economics

1 what does the marginal utility diagram show?
utility
o .
x y z quantity
marginal utility

a_ total utility becomes negative if the quantity consumed increases from y to z.
b_ total utility decreases if the quantity consumed increases from x to y.
c_ total utility decreases if the quantity consumed increases from y to z.
d total utility is maximised at x.

2 the initial allocation of goods between three consumers is shown.
2

which row shows a pareto improvement in the allocation of goods between consumers?
[ [consumer t | consumer? | consumers [total

a 2 5 11 18

b 4 5 9 18

cc 4 4 10 18

d 6 6 6 18

3 which assumption in relation to an indifference theory diagram is not correct?
a_ the consumer's income may change.
b the consumer may change their satisfaction-maximising objective.
c the consumers may change their tastes and preferences.
d_ the relative prices of products may change.

4 which type of efficiency is shown by the shift from long-run average cost curve 1 (lrac;) to
long-run average cost curve 2 (lrac2)?
-
lrac,
lrac,
5 quantity

a allocative

b dynamic

c_ pareto

d productive

5 a\firm wishes to maximise its revenue.
which condition must be met to achieve this goal?
a average cost = average revenue
b_ marginal cost = average revenue
c_ marginal cost = marginal revenue
d_ marginal revenue = zero
i ea

6 ihe costs and revenue of four tirms operating in a monopolistically competitive market are
shown.
total total total
firm variable cost fixed cost revenue
$m $m $m
www 20 10 15
x 40 50 80
ng 300 300 500
z 600 100 550
which firms will continue to operate in the short run but will shut down in the long run?
a xandww b xandy c wandz d yandz

7 a firm at its current level of production finds that its short-run marginal cost is less than its
short-run average variable cost.
which conclusion about the firm can be drawn from this information?
a average variable cost is constant.
b_ average variable cost is falling.
c_ average variable cost is greater than its average total cost.
d_ average variable cost is rising.

8 steel producer x takes over its main competitor, steel producer y.
what would x expect to happen to the price elasticity of demand for its product and its long-run
average cost as a result of this takeover?
price elasticity long-run
of demand average cost
a decrease decrease
b decrease increase
c increase decrease
d increase increase

9 what is an example of an external cost?
a distribution costs
b_ energy costs
c labour costs
d road congestion costs

10 the diagram shows the demand for and supply of a good and the marginal social costs (msc) for
that good.
msc
costs,
revenue s
a
www ! d
oo
a output
assuming there are no external benefits, which area measures the net social benefit at output
oq?
a x b x-y c xty d x-y-z

11. what would definitely result from the divorce of ownership and control?
a_ decreased moral hazard
b _ the principal agent problem
c greater productive efficiency
d increased profit maximisation

12 one reason for market failure is the existence of public goods.
which policy option is appropriate for addressing such a market failure?
a direct provision of the good by the government
b _ provision of detailed information to consumers
c _ subsidising firms that currently produce the good
d_ the adoption of maximum price controls

13 in 2020, the governor of california issued an order to ban the sale of new vehicles from 2035 that
are powered by petrol or diesel fuel.
which type of government policy is this?
a anudge
b apermit to pollute
c nationalisation
d regulation

14 the diagram illustrates a monopsony labour market in which the government has imposed a
minimum wage.
mcl
w,
wage rate s=acl
w,
w, i~ minimum wage
w,
d = mrp
a q, q, qs
quantity of labour
what is the difference between the wage the monopsonist wishes to pay and the wage received
by labour?
a ww; b w.w2 cc w.w3 d w.w,

15 economics textbooks state that labour is a derived demand for a firm in imperfect competition.
how is the demand curve for labour derived?
a_ by multiplying the average physical product by the average revenue
b_ by multiplying the average physical product by the marginal revenue
c_ by multiplying the marginal physical product by the marginal cost
d_ by multiplying the marginal physical product by the marginal revenue

16 the diagram shows the lorenz curves for norway (n) and india (i).
ado =) sess ecerenereeseemomemn acini
cumulative
percentage line of
of income perfect equality
| |
0 '
0 100
cumulative percentage
of households
what can be concluded from a comparison of the lorenz curves?
a india is more likely to have lower indirect taxes and a public sector education system than
norway.
b india is more likely to have a progressive income tax system and means tested benefits than
norway.
c_ norway is more likely to have a progressive tax system and public sector pensions than
india.
d_ norway is likely to have a higher percentage of tax generated from indirect taxes and
privately funded pensions than india.

1/ a reason for government intervention in the workings of the economy is to attempt to correct a
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.

18 a government wishes to support growth in the economy’s fishing industry.

which policy is likely to achieve sustainable growth in the fishing industry?

a giving more modern fishing boats with larger nets to workers who fish for a living

b_ paying bonus payments for larger fish catches to workers who fish for a living

c setting up a fish cooperative so that workers who fish for a living receive a higher price for
the fish that they catch

d _ subsidising the building of a fish farm in order to encourage workers who fish for a living to
switch from sea fishing

19 four citizens have each been unemployed for the past six months.

which citizen would not be characterised as being structurally unemployed?

a_ worked as a coal miner but coal-fired power stations are now being closed and is not willing
to retrain

b_no longer works in a town centre coffee shop because fewer people are buying goods in the
town centre since a pandemic

c_ cannot move with the firm that has relocated because of changing demand for its products

d has many skills and is waiting to decide which job might be the most suitable

20 in the diagram, op is the equilibrium level of income and oq is the full employment level of
income in a closed economy.
expenditure
iv
'u c+l+s
it c+l
+ r cc
45°
(e) p q
income
what is the deflationary gap?
a pq b rv cc tv d uv

21 what 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

22 in a closed economy with no government sector, when will an increase in investment spending
generate the largest increase in equilibrium national income?
a when households have a high level of autonomous consumption
b_ when households have a high level of compulsory saving
c_ when households have a high marginal propensity to consume
d_ when households have a high marginal propensity to save

23 which combination of policies is most likely to increase output?
[tect potey monetary pote |

a decrease budget deficit decrease interest rates

b decrease budget deficit increase interest rates

cc increase budget deficit decrease interest rates

d increase budget deficit increase interest rates

24 acountry is a net importer of oil. world oil prices have risen over the year.
assuming that all other factors remain the same, how is this likely to affect inflation, trade balance
and unemployment in this country?
| | inflation trade balance unemployment
a decrease no change increase
b increase improve decrease
cc increase worsen increase
d decrease no change decrease

25 what would reduce the effectiveness of a supply-side stimulus to the economy?
a animposition of maximum hours in a working week
b_anincrease in public sector spending
c the provision of new training schemes
d the relaxation of import controls on raw materials

26 a multinational company (mnc) shifts its manufacturing capacity to a developing country.
what is likely to be the short-run effect of this in the developing country?
short-run balance
employment investment of payments
increases increases current account
improves
a no no yes
b no yes no
cc yes no yes
d yes yes no

2/_ to inaicate the changing income disiribution, the kuznets curve plots gross domestic product per
capita against an economic variable x.
what is variable x?
a_ the exchange rate
b | the level of income inequality
c the price level
d the rate of interest

28 economists define the unemployed as being those who are not in work but are actively seeking
work. other groups of people in the population of working age include those classed as inactive
or self-employed.

which groups of people are included as part of a country’s labour force?
| | unemployed self-employed

a no no no

b yes no yes

cc yes yes no

d no yes yes

29 the table shows some united nations population statistics for 2010 and estimates for 2050.
total total urban urban population | population
type of region population | population | population | population | urbanised | urbanised
(m) 2010 | (m) 2050 | (m) 2010 | (m)2050 | (%) 2010 | (%) 2050
more developed 1237 1275 930 1100 75 86
less developed 5671 7875 2556 5186 45 66
least developed 855 1673 249 914 29 55
which relationship can be confirmed from the table?
a_ the least developed regions have the largest urban populations, actual or predicted, in both
years.
b_ the more developed regions have the lowest growth rate of urbanisation between 2010 and
2050.
c_ the type of region with the greatest total population in 2010 is predicted to have the greatest
rate of population growth by 2050.
d_ the type of region with the greatest urban population in 2010 is predicted to have the highest
level of urbanisation by 2050.

30 the diagram shows a lorenz curve with two areas, x and y, identified.
loo apres meres cinmieinnmiminemn
cumulative line of
% of income perfect
equality
¥ i
lorenz
curve !
0
0 100
cumulative %
of households
how is the corresponding gini coefficient calculated?
a xdivided by (x plus y)
b  (xplus y) divided by x
c (xplus y) divided by y
dy divided by (x plus y)

Solve 9708_s22_qp_33