Practise Questionss Flashcards
Specialisation- what may reduce benefits of this
Trade conducted by bartering
For benefits of specilaisation to occur
Needs of exchange is needed
There is a large increase in the numbero f diff models of bicycles produced by the bicycle industry
The most likely impact of this would be
An increase in barriers to entry to the bicycle industry
Harder to compete if more firms exist
One way to allocate road space in a congested city would be to charge drivers to use the roads
One reason why this policy is likely to result in a more efficient alocation of resources is becasue
Road usse would bbe rationed to drivers who beenfit from it the most
Distribution of income is equitabble?
Value of judgement
Online clothes retailers invest in new warehouses to enable them to hold larger stocks of clothes
Most likely to result in
Higher price elasticity of supply of clothes sold online
If ped above 1
Elastic
If ped below 1
Inelastic
Positive statements
Can be tested by looking evidence
Objective statements
Normative statements
Subjective statemnets
Carry value judgement what ought to be -shold rather than justifications
Economies of scale
Factors driving productoin cost down while increase volume of output
Internal economies of scale
Firm specific
Measure a companies efficiency of productive occur because of factors controlledby uts management team
Offer greater competitive adv
As extrnal econ of scale is shared among cpmpetitives
Eg. Technical econ of scale- assembly lines
Purchase in bulk
Cuts in administration costs
External economies of scale
Larger changes within the industry grows, av cost of bussiness drop
Positive externalities eg. Training/specialised workforce
Negative externalities- happen at industry leevls and are often called external diseconomies
Demerit goods represent a type of amrket failure beacsue
They are overconsumed in a free market
An economist puts forward a hypothesis which is asessed against evidence
As a result the hypothesis is accpeted, rejected or modified
This is an example of
The methodoogy ysed to test economic theories
Tax per unit can be seen on graph as
Verticle distance between supply curves
The growth of car manufcturing around birmingham led to firmss producing components for cars
As a result, car manufcaturing firms experienced fall in their av cost of production. This is an example of
An external economy of scale
Monopoly powers
Restrict output and charge higher prices comapred to competitive market
If barriers to entry to the market are removed, the most likely result will be that
The amrket price falls and output increases
A resource must be scarce if
It hss an opp cost
Government failure must have occurred when government intervention
reduces total welfare in the economy.
online streaming firm increased its paying subscribers by 300% over a 4-year period.
The firm’s share of the total time people spent watching television doubled and profits
grew rapidly.
Which one of the following is the most likely explanation for the firm’s success?
The firm was innovative and this increased barriers to entry for
firms wishing to join the industry
Which one of the following helps to explain why profits are likely to be lower in a perfectly
competitive market than in a monopoly market?
a monopoly, a firm can increase the price of the product by
limiting its output
An economist puts forward a hypothesis which is assessed against evidence. As a result of this, the hypothesis is accepted, rejected or modified
The methodology used to test economic theories
Normative statement
Cant test
‘Fat norman’
Positive statement
Can be tested
The growth of car manufacturing around birmingham led to firms producing components for cars. As a result, car manufacturing firms experienced a fall in their av cost of production. This is an example of
The techinal economy of scale
Why are sugary drinks overconsumeed
Demerit goods
Info failure
Adidctive
Underalue long time- over=optium bias
Behavoural econ- scial mormas, bounded rationality
Why does excess demand occur
When demand increases and availability does not keep up
Why is healthcare underconsumed in free market
Merit good and thus lt benefits not fully realised=- information failure
How to show excess demand when good is free
Verticle sipply curve hence excess demand when free (difference beteeen supply and demand when demand cruve crosses q curve)
How to show subsidy on externalities graph
Difference between msb and mpb
Graph from difference skilled and unskilled workers
Draw two side by side one elastic and one inealstci suppluy
Suggests decreased demand- q yet price higher
