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Foundation Bellerbys Economics Unit 1 module multiple choice questions
Flashcards
20 cards
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Questions
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Answers
1
The long run elasticity of supply is higher than the short run elasticity of supply because
In the long run firms can create substitutes
In the long run spare capacity can be reduced
In the long run demand increases
In the long run, stock of machinery and buildings can change
2
Which of the following statements about price elasticity of supply is correct?
Elasticity of supply is normally negative, not positive
PES is higher when factor resources are being fully utilised
Elasticity of supply is higher when stock levels are high
Elasticity of supply is lower the longer the time period
3
When the price goes down by 5% and, as a result, sales rises by 4%. The PED for the good is
-0.8
-1.25
0.8
1.25
4
On a supply and demand diagram, an increase in production costs will normally shift
the demand curve to the left
the supply curve to the right
the supply curve to the left
the demand curve to the right
5
If the production of output from the UK farming industry creates negative externalities
Social costs are lower than private costs
Social benefits/costs are higher than private benefits/costs
Social benefits are higher than private benefits
Social costs are higher than private costs
6
Increasing the output of games consoles from OM to ON causes what opportunity cost of TVs?
OM
KL
KW
NZ
7
With a de-merit good
Private benefit of consumption exceeds the social benefit
Private benefit of consumption is less than social benefit
Consumers can purchase the good at discounted prices
Producers are given a subsidy to produce the good
8
Which one of the following is not an example of capital as a factor of production?
A road
An office building
A bank loan
A tractor
9
The diagram shows the market for a product with external costs. The distance AB represents
External cost
External benefit
Social benefit
Profit for the business
10
The opportunity cost to society of constructing a new motorway would be
the other goods and services that could be produced
the financial cost of the road
the loss of farmland used in order to build the road
other goods and services which the labour used could produce
11
Government intervention in the economy to correct a market distortion may fail because
The opportunity cost of government intervention is zero
The laws of supply and demand do not apply to governments
Incomplete information relating to the costs of intervention
. Governments can only supply public goods
12
An argument for the state providing merit goods and services free of charge is that
They are never provided by the private sector
Consumption of merit goods results in negative externalities
People on low incomes may not be able to afford them
Merit goods are both non-excludable and non-rival
13
An indirect tax on the suppliers of a good usually
Offsets the effect of a government subsidy on the good
Causes an inward shift of demand
Increases the profits of producers supplying the good
Raises its price
14
Demand for a good or service is said to be effective only when it is associated with
Willingness and ability to pay for the good
Knowledge of the characteristics of the good
The existence of an adequate supply of the good
The satisfaction of a want
15
What effect will new technology have on the equilibrium price and output in an industry?
C
A
B
D
16
The equilibrium price in a market...
changes when demand equals supply
always increases when demand rises
is the balance of excess demand and excess supply
is the market-clearing price
17
The demand for a product will tend to be elastic when
It is subject to habitual consumption
The consumer regards the product as a necessity
It takes up a high proportion of a consumers' budget
It has few close substitutes in the market
18
What might cause the changes in equilibrium as per the diagram? A...
Increase in income tax and value added tax
Increase in the price of substitute / fall in material costs
Increase in the wages paid to all workers
Fall in incomes and a rise in interest rates
19
Suppose that market supply is perfectly inelastic. If the demand curve shifts to the left
Price and quantity will rise
Quantity will fall but the market price will remain the same
Price will fal but the quantity supplied will stay the same
Quantity will fall but the market price will remain the same
20
Economics is fundamentally concerned with the study of
Allocating scarce resources to satisfy unlimited wants
How to make more effective use of resources - reducing wants
How new wants and resources are produced
Determining how governments should allocate resources
