National Income, Oligopoly & Economic Efficiency

A firm is operating in a perfectly competitive market. What would ensure that it is both productively and allocatively efficient?

• It is in long-run equilibrium.
• It is maximising total revenue.
• It is producing where marginal revenue is equal to marginal cost.
• Long-run average costs are falling and sales are rising.

Which of the following will directly result in an increase in China's Gross National Product?

• increased wages earned in a Malaysian-owned factory in China
• increased imports of goods and services
• increased outflows of net property income
• increased taxes on domestic expenditure

A country’s GDP declines but the welfare of its population rises. What could explain this?

• a fall in leisure time
• a fall in the size of the subsistence sector
• a rise in positive externalities
• a rise in the size of the population

Which condition defines productive efficiency?

• All factors of production are fully employed.
• All firms are producing at their profit-maximising levels of output.
• The output of all goods is produced at minimum cost.
• There are no further opportunities for substituting capital for labour.

The diagram shows a firm’s cost and revenue curves. Which features are associated with the situation shown in the diagram?

• economies of scale and allocative efficiency
• interdependence and allocative efficiency
• price rigidity and economies of scale
• price rigidity and interdependence

What will increase the likelihood that the firms in an industry will collude to maximise their joint profits?

• The industry has many differentiated products.
• The industry is characterised by rapid technological change.
• The industry consists of a large number of producers.
• There are significant barriers to prevent new firms entering the industry.

The diagram shows a government’s revenue and expenditure for three years. What can be concluded from the diagram?

• A budget deficit was replaced by a budget surplus.
• A government net borrowing requirement emerged.
• The economy moved from a recession into a boom period.
• The yield from taxation continuously increased

Why might GNP per capita of different countries in a given year, measured in US dollars, be a poor indicator of their comparative standards of living?

• Their exchange rates are different from purchasing power parities
• Their population growth rates are different.
• Their rates of inflation are different.
• Their ratios of imports to national income are different.

What will directly result in an increase in China's Gross National Product?

• increased wages earned in a Malaysian-owned factory in China
• increased imports of goods and services
• increased outflows of net property income
• increased taxes on domestic expenditure

The diagram shows an aggregate demand curve. What helps to explain why the curve is downward sloping?

• When exports increase there will be an increase in national income.
• When government expenditure increases there will be an increase in national output.
• When investment increases there will be an increase in consumption.
• When the price level increases there will be an increase in interest rates.