economics

1. what might help achieve allocative efficiency?
a differentiated products
b government subsidies
c monopsony
d_ supernormal profits

2 in 2015, a company electrified the main railway line between two cities in order to decrease the
journey time. the work was noisy, expensive and took a long time.
what would be the likely outcome of this project?
a external costs increased and private benefits decreased.
b_ private benefits decreased and external cost decreased.
c_ private benefits increased and private costs increased.
d_ private costs increased and external costs decreased.

3 which measure is specifically designed to reduce divergences between private and social costs?
a equal pay legislation
b~ minimum wage legislation
c the abolition of tuition fees paid by university students
d _ the introduction of ‘bus only’ lanes in city centres

4 which is an internal economy of scale?
a efficient local transport networks
b_ improved access to spare parts as a result of industry growth
c lower risks from supplying a wider range of customers
d | the training of skilled labour at a college financed by local firms

5 the diagram shows the position of a profit-maximising firm in a perfectly competitive industry.
mc
price, ac
cost
ar =mr
o output
what is the correct analysis of this position?
profits in number of firms in the
short run industry in the long run
a supernormal decrease
b supernormal increase
cc normal remain the same
d subnormal decrease

6 when a firm doubles its variable inputs, its fixed inputs are unchanged and output less than
doubles.
what does this illustrate?
a decreasing average cost
b_ decreasing marginal cost
c_ diminishing returns
d_ diseconomies of scale

7 which practices would be classified as price discrimination?
; ‘ f charging lower return flight fares from
charging higher hall fates te meet kuala lumpur to hong kong for
the additional costs of train ;
eariparias passengers who stay overnight on a
p saturday in hong kong
a no no
b no yes
cc yes no
d yes yes

8 to maximise total revenue, up to which point should a monopolist increase output?
a_ where marginal revenue equals average revenue
b_ where marginal revenue is maximised
c_ where marginal revenue is zero
d_ where price elasticity of demand is zero
a

3 attirm is operating in perfect competition.
what will be the effect on the firm’s revenue if it increases its output by 5%?
a its revenue will be unchanged.
bits revenue will increase by 5%
c its revenue will increase by less than 5%.
d its revenue will increase by more than 5%.

10 a firm successfully engages in a policy of predatory pricing.
what will happen to the prices charged by the firm in the short run and in the long run?
prices in the prices in the
short run long run
a rise rise
b rise fall
cc fall rise
d fall fall

11 what will act as a barrier to collusion between firms?
a_anability to detect price cuts by rivals
b _ the abolition of anti-trust measures
c_ the existence of a small number of firms in the industry
dunstable demand conditions for products

12 the diagram represents different combinations of good x and good y.
a consumer prefers more units of both goods to fewer units but prefers, as far as possible, not to
give up any of good y to obtain more of good x.
u
good y ®
t v
ww
3 good x
which combination in the diagram could represent the consumer's order of preference in
descending order?
a utvw b uvtw cc tuvw d wvut

13 a consumer demands two goods, x and y. the indifference curve diagram shows the effect of a
change in the price of one of these goods on the consumer's equilibrium.
good y
ie) good x
which demand curve can be deduced from the diagram?
a b cc d

14 what could prevent a market failure?
a barriers to entry
b building regulations
c growth of firms
d persuasive advertising

15 the diagram shows the gini coefficient for four countries between 1975 and 2010.
gini coefficient for brazil, mexico, india and china 1975-2010

65
55 st ee — brazil
45 : - “= china
40 ps = i tere --- india
354. ’
30-4. =
25 te,
20
jan 75 jan 80 jan 85 jan90 jan95 jan00o jan05 jan 10

which country made the greatest move towards a more equal income distribution over the

period?

a brazil

b= china

c india

d mexico

16 extra fishing boats start to operate from a local harbour which depends on fishing for its main
income.
which action by the local authority is an example of nudge theory?
a distributing leaflets about the need to safeguard fish stocks
b increasing the licence fees for new boats
c insisting that all fish caught are sold to local people
d restricting the areas in which boats can fish

17 what is the main disadvantage of government regulation aimed at restricting the profits earned in
a monopolistic industry?
a_ it acts as a disincentive to innovation.
b_ it cannot take account of externalities.
c_itleads to diseconomies of scale.
d_ it leads to excessive advertising by firms.

18 what is an advantage of a ‘creation of property rights’ solution to externalities resulting from river
pollution?
a it allows the possibility of a claim for compensation to those harmed.
b_ it always makes the polluter pay for pollution caused.
c_itresults in better monitoring by the government of the damage from pollution.
d it will eliminate pollution completely.

19 in the uk in 2015 the average wage was £26500 a year. at the same time, certain footballers
were earning more than £150000 a week.
which aspect of the theory of wage determination is most likely to explain this wage differential?
a aggressive wage bargaining by the professional footballers’ trade union
b _ the inclusion in wages of an element of economic rent
c_ the monopsony structure of the market for professional footballers
d the theory of net advantages

20 vvnat is the most effective policy a government could introduce to reduce frictional
unemployment?
a cut welfare spending on benefits
b_ improve information about job vacancies
c_ reduce tax rates
d raise interest rates

21 which combination is usually found in the least developed countries?
a ahigh birth rate and a dominant primary sector
b_capital-intensive production and a low rate of saving
c labour-intensive production and a declining population
d net inward migration and a low death rate

22 the diagram shows selected us labour statistics from 2001 to 2014.
ool nee
net new jobs 200 64 employed asa
monthly average 100 \ qa all | 63 percentage of
(thousands) xl ) population aged
sulina hls? popstation ao
uw — —— to
ool un te
-300 59
ee
—400 po | 58
—500
2001 05 10 14
year
what can be concluded from the diagram about 2001-2014?
a employment as a percentage of the population aged 16 and over declined continuously.
b_ in periods when the number of net new jobs was rising the percentage employed increased.
c_ the natural rate of unemployment was achieved only in 2008.
d_ the number of unemployed workers fell in all except four years.

23 under conditions of full employment, the quantity theory of money suggests that (other things
being equal) the effect of an increase in the velocity of circulation will be to increase
a output.
b prices.
c_ the demand for money.
d_ the quantity of money.

24 in a closed economy with neither government expenditure nor taxation, the initial income is
$2000 million. all savings are carried out by consumers, who save 25 % of any income received
above $2000 million. businesses plan to invest $2000 million.

what is the value of the multiplier?
a 5 b 4 c @ pd 3
3 4

25 which combination of factors is most likely to result in economic growth?
a san increase in management productivity together with a reduction in the hours worked per
employee
b_ increased educational enrolment together with an increase in business regulation
c the discovery of a new raw material deposit together with significant emigration of labour
d the invention of a technology together with the investment to use it in the economy

26 acountry’s real national income per head increases.
what could explain why this might be accompanied by a fall in households’ standard of living?
a adecrease in state welfare payments
b  adecrease in the working age population
c_ anincrease in the trade deficit
d_anincrease in the consumer price index

27 a director becomes redundant as the result of a company merger. his salary was $80 000. he is
entitled to an annual private pension of $30 000.
in his first year after redundancy he earns $40 000 in consultancy fees and saves $8000 by
dismissing his gardener.
what is the resulting change in measured national income in the first year?
a +$70000 b +$60000 c -$80000 d -$18000

28 vvnich cause of economic growth would invoive the least cost for present and tuture generations
of a country’s population?
a increased exploitation of a country’s mineral resources
b investment financed by borrowing from abroad
c_ investment financed by high rates of domestic savings
d technological innovations in productive processes

29 what would encourage industrial expansion in a region of high unemployment?
a arationing system for building development in that region
bareduction in tax allowances on investment
c  arequirement that only local labour may be employed
d_ anend to nationally negotiated wage rates

30 a government currently has a balanced budget. it is considering the possible variations in tax

revenue and government expenditure shown.

' government

options tax revenue :
expenditure

www increase increase

xx increase reduce

¥ reduce increase

z reduce reduce
which three options are likely to have the potential to move the budget into surplus?
a w, xand y b w,xandz c w,yandz d x,yandz

Solve 9708_m17_qp_32