NEC preparation 12

What is a disadvantage of a market economic system?

• Entrepreneurs lack incentives to produce what consumers want.

• Government intervention will reduce the efficiency of firms.

• Market dominance by firms can lead to higher prices

• There is underproduction of demerit goods.

The diagram shows the demand curve for coffee in the US

Why did the quantity demanded move from Q1 to Q2?

• Coffee became cheaper.

• Incomes rose in the US.

• There was a successful advertising campaign by coffee retailers.

• The price of substitutes for coffee rose.

Which combination is usually found in a monopoly?

• many buyers and many sellers

• many buyers and single seller

• single buyer and many sellers

• single buyer and single seller

A government decreased the tax on all goods produced in its country.

What is the most likely consequence of this?

• a decrease in exports

• an increase in imports

• an increase in production

• a worsening of the balance of trade in goods

Which government policy measure would cause an increase in a country’s supply of labour?

• increasing unemployment benefits

• lowering interest rates

• raising income tax

• raising the age of retirement

What is classified as one of the four economic resources?

• consumption

• enterprise

• production

• trade

In a city, what is most unlikely to be provided by the private market system?

• a museum

• a school

• a sports field

• street lights

What is characteristic of a monopoly market structure?

• A monopolist may determine the price of its product.

• A monopolist’s product has many substitutes.

• There are no external costs.

• There is easy entry into the market.

What is an example of expansionary monetary policy?

• a decrease in income tax rates

• a decrease in the budget deficit

• a decrease in the money supply

• a decrease in the rate of interest

Which government policy would reduce economic growth?

• cutting the rate of corporation tax

• increasing expenditure on education

• lowering the rate of income tax

• raising interest rates