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Economics > Microeconomic essay-style questions/general essay points > Flashcards

Microeconomic essay-style questions/general essay points Flashcards

1
Q

Actions to limit consumption of a demerit good…

A
  • Taxation
  • Govt. intervention
  • Information campaigns
  • Regulation
  • However, behavioural economics e.g. bounded self-control, cost of enforcing regulations etc

(Perhaps unintended consequences)

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2
Q

Actions to boost consumption of a merit good…

A
  • Provide subsidies to firm, EoS e.g. marketing economies of scale
  • Information campaigns
  • However, behavioural economics…

(Perhaps unintended consequences)

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3
Q

Working out govt. tax revenue from supply curves on diagram…

(MCQs)

(Be mindful of units e.g. price or qty may be in thousands etc)

A

To work out govt. tax revenue…
- highest price - lowest price on diagram (Price at y-axis) OR correct axis value
- Then, multiply this by qty at s2 (qty at x-axis)
—–> (Highest price - lowest price) x qty s2

(Revenue = price x qty)

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4
Q

Working out tax per unit when the govt. imposes an indirect tax…

(MCQs)

A
  • Difference between highest price and lowest price
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5
Q

Why may a country’s exchange rate index fall?

A
  • Due to a rise in I.R rates of other countries
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6
Q

A left shift in AD leads to…

(UK financial crisis0

A
  • Negative output gap and cyclical unemployment

(With additional LRAS curve and SRAS curve)

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7
Q

According to Fisher’s equation of exchange, most likely effect of inflation would be…

A
  • Rise in (V) and fall in (Q)
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8
Q

At what level of employment can a firm max. its output…

A
  • Perhaps when marginal returns are at its lowest
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9
Q

When demand contracts…

A
  • QD falls, not demand!
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10
Q

A firm in a perfectly competitive market…

A
  • Minimises its losses by staying in the market in the short-run
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11
Q

In a monopsony labour market, where is employer’s profit-maximising wage rate and level of employment is a…

(Single employer and competitive labour supply)

A
  • Perhaps where lowest wage…
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12
Q

If MCQ question involves labour markets…

A
  • know that answer should link with labour market terms e.g. earning and MRP
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13
Q

Most likely short-run trade-off between macroeconomic objectives being achieved

A
  • Govt. budget deficit rises as unemployment rate reduced
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14
Q

What to do when working out consumer surplus change on diagram - For MCQs

A
  • Pick answer in overall consumer and producer surplus area or ‘triangle’
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15
Q

For MCQs

A
  • Link logical specific corresponding terms with answer and do not go to uncorresponding terms

(When its close, most of the time ;)

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16
Q

Most likely result from increase in bank rate

A
  • Rise in savings from risen I.R rates
17
Q

MCQ links for price and subsidy (when subs are in question)…

A
  • Reduction in price
18
Q

If a good is inelastic, what could a firm do to boost its profits?

A
  • Boost the good’s price, and vice versa
19
Q

Discuss the view that economic agents will always act as rational decision makers so as to maximise their utility…

A

Intro - Yes but not always
P1 - Behavioural economics WILL NOT maximise the utility -> e.g. irrational behaviour
P2 - Classical economics say consumers WILL maximise their utility
P3 - Behavioural economics WILL NOT maximise their utility e.g. nudging, social norms…
Conc - Yes but not always

20
Q

‘Evaluate the view that technological change tends to bring industries closer to the market structure of perfect competition’…

A

Intro - Yes, but not always
P1 - Yes, better tech leads to better marketing -> Better information (perf. comp. feature) -> e.g. price comparing
P2 - No, creative destruction -> Job losses -> Firms will shutdown (AC > AVC) -> lower firms (perf.comp feature missed)
P3 - Yes, better tech -> More firms as firms appealed by more innovation (perf. comp feature) -> Due to firms maximising revenue
Conc - Yes, but not always

21
Q

‘Discuss how the divorce of ownership from control may affect both the conduct and performance of firms’…

A

Intro - Define divorce of ownership from control and principle-agent problem -> Can lead to firms not performing well, leading to misconduct
P1 - Lead to inefficiency -> due to differing objectives e.g. allocative inefficiency or x-inefficiency
P2 - Whether if affects it or not depends on mechanisms available to shareholders to control managers’ behaviour -> So, good mechanisms could prof. max. if they wish, or if not, managers could max. revenue
P3 - Whether managers want to max. revenue due to no mechanisms for divorce of ownership from control would lead to reputable perception -> high revenue makes firm look reputable

22
Q

When market structure read…

A
  • Think of definition and characteristics
23
Q

For finding ‘range’ on data questions that state ‘for every £1’ or ‘for every $1’…

A

Newest value / oldest value

24
Q

Tax things…

A
  • LOWEST INCOME LEFT AT START = REGRESSIVE
  • HIGHEST INCOME LEFT AT START = PROGRESSIVE

Economics (16 decks)

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