cramp past paper

Question 1

Explain why economics is a social science

Answer 1

Economics is a social science because it studies human behaviour, in the economy more than one vairbvle changes at a time.
Economist build models of behaviour
People are unpredictable
Economist gather data and so do scientist

Question 2

Explain one advantage of the specialisation of labour workers spcilisaing in tasks on a production line?

Answer 2

Specialisation allows workers to perform tasks they are well suited to so therefore this results in an increase in labour productivity

Question 3

Expain why the majority of spending on flood defences is undertaken by the government rather than private citizens?

Answer 3

Flood defences are a public good
Flood deferences are subject to the free rider problems, therefore the benefits of flood defences cannot be confined to those who have paid for it therefore private citizens are unlike to spend a lot of it as their is no profit motives

Question 4

Long run shut down ?

Answer 4

Firms are likely to shut down if they make an economic loss
This means that TC >TR
Revenue is not suffiecnt to cover the oportuniutu cost of the factors of production an factors can generate more revenue in their next best use

Question 5

Why would a company shut down in the short run?

Answer 5

This would mean that each extra unit produced added to losses

Why would a company shut down in the long run?
A company might shit down in teh long run if it makes an economic loss
This would mean that it is making a sub-normal profit

Question 6

Other than avoiding diseconomies of scale explain one other motivation for a firm to demerge?

Answer 6

Demerger may enable a business to become more focused, a more focused business may improve various aspects of performance such as development of new products.

Question 7

What are diseconomies of scale?

Answer 7

Dieseocnomics of scale are increases in average cost as the firm increases output in the long run
Control
Co-ordniatrion
Communication

Question 8

Explain the definition of volatile?

Answer 8

A volatile price is one which exhibits sharp rises and falls often in quick succession to one another.

Question 9

Explain how the data in the table contradict one of teh key assumptions of traditional economic theory?

Answer 9

Economic theory assumes that consumers are insatiable (they always prefer more of a good to less)
However a negative marginal utility would indicate that consumers would prefer less to more contradicting that theory