Wrong Answers

Question 1

What is not a key feature of organisations?

Answer 1

Creation of a product/service.

Question 2

What are transaction costs associated with?

Answer 2

Outsourcing - the effort put into specifying what is required/delivery/monitoring are all transaction costs

Question 3

What type of good will likely experience large fluctuations in supply due to supply lag?

Answer 3

Wheat - takes around a year to repurpose a field/plant a crop and harvest

Question 4

What is the main benefit of specialisation of labour to a company?

Answer 4

It raises the productivity of labour

Question 5

What is one criteria needed to enable economies of scale?

Answer 5

There has to be sufficient demand for the product.

Question 6

What is an example of a Merit good?

Answer 6

Healthcare/Education

Question 7

What is NOT a valid economic reason for producing goods and services by the state?

Answer 7

It is a necessity that is consumed by everyone.

Question 8

What is NOT a tool that the government can use to attempt to stabilise markets?

Answer 8

Setting a minimum wage - this will not help producers determine how much of the good to supply

Question 9

If interest rates fall - how might this affect the price of bonds?

Answer 9

If interest rates fall, bonds will rise because they become a more attractive investment.

Question 10

What is the main reason that borrowers and lenders are unlikely to contact each other directly?

Answer 10

High costs

Question 11

What is aggregate demand made up of?

Answer 11

Consumption, investment, government expenditure, exports.

Question 12

How to calculate the value of the MPC?

Answer 12

Step 1: Calculate change in consumption
Step 2: Calculate change in income.
Step 3: Change in Consumption / Change in Income.

Answer = MPC.

Question 13

What is NOT an argument in favour of a minimum wage?

Answer 13

It prevents people from working below the minimum wage.

Question 14

What would lead a country’s balance of payments current account to move towards a surplus?

Answer 14

A rise in exports & foreign tourism into the country.

Question 15

What are advantages of dirty floating exchange rates?

Answer 15

Make a country’s exports more competitive

Assisting in the control of inflation.

Question 16

What does a rise in the reserve asset ratio lead to?

Answer 16

A fall in the level of liquidity in the banking sector

Question 17

What do Keynesian economists prefer?

Answer 17

Keynesian economists prefer to use Fiscal policy to control the economy.

Question 18

When is the revenue generated by an indirect tax the highest? (In general)

Answer 18

In general, when demand is inelastic & supply is also inelastic, tax revenue will be highest.

When demand is inelastic and supply is elastic, tax will affect consumers more.

When demand is elastic and supply is inelastic, tax will affect producers more.

Question 19

If a firm finds that its revenue rises by 5% when it increases the price of it’s product by 5%, what is the PED?

Answer 19

Perfectly Inelastic - if the price has risen by 5% then volume sold must be unchanged for revenue to rise by 5%.

Question 20

What could cause cost push inflation?

Answer 20

A shift in taxation towards indirect taxes and away from direct taxes.

Question 21

A 6% bond is trading for 120% of it’s nominal value of £1000

What is the running yield of this bond?

Answer 21

Interest earned = 1000 * 0.06 = $60

Running yield = Interest Earned / Market Price of the bond

60/1200 = 5%

Question 22

If assets are owned in a currency which is appreciating against another, what will happen?

Answer 22

Increase in value of assets due to translation risk

Question 23

How do central banks ensure there is sufficient liquidity in the financial system?

Answer 23

By lending money to commercial banks

Question 24

What is an advantage of having a fixed exchange rate?

Answer 24

Importers and exporters face less foreign exchange risk

Question 25

Which two of the following would reduce the level of international competition faced by a domestic company?

Answer 25

Government imposing a quota on imported goods

A weakening domestic currency

Question 26

What three advantages does an organisation have over individuals working alone?

Answer 26

Resources and best practice can be shared

Workers can develop more expertise

Question 27

Which of the following apply to products with a low price elasticity of demand?

Answer 27

If suppliers increase prices, their total revenue rise

Price rises will cause demand to fall

The demand curve has a steep gradient

Question 28

Which of the following will occur if government sets an effective minimum price policy for goods?

Answer 28

Suppliers will benefit

Question 29

Which two of the below are characteristics of good information?

Answer 29

Factually correct

Released without undue delay

Question 30

What two things would help to close a budget deficit?

Answer 30

Imposing a duty on imports

Reducing benefits payments

Question 31

How would a longer term investment give a higher yield than a shorter one?

Answer 31

Higher interest and/or lower market value

Question 32

Why do ordinary shares pay a higher return than debt?

Answer 32

Shareholders face more risk than debt holders