Micro 2

Food prices in a country increased by 20% due to an infectious virus. Which statement is normative?

• Consumers were scared of running out of food

• Farm workers demanded higher wages to cover extra hours worked

• Supply of foreign food was reduced because of closed borders

• Transport costs increased by 10%

Which products are likely to have a positive cross - elasticity of demand with tea?

• Biscuits and cakes

• Coffee and hot chocolate

• Cups and saucers

• Sugar and milk

The PED for tea in many countries has risen. What is the most likely cause of this change in PED?

• A decrease in the incomes of consumers

• A decrease in the number of complements to tea

• An increase in the amount of tea supplied

• An increase in the number of substitutes for tea

How can the concept of marginal utility explain the shape of the downward sloping demand curve?

• Consumer tastes only change when their power spending power increases

• Extra utility gained from consuming successive units of a good falls

• Satisfaction of consuming an extra unit is > than loss of money spent

• Total utility gained buying units will continue to increase indefinitely

Which of these is the BEST explanation of why an information gap is considered to be a market failure?

• Because consumers cannot fully understand the market

• Because governments are forced to intervene in the free market

• Because producers may not maximise their profit

• Because it is likely to lead to misallocation of resources

Which of the following defines a negative externality?

• MSC > MSB

• MSC > MPC

• MSC < MPB

• MPC > MSC

Which would be treated as as an external cost arising from the growing volume of cars on Britain's roads

• The cost of car purchase and replacement

• Depreciation of car values due to car mileage

• Higher prices in shops due to increased costs of transportation

• The costs of purchasing fuel

What is closest to being a pure public good?

• Electricity

• Health services

• Water supply

• Street lighting