Economics Oct/Nov 2022 (20/09/22)

Some multinational oil companies extracting oil in developing countries are now required to repair the damage they do to the environment. Which best describes the total costs incurred by the oil companies in such circumstances?

• external costs
• private costs plus external costs
• social costs plus external costs
• social costs plus private costs

In an economy, no one can be made better off without making someone else worse off. What does not necessarily follow from this?

• The conditions for allocative efficiency have been met.
• The conditions for productive efficiency have been met.
• The distribution of income is socially acceptable.
• The economy is operating at a point on its production possibility curve.

A government decided to approve a road building scheme because it was socially beneficial. In making its decision it calculated private costs at $800m, private benefits at $800m and external costs at $150m. What must have been true about the external benefits of the scheme?

• External benefits equalled private benefits.
• External benefits exceeded external costs.
• External benefits exceeded $200m.
• There were no external benefits.

What is it called when a consumer’s marginal utility is greater than the price paid for the good?

• a Giffen good
• an inferior good
• consumer surplus
• producer surplus

A consumer has $3 to spend each day on chocolate bars or toffee bars, which all cost $1 each. The table below shows the units of additional satisfaction she gets from consuming each bar. What should she buy to maximise her total utility?

• 1 chocolate bar and 2 toffee bars
• 2 chocolate bars and 1 toffee bar
• 3 chocolate bars
• 3 toffee bars

The curve JK in the diagram is a consumer’s initial budget line.

• A
• B
• C
• D

The diagram shows a consumer’s indifference curves (IC) for goods F and G together with the consumer’s budget lines. What could explain the movement from X to Z on the diagram?

• a fall in the price of G when G is an inferior good
• a fall in the price of G when F is a Giffen good
• a fall in the price of G when G is a normal good
• a fall in the price of G when G is a Giffen good

A firm has the choice between five levels of output. The table shows the total cost and total revenue of producing at each output level. The firm could sell whatever output it produces. The firm decides to produce 4000 units. What is the firm’s aim?

• to maximise profit
• to maximise sales
• to maximise revenue
• to minimise average costs

In which type of market structure are commercial banks usually found?

• perfect competition, because they all link their interest rates to that of the central bank
• perfect competition, because they offer identical products and services
• monopolistic competition, because a competitive market prevents them making excess profits
• oligopoly, because they are affected by the actions of other banks

What is a condition for operating a successful cartel?

• a large number of firms in the industry
• each firm has a differentiated product
• low barriers of entry to the industry
• strictly enforced production quotas