economics

1. which condition must be met for economic efficiency to be achieved?
a marginal social benefits are at a maximum in the production of all goods.
b- marginal social costs are at a minimum in the production of all goods.
c_ marginal social costs are zero in the production of all goods.
d_ marginal social costs equal marginal social benefits in the production of all goods.

2 what is a characteristic of a merit good?
a free at the point of use
b has zero marginal costs
c non-competitive in use
d_ possesses positive externality

3 which statement is correct?
a_ external benefit minus private benefit equals social benefit.
b_ private benefit minus external benefit equals social benefit.
c_ social benefit minus external benefit equals private benefit.
d_ social benefit plus private benefit equals external benefit.

4 when does a consumer achieve maximum total utility (tu), according to marginal utility (mu)
theory for two goods, x and y, with different prices (p)?
a muy = muy
b mux _ muy
px py
cc mux _ muy
py px
d tux = tuy

5 the diagram shows a change in a consumer's budget line from rr to ss.
r
roduct y
s)
16) r §
product x

what might explain why this occurred?
a adecrease in income and a fall in the price of x
b- adecrease in income and a rise in the price of x
c_anincrease in income and a fall in the price of x
d_anincrease in income and a rise in the price of x

6  vvhen shirts are produced, fixed costs are 9100 and the variable cost is po per snirt.
if the price is $10, which output would result in normal profit?
a 10 shirts
b20 shirts
c25 shirts
d100 shirts

7 the table shows four market structures.
which characteristics could describe the market structure shown?
barriers differentiated
market structure

to entry products

a | monopolistic competition low no

b monopoly high yes

cc oligopoly low no

d perfect competition high yes

8 a firm abandons its policy of horizontal expansion and switches to a policy of backward vertical
growth.
what does this suggest is most likely about the firm’s objectives?
a_ it now prefers revenue maximisation to cost minimisation.
blt now prefers sales maximisation to profit satisficing.
c_ it now prefers security of sales to profit maximisation.
d it now prefers security of supplies to growth of market share.

9 what identifies the output level required to meet the stated aim of the firm?
aim of firm produce at output where
a maximum efficiency marginal cost is at a minimum
b profit maximising marginal cost is equal to average revenue
cc quantity of sales maximising average revenue is equal to average cost
d revenue maximising marginal revenue is zero

10 what makes it likely that firms will collude in setting prices for a particular product?
a_ ahighly contestable market structure
b  asmall number of firms with economies of scale
c persistent shortages of the product being supplied
d_ the existence of patent rights possessed by firms

11 the diagram shows a firm’s marginal and average cost curves.
the firm enters a collusive agreement with other firms in the industry. it is agreed that each firm
will charge a common price, op, and will restrict the level of its output to a production quota set
by the industry cartel.
the firm is allocated a production quota, oq.
$
mc ac
pp g h
0 q
quantity
the firm decides to cheat in order to maximise its profits.
what is its short-run increase in profits?
a pgkl
b phjl
c phjl minus pgnm
d pgkl minus lknm

12 the diagram shows a notice on a motorway near cambridge.
this road was recently
cleared of 17 bags of litter.
clearing litter puts local authority

road-workers’ lives at risk. a

what is this an example of?

a government regulation

b~ merit good

c nudge theory

d public good

13 a reason for government intervention in the workings of the economy is to attempt to correct for
market failure. sometimes, though, government failure may occur.
what is not a possible reason for government failure?
a governments may have to make decisions on the basis of out-of-date information.
b governments may make decisions that reduce negative externalities.
c_ the extent of the market failure may be difficult to judge.
d when circumstances change a government may be unable to respond quickly.

14 which policy combination will reduce income inequalities in a country?
a_ impose a fixed amount tax on all people and reduce unemployment benefits
b increase social welfare payments and impose a higher marginal income tax rate
c_ increase transfer payments and impose higher indirect taxation
d_ reduce rates of tax on higher incomes and increase welfare payments

15 the diagram shows an economy's lorenz curve (vw).
100 4w
45°”
cumulative % ge
of income ge
ra area y
ye
0 100
cumulative % of population
how is the gini coefficient for the economy calculated?
¥ ¥ z z
a — sz bos cc = dbs
vez z y y+z

16 what will cause the supply curve of labour in a particular industry to shift to the left?
a a fall in demand for the industry’s product
bagreater use of machinery in the production of the industry's output
c_ arise in wages paid in similar occupations in other industries
d a weakening of trade union influence in the industry

17 the diagram shows the costs and revenue curves in the labour market for a firm in imperfect
competition.
$ mc,
w,
w,
ac,
ww lo sseseanse
w, * arp,
w, at
|i 1 mrp,
[e) q rs
number
of workers
initially the firm is at an equilibrium in the factor market.
what will happen to the wage rate and employment if a trade union negotiates a wage of w?
a fall from w3 to w remain the same at or
b fall from w, to w increase from oq to or
cc rise from w, to w increase from oq to or
d rise from w, to w remain the same at oq

18 a country has a population of 100 million. 60 million are of working age and 50 million are in the
labour force. the country’s unemployment rate is 10%.
how many people are employed?
a 40 million b 45 million c 50 million d 54 million

19 the table shows the nominal gdp growth and inflation rate in four countries, w, x, y and z.
| escare, [ aa
growth rate (%) rate (%)
ww 2.1 1.9
xx -1.6 8.9
y 4.1 5.8
z -2.0 16.4
what can be concluded from the table?
a wexperienced the highest rate of real economic growth.
b= xand z experienced deflation.
cy experienced the greatest rise in the standard of living.
d zexperienced the greatest growth in public debt.

20 wvhnicn trade policy of a developed couniry is least likely to allow a developing country to
experience increased growth?
a adecrease in administrative restrictions on imports from developing countries
b_anincrease in subsidies of capital goods exports to developing countries
c_ areduction in quotas on imports from developing countries
d_ areduction in tariffs on imports from developing countries

21 what is not included in national income accounts?
a agift by a parent to her daughter as a deposit on an apartment
b_ earnings of a part-time worker in a school dining room
c_ interest earned on savings accounts intended for retirement
d profits re-invested by a company to fund capital expenditure

22 a developing country relies heavily on the production of a primary product for its national income.
which change will make it more likely that the country will benefit from its participation in
international trade?

a_anincrease in income elasticity of demand for the primary product
b_anincrease in tariffs imposed on the primary product by developed countries
c_anincrease in the cost of international freight transport in real terms
d_anincrease in the price of manufactured products relative to the primary product

23 what might cause a country to experience both a rise in the number of people unemployed and
an increase in job vacancies?
a adecrease in housing and transport costs
b  adecrease in unemployment benefit
c_anincrease in the occupational immobility of labour
d_anincrease in the skills of the labour force

24 in a two sector economy autonomous consumption expenditure increases by $100 billion,
=a investment expenditure by $200 billion and the marginal propensity to consume
what will be the increase in national income?

a $150 billion
b $300 billion
c_ $450 billion
d $600 billion

25 the central bank in an open economy cuts the interest rate to avoid deflation.
under which conditions is this expansionary monetary policy most likely to be effective?
[asset ces consurton peng |
a rise rapidly interest elastic
b rise rapidly interest inelastic
cc rise slowly interest elastic
d rise slowly interest inelastic

26 the diagram shows that the elasticity of demand for money becomes infinite at a certain rate of

interest.

rate of

interest

demand for money
(e) ’
quantity of money

which statement explains this situation?
a_ at low interest rates there is an infinite demand for bonds.
b_ other assets are close substitutes for money.
c some money is required for transactions balances.
d_ there is a liquidity trap.

27 what would be most likely to result in an increase in unemployment?
a adecrease in the level of bank loans
b- adecrease in the level of taxation
c_ adecrease in the rate of interest
d_anincrease in the money supply

28 which macroeconomic indicator is least likely to identify a developing country?
a real gdp per capita
b _ the gini coefficient
c the human development index
d the phillips curve

29 what would not help to achieve the macroeconomic objective of economic growth?
a_ decreasing corporation tax
b increasing income tax
c_ reducing interest rates
d spending on education and training

30 what is a reflationary fiscal measure?
a increasing government spending
b increasing taxes
c increasing the money supply
d_ reducing interest rates

Solve 9708_w18_qp_32