Efficiency criteria: Pareto-optimality, Kaldor–Hicks and wealth maximization. - One Line Questions

1. The 'Second Fundamental Theorem of Welfare Economics' suggests that: — All Pareto-optimal outcomes can be achieved by competitive markets.
2. In a perfectly competitive market with no externalities or public goods, the equilibrium outcome is: — All of the above.
3. A situation is Pareto-superior to another if: — At least one person is better off and no one is worse off.
4. Wealth maximization is often criticized for: —
5. The Kaldor-Hicks criterion is sometimes called the 'hypothetical compensation test' because: — Compensation need not actually be paid for a change to be considered efficient.
6. The core idea behind Pareto-optimality is: — Allocative efficiency
7. The concept of 'potential Pareto improvement' implies that a change is beneficial if: — The winners could compensate the losers, even if they don't.
8. Wealth maximization can be seen as a broader concept than Kaldor-Hicks efficiency because: — It may encompass changes that do not result in a net gain for any identifiable group.
9. Which of the following is a potential drawback of wealth maximization as an efficiency goal? — It may justify policies that significantly harm a minority if the majority benefits substantially.
10. The main advantage of Kaldor-Hicks efficiency over Pareto-optimality is: — It allows for more policy changes to be deemed efficient.
11. If an allocation of resources is NOT Pareto-optimal, it implies that: — It is possible to make at least one person better off without making anyone worse off.
12. The Kaldor-Hicks criterion suggests a change is desirable if: — The gains to the winners are large enough to compensate the losers.
13. A situation where resources are allocated such that any reallocation would make at least one person worse off is known as: — Pareto-optimal
14. Which economic concept defines a state where no individual can be made better off without making someone else worse off? — Pareto-optimality
15. The critique that Kaldor-Hicks efficiency might justify policies that harm the poor for the benefit of the rich relates to its: — Indifference to distribution.
16. Wealth maximization as an efficiency criterion focuses on: — Maximizing the total value of assets and resources in an economy.
17. A situation is Pareto-optimal if and only if: — No further mutually beneficial trades are possible.
18. In the context of efficiency criteria, 'wealth' is often interpreted as: — The sum of consumer and producer surplus.
19. A policy that makes one person happier and another person equally happy is: — Not a Pareto improvement
20. Consider an economy with two individuals, A and B. If we can increase A's utility without decreasing B's utility, the economy is: — Pareto inefficient
21. Consider a market where a monopolist charges a price higher than marginal cost. This market outcome is typically: — Pareto inefficient
22. The 'First Fundamental Theorem of Welfare Economics' states that under certain conditions, competitive markets lead to outcomes that are: — Pareto-optimal
23. Which efficiency criterion is most likely to be indifferent between an outcome where one person has all the wealth and another where wealth is equally distributed, provided total wealth is the same? — Wealth maximization
24. If a policy leads to a situation where someone gains $100 and someone else loses $50, this is considered efficient by: — Both B and C
25. The potential for interpersonal comparisons of utility makes which criterion more complex to apply? — Pareto-optimality
26. Which efficiency criterion is most directly related to the idea of maximizing the sum of consumer and producer surplus? — Wealth maximization
27. If a policy change results in some individuals being better off and others being worse off, but the winners could theoretically compensate the losers to make them no worse off, this change is considered efficient according to: — Kaldor-Hicks criterion
28. The concept of 'potential Pareto improvement' is most closely associated with which criterion? — Kaldor-Hicks efficiency
29. The statement 'a change is efficient if the sum of the absolute changes in economic welfare is positive' best describes: — Wealth maximization
30. Which efficiency criterion is often used in cost-benefit analysis? — Kaldor-Hicks efficiency
31. The 'compensation principle' is another name for: — Kaldor-Hicks efficiency
32. If a change leads to a situation where compensation is possible but not actually paid, it is considered efficient by: — Kaldor-Hicks criterion
33. Which efficiency criterion is most directly related to the concept of 'gains from trade'? — All of the above
34. A situation where total economic welfare is maximized, irrespective of its distribution, aligns with the principle of: — Wealth maximization
35. Which criterion is less concerned with the ethical implications of resource distribution? — Wealth maximization
36. If a policy change creates winners and losers, and the winners' gains are greater than the losers' losses, it is efficient under: — Both B and C
37. Which efficiency criterion is most likely to support a project that benefits many people slightly but harms a few people significantly? — Wealth maximization
38. Which criterion is considered a normative criterion rather than purely positive? — Kaldor-Hicks efficiency
39. The condition that requires the marginal rate of substitution (MRS) to equal the marginal rate of transformation (MRT) in all industries is a condition for: — Pareto-optimality in exchange and production.
40. A situation where the marginal benefit of a good equals its marginal cost is a condition for: — Both A and B.
41. If an economy is operating on its production possibility frontier, this is a condition for: — Pareto-optimality in production.
42. Which of the following is a situation of Pareto inefficiency? — The existence of positive externalities.
43. If an economy is at a state of Pareto-optimality, it implies that: — No further mutually beneficial reallocations are possible.
44. Wealth maximization, as an objective, is most closely aligned with the principles of: — Utilitarianism
45. The challenge in applying Pareto-optimality in practice is often due to: — The requirement for unanimous consent for any change.
46. The ability to achieve Pareto-optimality is often constrained by: — All of the above.
47. The concept of Pareto-optimality is primarily concerned with: — The efficiency of resource allocation.
48. The distinction between Pareto-optimality and Kaldor-Hicks efficiency lies primarily in: — Whether actual compensation is required.
49. Which efficiency criterion is considered stronger or more stringent than Kaldor-Hicks efficiency? — Pareto-optimality
50. Which criterion is a necessary but not sufficient condition for Pareto-optimality? — Kaldor-Hicks efficiency
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