Solved PYQs 22-31 of 39: Welfare Economics | IEcoS (Economic Services) Economics Paper-1 | Chapter-wise | PYQ 2021
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Question 22 | PYQ 2021500 words | 6 marks
Distinguish between pure strategies and mixed strategies of a game.
Answer
Pure Strategy
- A pure strategy is an unconditional, defined choice that a player makes in a situation or game.
- For illustration, in the game of Rock-Paper-Scissors, if a player would choose to only play Rock for each and every independent trial, regardless the other player strategy, considering paper would be the players pure strategy.
- Th…
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Welfare EconomicsSocial Choice, Game Theory and More
Question 23 | PYQ 2020500 words | 6 marks
Explain the meaning of Nash equilibrium. How does it differ from an equilibrium in dominant strategy?
Answer
Nash Equilibrium
Named after an American Mathematician and economist – John F. Nash (Nobel Prize winner in Economics in 1994). It is a strategy for each player that is the best choice for each player given the equilibrium strategy of others. A game is in equilibrium if neither player has an incentive to change his or her choice, unless…
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Welfare EconomicsSocial Choice, Game Theory and More
Question 24 | PYQ 2020500 words | 6 marks
Why do externalities prevent markets from being efficient? How does Coase theorem correct an externality?
Answer
Externality
An externality is a cost or benefit that stem from the production or consumption of a good or service.
It can be of 2 types-
Negative Externality
- It is one that creates side effects that could be harmful to either the general public directly or through the environment.
- Example- A person living with a smoker, will become a passi…
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Welfare EconomicsPublic Goods and Externality
Question 25 | PYQ 2020500 words | 6 marks
Discuss social choice theory in economics. Distinguish between the views of Amartya Sen and Kenneth arrow in making choices for social welfare.
Answer
Social Choice Theory
- Social choice theory or social choice is a theoretical framework for analysis of combining individual opinions, preferences, interests, or welfares to reach a collective decision or social welfare in some sense. Whereas choice theory is concerned with individuals making choices based on their preferences, social ch…
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Welfare EconomicsSocial Choice, Game Theory and More
Question 26 (1 of 2 Based on Passage) | PYQ 2020160 words | 5 marks
Passage
Mohan is paid ₹8 if two coins turn both heads and ₹1 if two coins turn both tails. Ram is paid ₹3 when the two coins do not match.
Write down the pay-ff matrix of the above problem.
Welfare EconomicsSocial Choice, Game Theory and More
Question 27 (2 of 2 Based on Passage) | PYQ 2020 160 words | 5 marks
Whom do you consider in the better situation?
Welfare EconomicsSocial Choice, Game Theory and More
Question 28 | PYQ 2020500 words | 6 marks
State the fundamental theorems of welfare economics.
Answer
In welfare economics, there are two fundamental theorems-
- First Fundamental theorem
- This theorem is also known as “Invisible Hand Theorem”. According to this theorem, any competitive equilibrium leads to Pareto efficient allocation of finite resources. Social optimum is the main idea for market structure in t…
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Welfare EconomicsPareto Optimality
Question 29 | PYQ 2020500 words | 6 marks
Public goods are both non-rival and non-exclusive. Explain each of these terms and show clearly how they differ from each other.
Answer
According to Prof. Baumol, public good is that good “whose consumption by one individual does not reduce its utility to any other individual”.
- A public good has two main key characteristics-
- Non-excludable- It means that any person can՚t force other person from using the good. For example, A service given …
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Welfare EconomicsDivergence between Social and Private Welfare
Question 30 | PYQ 2021500 words | 6 marks
Find the value of a game:
A | B | ||
25 | 10 | ||
5 | 15 | ||
Answer
Let B plays with probability x.
And B plays with probability .
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Welfare EconomicsSocial Choice, Game Theory and More
Question 31 | PYQ 2021500 words | 6 marks
Distinguish between Egalitarian society, Utilitarian society, Market-oriented society and Rawlsian society.
Answer
In egalitarian societies, all individuals in a society have equal rights and opportunity by birth. No discrimination would be made in terms of caste, religion, etc.
- Such society are often referred as classless societies.
- This type of system is not usable or applicable in today՚s modern world as it got formed from religions, race, money,…
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Welfare EconomicsSocial Choice, Game Theory and More