economics

1 what is an example of a negative externality?
a lower profit due to increased competition from new firms entering the market.
b reduced government funding for a museum.
c_ the increase in noise levels from aircraft due to the expansion of a large city airport.
d_ the increase in production costs due to an increase in the cost of importing raw materials.

2 the diagram shows a firm operating in monopolistic competition.
at which point is the firm allocatively efficient?
revenue mc ac
/costs
a
b
=
an ar
(e)
d output

3 the amount of training undertaken in a mixed economy is not socially optimal.
what could explain this?
a experienced educators are a scarce resource.
b_ ina mixed economy training is a public good.
c_ the individual’s benefit from training is less than the benefit to society.
d_ training is a large variable cost for firms.

4 four bus companies control more than two-thirds of the market in a country.
critics claim that these companies fix prices on some routes to maximise revenue whilst lowering
prices on other routes to stop smaller competitors entering the market.
which anti-competitive practices are these companies accused of?
a collusion and limit pricing
b_ collusion and price leadership
c limit pricing and price discrimination
d price leadership and x-inefficiency

5 ona diagram the slope of a consumer's budget line becomes steeper.
what can definitely be concluded from this?
a the consumer's income has fallen.
b the consumer's income has risen.
c_ the price has decreased for the product on the horizontal axis.
d_ the price has increased for the product on the horizontal axis.

6 [he diagram snows two iinallterence curves and two duaget lines for goods x and y.
good y
¥
h
ic,
ic,
o xx x2
good x
the consumer's initial position is at point f. the consumer's preferred final position becomes
point h.
what does the movement from f to g represent?
a the income effect of a price fall for x
b the price effect of a price change for x
c the substitution effect of a price fall for x
d_ the substitution effect of a price rise for x

7 the table shows the total costs at different levels of output for a firm producing chairs.
(chairs) ($)
0 50
1 60
2 64
3 77
4 94
5 114
what is the average variable cost when output is 4 chairs?
a $11 b $17 cc $44 d $23.50

6 at whicn level of output will a tirm acnieve the aim of sales maximisation?
a where ac=ar
b~ where ac = mc
c where mc =ar
d_ where mr = zero

9 in market economies firms can operate under monopolistic competition.
which feature is not typical of this type of market?
a non-price competition through advertising
b price leadership with few large firms
c promotion of differentiated products
d_ unrestricted entry results in long-run normal profit

10 when will the ‘principal-agent’ problem occur?
a when managers are not allowed to become shareholders
b when members of a cartel collude to gain higher profit
c_ when one firm dominates the market
d_ when owners have different objectives to managers

11 which feature of oligopoly is being assumed when the demand curve for an individual firm is as
shown?
price |d
d
o quantity
a price discrimination
b price leadership by the dominant firm
c_ interdependence between firms
d_ collusion between firms

12 the table provides data on the number and value of mergers in europe and north america
between 2014 and 2017.
year
2014 17000 980 billion 14000 2289 billion
2015 15500 1161 billion 14500 2533 billion
2016 18100 1003 billion 15100 1858 billion
2017 18000 980 billion 18500 1822 billion
what can be deduced from the table?
a_ the average value of a merger in europe was higher in 2017 than 2014.
b_ the difference in the number of mergers in europe and north america was the same in 2014
and 2016.
c_ the value of mergers each year in us dollars was always lower in europe.
d the number of mergers each year was always higher in europe.

13 charities distribute plastic bags to households that householders can fill with clothes they no
longer want. the charities then collect them and sell the clothes to raise funds. only one charity
leaves a note thanking the householder for the donation.

what best describes this charity’s approach?
a game theory

b monopoly behaviour

c_non-price competition

d_ nudge theory

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

15 when will a society have achieved an equitable distribution of income?
a when all individuals have equal job opportunities
b_ when all workers are paid the same wages
c_ when the incomes within the society are equally distributed
d_ when the society believes that the distribution of income is fair

16 ‘the addition to revenue which results from employing one additional unit of a factor of
production, while the quantities of all other factors of production remain constant’.
what does this define?
a marginal factor cost
b- marginal revenue
c_ marginal revenue product
d the law of diminishing returns

17 the alternative to work is to have leisure time. the diagram shows a worker's decision of how
many hours of labour to supply.
z
real wage rate supply of labour
4
x
o hours of
labour
what happens between y and z?
a extra leisure is preferred to work.
b_ extra work is preferred to leisure.
c_ the job now requires more specific skills.
d_ the price elasticity of supply for the final product has become more inelastic.

18 by moving from rural areas to large urban areas to work, how might economic migrants create
benefits in both areas in developing countries?
[ aaawes sc aes |
a by improving land ownership systems by becoming better educated
b by receiving financial help from urban workers by providing necessary labour
cc by reducing population pressure on resources by living in informal settlements
d by solving unemployment problems by obtaining loans from moneylenders

19 which change is most likely to increase both economic growth and economic development in the
long run?
a adecrease in the saving ratio
b_anincrease in investment in human capital
c_ the depletion of non-renewable resources
d_ the greater use of compulsory overtime working of labour

21 the diagram shows selected us labour statistics from 2001 to 2013.
ool deg
net new jobs 200 ill 64 employed asa
ment amcce soo \ iu fh filles rocansoe
ene gtlitilitss apuiaton aa
sol une
soy
—500
2001 03 05 o7 09 11 2013
year
what can be concluded from the diagram?
a_ between 2004 and 2005, when the number of net new jobs was rising, the percentage
employed increased.
b- employed as a percentage of the population aged 16 and over declined continuously.
c_ the natural rate of unemployment was achieved only in 2008.
d the number of employed workers rose in all except four years.

22 what indicates that a developing country is becoming less dependent on foreign aid?

a_ it gains foreign currency by exporting a range of raw materials, and uses this to import
machinery from developed economies.

b_ it has to change its economic structure in order to qualify for a bailout loan from the world
bank.

c_ its balance of payments goes into deficit when it has to start paying interest on loans taken
out with foreign banks.

d its local firms go out of business after a foreign multinational sets up in the country.

23 how must gdp at market prices (producer prices) be adjusted to find gdp at factor cost?
a by adding exports and deducting imports
b by adding net property income and deducting transfer payments
c by adding profits and deducting income taxes
d by adding subsidies and deducting indirect taxes

24 the diagram shows the equilibrium levels of national income in a closed economy with no
government, at two levels of investment, i, and ip.
saving / ss
investment
* i
an ng ty
fe) !
u zz national income
which ratio gives the value of the multiplier?
a ix » @ lz 5 &
uz tx xy uz

25 an upward shift of the curve relating consumption to national income could be caused by
a_areduction in taxation.
b_anincrease in investment.
c_anincrease in national income.
d_anincrease in savings.

26 which combination of changes is most likely to result in an increase in the demand for money?
[mr [es ar
level level rate
a fall fall rise
b fall rise fall
cc rise fall rise
d rise rise fall

27 in 1936 keynes explained how economic policy can be used to increase aggregate demand and
prevent an economic depression.
which policy supports keynes’ theory?
a_ central banks should raise interest rates and decrease liquidity.
b governments should increase expenditure and decrease taxation.
c governments should encourage consumer savings rather than expenditure.
d_ trading policy should prevent the free movement of capital.

28 a central bank increases the money supply in an attempt to stimulate investment and growth
when the economy is in recession.
when might this policy be ineffective?
a _ if the economy is in the liquidity trap
b _ if the economy is in the poverty trap
c _ if the marshall-lerner condition does not hold
d _ if the value of the multiplier is very low

29 which statement describes what the phillips curve shows?
a aninverse relationship exists between inflation and unemployment.
b_ as employment increases the balance of payments deteriorates.
c_ economic growth and employment have a positive relationship.
d_itis possible to achieve low inflation and high economic growth at the same time.

30 to stimulate economic growth the government increases the size of its budget deficit and funds
this by increasing the money supply.
what is most likely to reduce the effectiveness of these measures in achieving their aim?
a_ a floating exchange rate
b= ahigh marginal propensity to import
c alow marginal propensity to save
d_aninterest-inelastic demand for money

Solve 9708_s20_qp_31