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Economics > Unit 1 - Past Paper Questions > Flashcards

Unit 1 - Past Paper Questions Flashcards

1
Q

the main economic objective of firms in a market economy is most likely to be the

A

maximisation of profits

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2
Q

the price elasticity of supply for most goods is

A

positive

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3
Q

what leads to a greater productivity in an industry is

A

an increase in capital investment in the industry

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4
Q

an example of intervention

A

public goods
not provided
-government provision

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5
Q

the existence of scarcity resources in an economy implies that individuals

A

must make choices

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6
Q

and increase in uk income leads to and increase in demand for holidays abroad and a decrease in demand for holidays in the uk. which one is the inferior and the normal good?

A

the inferior good is the uk holidays

the normal good is the holidays abroad

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7
Q

derived demand

A

can be described as a relationship between the demand for air travel and the demand for pilots

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8
Q

i the absence of government intervention in this market, a misallocation of resources is likely to occur, because..

A

because there is under-cunsumption of the good

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9
Q

when money is used as a medium of exchange..

A

trade is likely to increase

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10
Q

a firm increases the size of it business. as a result, its average cost fall because of better utilisation of its factory and the lower cost of buying advertising place. the firm therefore, …

A

experience grater technical and marketing economies of scale

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11
Q

when social benefits of some private gods exceed the private benefits, then..

A

… is happening market failure

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12
Q

a misallocation of resources is most likely to occur in monopoly ..

A

…in higher price are share that under competitive conditions

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13
Q

when no account is takes of positive externalities in consumption, thus, ..

A

market failure arises

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14
Q

an example of immobility of factor of production is..

A

…when workers unwillingness to change jobs

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15
Q

a product has a price elasticity of demand of -0.5. if the price of this product increases by 10%, then the total revenue..

A

rise by less than 10%

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16
Q

an inferior good always has

A

negative income elasticity of demand

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17
Q

a government wishing to reduce firms’ carbon emissions through the use of pollution permits my fail to achieve such a reduction because

A

permits issued to firms to do not impose strict enough limits on their carbon emissions

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18
Q

the central purpose of economic activity is

A

the satisfaction of needs and wants

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19
Q

to calculate the percentage change in the quantity supplied of a good following a change in its price, the price elasticity of supply should be …

A

… multiplied by the percentage change in price

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20
Q

an economy in which average incomes have fallen by 5% has also seen the demand for holidays overseas fall by 20%. it can be concluded from this that the income elasticity of demand for holidays overseas is

A

+4.0

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21
Q

a monopoly market will be less economically efficient than a competitive market if, under monopoly …

A

prices are higher and output is lower

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22
Q

an economy is always productively efficient if it

A

can produce more of one good only by producing less of another

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23
Q

the equilibrium price in a market is..

A

is the balance of excess demand and excess supply

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24
Q

fish in the ocean is..

A

a factor of production know as land

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25
Q

a hight cost of administering government policy is

A

the result of a government failure

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26
Q

composite demand:

A

is use for two or more proposes

the demand for bricks increases for use in both house and factory building

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27
Q

positive externalities exist when

A

private benefits are less than social benefits

28
Q

market failure arises whenever firms

A

create externalities

29
Q

all other things being equal, supply curves slope upwards from left to right because ..

A

..higher prices lead to higher profits

30
Q

one reason why uk governments provide education is because

A

the private benefit form education is less than the social benefit

31
Q

an increase int he price of petrol will often result in consumers economising in their use of fuel by reducing the number of journeys they make in their cars. this..

A

.. illustrates the operation of the rationing function of the price mechanism

32
Q

a firms will always reduce its unit cost of production as it expands its output if it

A

benefits from specialisation

33
Q

market failure results in a misallocation of resources. in some cases, this can be corrected by the government..

A

providing public goods

34
Q

land owned or rented by firms is ..

A

factor of production

35
Q

the existence of diseconomies of scale at low levels of output is..

A

likely to discourage the growth of a firm

36
Q

the income elasticity of demand for bus travels is -1.5. this means that ..

A

bus travel is an inferior good

37
Q

when the government overproduced a merit good..

A

is an example of government failure

38
Q

the free market equilibrium price of a merit good is £50 per unit, at present, the government does not intervene in the market for this good. the government is most likely to correct the market failure associated with this good if…

A

subsidies the free market price

39
Q

a firm is productively efficient when

A

it is operating at the lower point on its average cost curve

40
Q

the granting of a patent to a pharmaceutical company for newly developed drug is..

A

most like to be a source of monopoly power

41
Q

if there is a negative externality of demand between two goods, this means that the two goods are

A

complementary to each other

42
Q

a shift to the right of the supply curve for a product can be caused by

A

the entry of new firms into the industry

43
Q

in a free market, the rationing function of the price mechanism means that

A

when there is a shortage of a product, the price will rise and deter some consumers from buying the product

44
Q

merit goods are likely to be under provided in a free market economy because their

A

social benefits exceed their private benefits

45
Q

at current levels of output, the marginal social cost of making a good is grater that its MPC. also, the MSB of the good is grater than its MPB. as a result, there will probably be

A

a misallocation of resources

46
Q

when the introduction of pollution permits to limit negatives externalities happens

A

this is an appropriate form of government intervention for the problem identified

47
Q

a manufacture of rubber tyres for motor vehicles invents and sells a new tyre. the new tyres cut petrol consumption by 25% on cars fitted with them

A

the demand for crude oil to produce petrol will fall because the emend for oil is derived from the demand for petrol

48
Q

the price elasticity of supply of wheat is

A

les elastic in the long run than in the short tun

49
Q

a free good

A

has zero opportunity cost

50
Q

where there is a partial market failure…

A

a market exists but there is a misallocation of resources

51
Q

what is a positive statement

A

is one which can be tested against facts

52
Q

a market is initially in equilibrium. the government then intervenes in the market creating exceeds supply at the initial equilibrium price. the most likely intervention that most been carried out by the government si

A

a subsidy on production

53
Q

a product has a price elasticity of supply of +1.5. if ts price falls from £10 to £8 its supply will

A

decrease by 30%

54
Q

government intervention in a market economy is most likely to lead to an increase in economic welfare if

A

the market mechanism fails to take account of externalities

55
Q

what does means that someone enjoying the towers in a public park

A

the economist be most likely to classify as a consumption activity

56
Q

improving the information available to consumers is a way to..

A

reduce market failure

57
Q

a merit good, such as healthcare, is

A

excludable with positive externalities in consumption

58
Q

a market in which a number of firms are competing is gradually taken over by a monopolist. unless there re economies of scale, this is likely to lead to lower

A

output

59
Q

a company wishes to increase labour productivity. all other things being equal, this is most likely to be achieved if the company…

A

invest in more capital equipment

60
Q

the main role of prices in a market economy is to

A

allocate scare resouces

61
Q

the consequences of subsidies is…

A

leads to an increase in the output sold of a good

62
Q

a free good has the characteristic of

A

it has no opportunity cost in supply

63
Q

one reason why the free market fails to achieve an optional allocation of scare resources is because

A

there is underproduction of goods with positive externalities

64
Q

all things being equal, the most likely thing to discourage the growth of a firms is

A

diseconomies of scale at low levels of output

65
Q

a government imposes an indirect tax on a product. the price of the product is likely to rise by the full amount of the tax if the price elasticity of…

A

.. supply is perfectly elastic

Economics (4 decks)

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