Economics Oct/Nov 2022 (06/09/22)

The takeover of a life assurance company by a bank is an example of

• horizontal integration.
• lateral integration.
• vertical backwards integration.
• vertical forwards integration.

What would be an example of a market failure?

• higher prices for hotel rooms at holiday periods
• noise pollution experienced near major airports
• periods of inflation when prices of all goods and services rise
• 20% of a country’s population live in poverty

What is a necessary condition for the achievement of productive efficiency?

• the removal of all externalities
• the elimination of all divergences between private and social costs
• equality between price and marginal cost in all industries
• the production of a good at minimum average cost for a given output

Imperfect competition is distinguished from perfect competition in that, in long-run equilibrium,

• supply is elastic
• demand is inelastic.
• marginal cost will be below average cost.
• average revenue will be below marginal revenue.

What makes it harder for a small firm to compete against large firms in the same industry?

• Copyrights on the product have expired.
• Customers want individual product designs
• The cost of entering the industry is low
• The industry’s product is standardised.

A firm operates at the maximum point on its average product curve. What necessarily follows?

• Average variable cost is at a minimum.
• Marginal cost is at a minimum.
• Marginal product is at a maximum.
• Total profit is at a maximum.

The dominant firm in an oligopoly sets up a research institute to carry out new product development. Which two features of oligopoly are present in this project?

• creation of barriers to entry and collusion
• creation of barriers to entry and non-price competition
• non-price competition and price leadership
• price leadership and collusion

To control the cost of living governments have sometimes imposed a maximum price on certain goods that is below the free market price. What is often an undesirable side effect of such policies?

• accelerating general inflation
• an increase in profits above normal profits
• an increase in the stocks of unsold goods held by firms
• shortages of the good

The table shows the values of the Gini coefficient for some countries in 2007. Using the information above, which statement is correct?

• Income is distributed more equally in Denmark than France.
• Income is distributed more equally in Namibia than Zambia
• Income per capita is higher in Zambia than Namibia
• Income per capita is higher in Zambia than Namibia

Other things remaining equal, what will reduce the level of national income in an economy

• a fall in planned savings
• a fall in the marginal propensity to import
• an increase in the average propensity to consume
• a reduction in the level of defence expenditure