A firm is productively efficient when

it is operating at the lowest point on its AC curve

Merit goods are likely to be underprovided in a free market economy because their

social benefits exceed their private benefits.

Which one of the following is most likely to be a source of monopoly power?

The granting of a patent to a drug company for a new drug

Where there is partial market failure

a market exists but there is a misallocation of resources.

Which one of the following is an example of government failure?

The government overproducing a merit good

Which one of the following is an appropriate form of gov intervention for the given problem

introducing pollution permits to limit -tive externalities

The price elasticity of supply of wheat is

affected by the stocks of wheat available

The central purpose of economic activity is

the satisfaction of needs and wants

Which one of the following is most likely to discourage the growth of a firm? The existence of

diseconomies of scale at low levels of output

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

the entry of new firms into the industry.

An economy is always productively efficient if it

can produce more of 1 good only by producing lessof another.

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Econ AQA Unit 1 Multiple choice

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Questions 15

Answers

1
A firm is productively efficient when
it is operating at the lowest point on its AC curve
it cannot increase current production even if demand rises
an increase in production will decrease average costs.
output per worker cannot increase.
2
Merit goods are likely to be underprovided in a free market economy because their
private benefits exceed their social benefits.
social benefits exceed their social costs.
social benefits exceed their private benefits.
private costs exceed their private benefits.
3
The income elasticity of demand for bus travel is − 1.5. This means that
10%increase in fares leads to a 15% decrease in passengers
as unemployment falls, more people will use buses.
bus travel has a negative cross elasticity of demand.
bus travel is an inferior good
4
Which one of the following is most likely to be a source of monopoly power?
The granting of a patent to a drug company for a new drug
diseconomies of scale at high levels of output
The employment of more workers by a firm as it gets bigger
The merger of two small firms in a large industry
5
Where there is partial market failure
a market exists but there is a misallocation of resources.
there is excess demand in the market at the current market P
the product is both non-excludable and non-rival in C.
the market can only be competitive with government support.
6
Market failure arises whenever firms
reduce expenditure on research and development.
make a loss.
replace machines with workers
create externalities.
7
Which one of the following is an example of government failure?
Government provision of national defence
All subsidies given to private sector firms
The government overproducing a merit good
The gov allowing free market to raise the price of oil
8
Which one of the following is an appropriate form of gov intervention for the given problem
The use of a buffer stock to stabilise P of a public good
The imposition of a max P for a merit good above market P
introducing pollution permits to limit -tive externalities
a subsidy for a product which generates -tive externalities
9
The price elasticity of supply of wheat is
determined by the availability of substitutes.
more elastic when there are restrictions on wheat imports.
affected by the stocks of wheat available
less elastic in the long run than in the short run.
10
A free good
has zero opportunity cost
is non-excludable and non-rival.
is paid for by the government.
has a perfectly inelastic supply
11
If there is a -tive value for the cross elasticity of demand between two goods.The 2 goods are?
both inferior goods.
complementary to each other.
substitutes for each other.
unrelated to each other.
12
The central purpose of economic activity is
to create maximum profit.
to save scarce resources
to achieve economic efficiency
the satisfaction of needs and wants
13
Which one of the following is most likely to discourage the growth of a firm? The existence of
diseconomies of scale at low levels of output
large economies of scale at low levels of output
marketing economies of scale at high levels of output
competing firms in the same industry
14
A shift to the right of the supply curve for a product can be caused by
a tax on the product.
the entry of new firms into the industry.
a rise in costs of production.
a rise in popularity of the product.
15
An economy is always productively efficient if it
can produce more of 1 good only by producing lessof another.
is operating with full employment of labour
continually increases its average standard of living.
maximises investment in capital goods.

Econ AQA Unit 1 Multiple choice Flashcards | StudBud