Practise Questionss

Question 1

Specialisation- what may reduce benefits of this

Answer 1

Trade conducted by bartering

Question 2

For benefits of specilaisation to occur

Answer 2

Needs of exchange is needed

Question 3

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

Answer 3

An increase in barriers to entry to the bicycle industry
Harder to compete if more firms exist

Question 4

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

Answer 4

Road usse would bbe rationed to drivers who beenfit from it the most

Question 5

Distribution of income is equitabble?

Answer 5

Value of judgement

Question 6

Online clothes retailers invest in new warehouses to enable them to hold larger stocks of clothes
Most likely to result in

Answer 6

Higher price elasticity of supply of clothes sold online

Question 7

If ped above 1

Answer 7

Elastic

Question 8

If ped below 1

Answer 8

Inelastic

Question 9

Positive statements

Answer 9

Can be tested by looking evidence
Objective statements

Question 10

Normative statements

Answer 10

Subjective statemnets
Carry value judgement what ought to be -shold rather than justifications

Question 11

Economies of scale

Answer 11

Factors driving productoin cost down while increase volume of output

Question 12

Internal economies of scale

Answer 12

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

Question 13

External economies of scale

Answer 13

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

Question 14

Demerit goods represent a type of amrket failure beacsue

Answer 14

They are overconsumed in a free market

Question 15

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

Answer 15

The methodoogy ysed to test economic theories

Question 16

Tax per unit can be seen on graph as

Answer 16

Verticle distance between supply curves

Question 17

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

Answer 17

An external economy of scale

Question 18

Monopoly powers

Answer 18

Restrict output and charge higher prices comapred to competitive market

Question 19

If barriers to entry to the market are removed, the most likely result will be that

Answer 19

The amrket price falls and output increases

Question 20

A resource must be scarce if

Answer 20

It hss an opp cost

Question 21

Government failure must have occurred when government intervention

Answer 21

reduces total welfare in the economy.

Question 22

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?

Answer 22

The firm was innovative and this increased barriers to entry for
firms wishing to join the industry

Question 23

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?

Answer 23

a monopoly, a firm can increase the price of the product by
limiting its output

Question 24

An economist puts forward a hypothesis which is assessed against evidence. As a result of this, the hypothesis is accepted, rejected or modified

Answer 24

The methodology used to test economic theories

Question 25

Normative statement

Answer 25

Cant test

‘Fat norman’

Question 26

Positive statement

Answer 26

Can be tested

Question 27

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

Answer 27

The techinal economy of scale

Question 28

Why are sugary drinks overconsumeed

Answer 28

Demerit goods
Info failure
Adidctive
Underalue long time- over=optium bias
Behavoural econ- scial mormas, bounded rationality

Question 29

Why does excess demand occur

Answer 29

When demand increases and availability does not keep up

Question 30

Why is healthcare underconsumed in free market

Answer 30

Merit good and thus lt benefits not fully realised=- information failure

Question 31

How to show excess demand when good is free

Answer 31

Verticle sipply curve hence excess demand when free (difference beteeen supply and demand when demand cruve crosses q curve)

Question 32

How to show subsidy on externalities graph

Answer 32

Difference between msb and mpb

Question 33

Graph from difference skilled and unskilled workers

Answer 33

Draw two side by side one elastic and one inealstci suppluy
Suggests decreased demand- q yet price higher