MWS EXAM UPDATED ACTUAL Exam
Questions and CORRECT Answers
Redistribution (robin-hood function) - CORRECT ANSWER - redistribution is about the
allocation of the pie (equity)
- poverty relief
- reducing inequality
- social inclusion
social welfare function (SWF) - CORRECT ANSWER - aggregates utility functions of all
individuals
utilitarian social welfare function - CORRECT ANSWER - Maximizes the sum of
individual utilities
W = U1 + U2 + U3 + ... + Un
Rawlsian Social Welfare Function - CORRECT ANSWER - maximizes the utility of the
worst-off member of society
W = min (U1, U2, ..., Un)
Market failures (piggy-bank function) - CORRECT ANSWER - alleviating market failures
is about the size of the pie (efficiency)
even if you do not want to redistribute, government intervention may be needed, in case of:
- externalities
- bounded rationality
- information asymmetry
,The three objectives to designing the welfare state - CORRECT ANSWER - - equity
- efficiency
- administrative feasibility
equity - CORRECT ANSWER - - poverty relief
- reducing inequality
- social inclusion
efficiency - CORRECT ANSWER - making the best use of limited resources given
people's tastes (or preferences) and the available technology
administrative feasibility - CORRECT ANSWER - - the system should be simple, easy to
understand, and cheap to administer
- benefits should be as little open to abuse as possible
cash transfers - CORRECT ANSWER - unconditional: child benefits
contribution-based: unemployment or disability benefits
means-tested: social assistance, housing benefits
actuarially fair insurance premium - CORRECT ANSWER - the insurance company
experiences no losses / profits
challenges and trends for the welfare state - CORRECT ANSWER - - globalization and
worldwide trade (more and more difficult)
- demographic changes (aging populations, more female participation)
- changes in the structure of jobs and polarization between skilled workers and peripheral
workforce
- AI
, risk sharing - CORRECT ANSWER - insurers pool risks, to reduce risks for individuals
- takes advantage of LOLN
- the average of individual risks decreases with increasing pool size
four conditions of private provision of insurance - CORRECT ANSWER - 1. risk
probabilities are independent; it cannot be common shock
2. probabilities less than one
3. known probabilities
4. no asymmetric information
consumption smoothing - CORRECT ANSWER - institutions, like governments and social
systems, should enable individuals to manage their spending and financial resources over their
lifetime in a way that ensures stability and avoids extreme fluctuations in their standard of living.
In essence, it's about helping people maintain a relatively consistent level of consumption and
financial well-being throughout their lives
Bismarck approach - CORRECT ANSWER - focuses more on maintaining people's living
standards based on their earnings (consumption smoothing)
Beveridge approach - CORRECT ANSWER - places greater importance on lifting people
out of poverty with flat-rate benefits
residual welfare model - CORRECT ANSWER - regards welfare only important when
market or family structures break down.
institutional welfare model - CORRECT ANSWER - regards welfare as an integral part of
modern industrial society
Cutler and Lleras-Muney (2006) - CORRECT ANSWER - Using a variety of data sets in
two countries, we examine the relation between education and health behaviours. Education
Questions and CORRECT Answers
Redistribution (robin-hood function) - CORRECT ANSWER - redistribution is about the
allocation of the pie (equity)
- poverty relief
- reducing inequality
- social inclusion
social welfare function (SWF) - CORRECT ANSWER - aggregates utility functions of all
individuals
utilitarian social welfare function - CORRECT ANSWER - Maximizes the sum of
individual utilities
W = U1 + U2 + U3 + ... + Un
Rawlsian Social Welfare Function - CORRECT ANSWER - maximizes the utility of the
worst-off member of society
W = min (U1, U2, ..., Un)
Market failures (piggy-bank function) - CORRECT ANSWER - alleviating market failures
is about the size of the pie (efficiency)
even if you do not want to redistribute, government intervention may be needed, in case of:
- externalities
- bounded rationality
- information asymmetry
,The three objectives to designing the welfare state - CORRECT ANSWER - - equity
- efficiency
- administrative feasibility
equity - CORRECT ANSWER - - poverty relief
- reducing inequality
- social inclusion
efficiency - CORRECT ANSWER - making the best use of limited resources given
people's tastes (or preferences) and the available technology
administrative feasibility - CORRECT ANSWER - - the system should be simple, easy to
understand, and cheap to administer
- benefits should be as little open to abuse as possible
cash transfers - CORRECT ANSWER - unconditional: child benefits
contribution-based: unemployment or disability benefits
means-tested: social assistance, housing benefits
actuarially fair insurance premium - CORRECT ANSWER - the insurance company
experiences no losses / profits
challenges and trends for the welfare state - CORRECT ANSWER - - globalization and
worldwide trade (more and more difficult)
- demographic changes (aging populations, more female participation)
- changes in the structure of jobs and polarization between skilled workers and peripheral
workforce
- AI
, risk sharing - CORRECT ANSWER - insurers pool risks, to reduce risks for individuals
- takes advantage of LOLN
- the average of individual risks decreases with increasing pool size
four conditions of private provision of insurance - CORRECT ANSWER - 1. risk
probabilities are independent; it cannot be common shock
2. probabilities less than one
3. known probabilities
4. no asymmetric information
consumption smoothing - CORRECT ANSWER - institutions, like governments and social
systems, should enable individuals to manage their spending and financial resources over their
lifetime in a way that ensures stability and avoids extreme fluctuations in their standard of living.
In essence, it's about helping people maintain a relatively consistent level of consumption and
financial well-being throughout their lives
Bismarck approach - CORRECT ANSWER - focuses more on maintaining people's living
standards based on their earnings (consumption smoothing)
Beveridge approach - CORRECT ANSWER - places greater importance on lifting people
out of poverty with flat-rate benefits
residual welfare model - CORRECT ANSWER - regards welfare only important when
market or family structures break down.
institutional welfare model - CORRECT ANSWER - regards welfare as an integral part of
modern industrial society
Cutler and Lleras-Muney (2006) - CORRECT ANSWER - Using a variety of data sets in
two countries, we examine the relation between education and health behaviours. Education
