Test 5 Review

The production possibilities curve (PPC) shows the hours per day a student has for either entertainment or revision.

The student revises for 3 hours a day. As exams approach, the student decides to revise for 9 hours a day.

What is the opportunity cost of this decision?

• 3 hours of revision

• 6 hours of entertainment

• 6 hours of revision

• 9 hours of entertainment

What is the role of the price mechanism in a market economy?

• to allocate scarce resources

• to increase the provision of merit goods

• to make the distribution of goods and services more equal

• to reduce the negative externalities of production and consumption

What is a macroeconomic concept?

• the effect of a price change of a good

• the equilibrium price in the market for a good

• the reason for a change in a firm's behaviour

• the total spending in an economy

What will increase the demand for labour in an industry?

• a decrease in labour productivity in that industry

• a decrease in the demand for the good made in that industry

• an increase in labour productivity in that industry

• an increase in wages in that industry

Which government policies will both reduce the difference in income between low-paid and high-paid workers?

• a decrease in maximum wage and a more regressive income tax system

• a decrease in the maximum wage and a reduction in trade union power

• an increase in the minimum wage and a more progressive income tax system

• an increase in the minimum wage and a more regressive income tax system

What is a major advantage of a horizontal merger compared with a conglomerate merger?

• It causes more motivation of the workforce

• It gains financial economies of scale with cheaper borrowing from banks

• It leads to diversification making the firm less vulnerable

• It reduces competition and increases the merged firm's market share

Which statement about supply-side policy is correct?

• it aims to increase the productive potential of the economy

• It aims to increase the total demand in the economy

• it involves changes in the equilibrium foreign exchange rate

• It involves changes in the rate of interest

Why is weighting used in the Consumer Prices Index (CPI)?

• to ensure that all items in the index are treated equally

• to ensure that all price changes are included in the index

• to ensure that the index includes changes in the quantity consumed

• to ensure that the index reflects the spending pattern of consumers

Which combination of policy measures is most likely to increase the level of employment?

• decrease general taxation and decrease the general rate of interest

• decrease general taxation and increase the rate of interest

• increase general taxation and decrease the rate of interest

• increase general taxation and decrease the rate of interest

The birth rate in a country is higher than the death rate.

What might prevent the country's population from rising?

• Emigration is greater than immigration

• The birth rate is falling

• The country's medical care improves

• The death rate is rising