing. Which of the following statements is true?
Correct : D. If the UK has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing
80. Who propounded the opportunity cost Theory of international trade?
Correct : D. Haberler
81. ‘Infant industry argument’ in international trade is given in support of:
Correct : A. Granting Protection
82. The Heckscher-Ohlin approach to international trade provides important insights, in
Correct : D. All of the above
83. Which of the following trade policies limits specified quantity of goods to
be imported at one tariff rate.
Correct : A. Quota
84. In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
Correct : C. relative availabilities of factors of production
85. According to Ricardo, a country will have a comparative advantage in:
Correct : C. Industries that sell to domestic and foreign buyers
86. Nations conduct international trade because:
Correct : B. Resources are not equally distributed among all trading nations.
87. Which of the following is a determinant of trade?
Correct : D. All of the above
88. Which of the following is not a benefit of international trade?
Correct : A. High wage levels for all domestic workers
89. Who benefits from tariff protection?
Correct : B. Domestic producers of the good produced
90. A closed economy is one in which:
Correct : C. The home economy is isolated from foreign trade
91. What determines the pattern of specialisation and trade in industries with
external economies of scale?
Correct : C. Historical competition
92. David Ricardo's trading principle emphasis the:
Correct : C. role of comparative costs
93. Under Heckscher-Ohlin Model, international trade can lead to increases in:
Correct : B. Output of both products and consumer welfare in both countries
94. A main advantage in specialisation results from:
Correct : A. Economies of large-scale production
95. The exchange of goods and services are known as
Correct : B. Trade
96. Which is not an advantage of international trade:
Correct : C. Dependence on foreign countries
97. The first classical theory of International Trade is given by
Correct : C. Adam Smith
98. In classical theory of International Trade, the exchange of goods and
services takes on the basis of ………….. system?
Correct : A. Barter
99. If capital is available in large proportion and labour is less, then that
economy is known as
Correct : A. Capital Intensive
100. In Heckscher Ohlin theory, what is assumed to be same across the
countries?