economics

1. why do governments often subsidise the cost of entrance to museums?
a museums are a pure public good.
b_ social benefits are less than social costs.
c_ social benefits exceed private benefits.
d_ social costs exceed private costs.

2 ~the table shows the marginal costs of production and marginal benefits of consumption.
marginal private | marginal social | marginal private | marginal social
cost ($) cost ($) benefit ($) benefit ($)
what is demonstrated in these values?
a anegative consumption externality
b_ apositive production externality
c_ pareto optimality
d_ resource misallocation

3 a cost-benefit analysis concludes that a nuclear power station project might be socially
worthwhile, although it will take 10 years to bring into operation.
why might a government decide not to undertake the project?
a_ cost-benefit analysis has no method for valuing the long-term impact of a project.
b_ cost-benefit analysis is only suitable for private sector projects.
c_ the government believes that the project has too high an opportunity cost.
d_ the government's policy is to restrict the extent of the market system.

4 the diagram shows a budget line indicating combinations of good y and good x that a consumer
could buy with a given income. the combinations shown by points s and t both lie on the same
normal indifference curve.

jood y
z
ss
ww
t
[e)

good x
which statement is logically correct?
a_ the consumer is indifferent between combinations w, s and t.
b the consumer prefers combination t to combination w.
c_ the consumer prefers combination w to combination s.
d_ the consumer prefers combination z to combination t.

5 the table shows some of the assumptions of perfect competition and monopolistic competition.
which pairing is correct?
| | perfect competition monopolistic competition
a identical products freedom of entry and exit
b barriers to entry differentiated products
cc large number of firms small number of firms
d differentiated products barriers to entry

6 what is a feature of a natural monopoly?
a the monopoly produces a product that has no close substitutes.
b_ average costs fall over the entire range of output.
c the monopoly controls the supply of its raw materials.
d_ diseconomies of scale set in at low levels of output.

7  afirm is already the monopoly producer of product x.
which strategy might the firm pursue in order to prevent new firms from entering the market for
product x?
a_ co-operation
b limit pricing
c predatory pricing
d price leadership

8 what makes collusion between firms in an oligopolistic industry more difficult?
a barriers to the entry of new firms
b limited scope for cost reduction via innovation
c _ significant product differentiation between firms
d stability in the market demand for the product

9 what is the defining characteristic of an oligopolistic industry?
a contestability
b large numbers of firms
c mutual interdependence
d price rigidity

10 a perfectly competitive firm is currently producing at a level of output where its marginal cost is
above both its average total cost and the market price.
what would be the effect on price and output if the firm were to maximise its profit?
a decrease increase
b decrease unchanged
cc increase decrease
d increase unchanged

11. in which industrial sector is a small firm most likely to survive?
a banking
b_ construction
c_ insurance
d_ mining

12 a firm wishes to avoid attracting competition from new entrants. it charges the maximum price
that is consistent with this aim.
in which type of market does this firm operate?
a acontestable market
b  amonopolistically competitive market
c amonopsonistic market
d_ aperfectly competitive market

13 in which market structure will the industry price be unaffected by a change in the output of one
individual firm?
a monopolistic competition
b monopoly
c oligopoly
d_ perfect competition

14 in 2015 the price of oil fell dramatically. as a result, 65000 jobs were lost in the north sea oil
industry.
how would this be represented on a diagram for the labour market for oil workers?
a  amovement down the marginal revenue product curve
b_ashift towards the horizontal axis of the marginal cost curve
c_ashift towards the origin of the marginal revenue product curve
d_ashift towards the vertical axis of the average cost curve

15 an actor is paid $100000 a year. the next best paid job he could get is as a lecturer at $60000 a
year.
what are his transfer earnings and his economic rent?
[| tenstereamines | econemierent |
a $60000 $40000
b $60000 zero
cc $40000 $60000
d $40000 zero

16 what is not an outcome of the existence of private property rights?
a_ they encourage private owners to conserve property when its value is expected to rise.
b_ they give private owners the incentive to manage their property carefully.
c_ they make a private owner accountable for damage to others from property misuse.
d_ they prevent private owners gaining from using resources to benefit others.

17 astate-owned concern is privatised as a monopoly.
what would increase the likelihood of its achieving productive efficiency?
a anabsence of barriers to entry
b_ the need for capital representing a high sunk cost
c the existence of significant economies of scale
d_ variable costs forming a small proportion of total cost

18 which policy is most likely to both increase productivity and improve equity?
a a switch in taxation from income to expenditure
b | the introduction of minimum prices on essential foodstuffs
c the privatisation of state-run transport systems
d_ the supply of free health care

19 which indicator is least likely to be used when measuring the comparative economic
development of a country?
a adult literacy rate
b_ average life expectancy at birth
c level of real gnp per head
d - size of population

20 what needs to be removed to improve nominal gdp as a measure of comparative living
standards?
a the effects of exports and imports
b the effects of exports and population change
c the effects of population change and imports
d the effects of population change and inflation

21 ihe diagram snows the age structure of the polisn population in 20109 and the predicted structure
in 2050. since 2013, the retirement age in poland has been 67 for men and 65 for women.
2015 (%) 2050 (%)
8 6 4 2 0 0 2 4 6 8
100+
95-99
90-94
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
what might be concluded from the diagram?
a_ fewer school places will be needed in 2050 than 2015.
b_ full employment is more likely in 2050 than 2015.
c_ the number employed between ages 20-24 in 2015 was higher than that predicted for 2050.
d_ there will be a higher percentage of the population over retirement age in 2050 than in 2015.

22 the table gives information on differences between females and males in 2013 in the human
development index and gross national income per capita in countries with different levels of
development.

gni per capita
hdi (us $ purchasing
power parity 2011)
very high development .871 .887 26 667 53681
high development 710 133 9426 16 966
medium development 565 622 3199 8619
low development 446 .506 2011 3789
what can be concluded from the table?
a females are closer to males in earning ability than in development opportunities.
b females are closest to males in development opportunities in countries with low
development.
c males have over twice the purchasing power of females in countries with very high
development.
d_ the table ignores the different level of educational attainment between females and males.

23 in an economy with no government sector:
c = consumption
| = investment
x = exports
m = imports
y = national income.
if c = 40 + 0.5y, | = 80, x = 100 and m = 100, what will be the equilibrium level of y?
a 60 b 240 c 280 d 640

24 the diagram shows a closed economy in which the full employment level of income is yr.
j
aggregate l ad
demand, k
consumption cc
a |
oo m ny,
income
which distance measures the deflationary gap?
a jk b jl c ny- d my-

25 in the quantity theory of money equation, mv = pt, v is defined as the income velocity of
circulation.
which change would tend to reduce the value of v?
a amove to monthly rather than weekly salary payments by firms
b_anincrease in interest rates
c_anincrease in the use of cash machines to reduce money balances held
d_ anincrease in the use of credit cards by individuals

26 what moves from households to firms within the circular flow of income?
a factor services
b_ investment
c savings
d_ taxes

27 what is meant by liquidity preference?
a adesire to be paid in cash rather than by cheque
b_adesire to be paid monthly rather than weekly
c_ adesire to hold assets that are convertible into cash
d_ adesire to hold money rather than other assets

28 what is an appropriate government policy for closing a deflationary gap?
a_anincrease in the rate of interest
banopen market sale of bonds
c_anincrease in government spending
d_anincrease in income tax

29 which policy is most likely to contribute to people ending up in a poverty trap?
a legal minimum wage
b means-tested benefits
c prevention of cheaper imports
d proportional taxation

30 during year 1, a government announces a temporary one-year reduction in the level of indirect
taxation balanced by an equivalent temporary one-year increase in direct taxation.
what is most likely to be the impact on household saving in year 1 and in year 2?
impact on household impact on household
saving in year 1 saving in year 2

a decrease decrease

b decrease increase

cc increase decrease

d increase increase

Solve 9708_w17_qp_32