Paper 1

Question 1

policies to reduce pollution - what diagrams should you use?

Answer 1

positive consumption externality
underconsumption
negative production externality
overproduction

Question 2

what are policies to reduce underconsumption

Answer 2

subsidising merit goods such as reusable packaging, advertising to reduce information failure

Question 3

what are policies to reduce overproduction?

Answer 3

tax per unit, minimum price -eg carbon credits to reduce pollution levels

Question 4

explain how carbon credits work?

Answer 4

businesses get a certain amount of pollution they can produce unless they buy more credits. It can be balanced by emission reduction projects/

Question 5

what are some issues with carbon credits?

Answer 5

hard to measure, transaction costs in buying credits, complex, simple tax may be easier. free rider problem as without full participation other countries can free ride on their efforts

Question 6

what are some ways to improve inequality?

Answer 6

increase the national minimum wage, increase trade union power, increase progressive taxation

Question 7

what are some benefits of increasing trade union power?

Answer 7

increase in wages, increase in MRPL, reducing inequality

Question 8

what are drawbacks of trade union power?

Answer 8

real wage unemployment, automation

Question 9

what is some context of trade unions?

Answer 9

since 1980 trade union membership has fallen and income of the top 1% has risen. could be due to the decline of manufacturing sectors.

Question 10

what is some evaluation to trade unions?

Answer 10

only effective in a closed shop trade union (only hiring from a specific union), in a monopsony employment might rise as the firm will be a wage taker up until a point

Question 11

what are the limits of trade unions?

Answer 11

legislation can prevent trade unions from being effective - for example introducing a minimum percentage of votes for strike action. if there isn’t high union density it may be ineffective

Question 12

why is the supply curve of labour in a trade union kinked?

Answer 12

because the firm must increase the wage rate for all workers to attract more

Question 13

what are the main objectives of firms?

Answer 13

profit max -mc=mr
sales max - ar=ac
profit satisfying 
social/environmental concerns
revenue max -mr=0

Question 14

why might firms profit max?

Answer 14

improve dynamic efficiency, snp used to differentiate, attracting shareholders to invest due to more likelihood of receiving good dividends payments

Question 15

why might firms sales max?

Answer 15

to increase market share, attracting high skilled workers

Question 16

why might firms revenue max?

Answer 16

improving long term profitability and improving brand loyalty- can be used as influence political?

Question 17

what are some benefits of nationalisation?

Answer 17

natural monopoly, profit shared with taxpayer, gov cares about external costs more

Question 18

arguments against nationalisation?

Answer 18

too big productively inefficient as workers do not feel as if they own the firm and reap the rewards, politics can influence decisions, gov may have poor knowledge of industry

Question 19

chain of analysis for economies of scale

Answer 19

lower variable cost per unit due to larger scale internal purchasing economies of scale

Question 20

arguments for privatisation?

Answer 20

efficiency (profit motive), higher share ownership, increased competition

Question 21

what are some benefits of an increased national minimum wage?

Answer 21

increased job incentive, increased productivity, offset of monopsony power

Question 22

what are some drawbacks of a min wage?

Answer 22

reduction in employment, higher wages passed to consumers, certain sectors choosing to move abroad.

Question 23

how do you reduce the gender pay gap?

Answer 23

increase childcare facilities in order to reduce wage discrimination through hours worked rather than wage rates

Question 24

what is Scotland minimum price on alcohol?

Answer 24

50p per unit

Question 25

what is the current national minimum wage?

Answer 25

£9.50 per hour

Question 26

what are the benefit of increased productivity?

Answer 26

greater fufillment - increase In long run profitability, more effective workplace - decrease in staff turnover, stronger ROI

Question 27

how do you measure return to investment?

Answer 27

profit earned/ cost of investment

Question 28

what are some benefits of a min wage?

Answer 28

offset monopsony power, increased productivity

Question 29

what are some negatives of a min wage?

Answer 29

real wage unemployment, higher prices for consumers

Question 30

what is the efficiency wage theory?

Answer 30

higher wages > increase in productivity > better customer service > more revenue > more engagement > higher profits > higher economic growth

Question 31

for externalities what lines represent what?

Answer 31

MSC/MPC = SUPPLY
MSB/MPB = DEMAND

Question 32

how do you reduce information failure of merit and de merit goods?

Answer 32

education reforms - changing the syllabus, not interventionist - inspires rational decisions - only works long term and success is not guaranteed

Question 33

what is the current price of a carbon credit?

Answer 33

£72 per ton of co2 in the uk, global average being 3$