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WorksheetsBT - Ch. 4 & 5
Total questions: 25
Worksheet time: 13mins
Consider the following statements:
1) 'Equilibrium' is the selling price above which the number of units demanded by the market starts to decline.
2) As the selling price of a product increases, the number of units supplied by the market will also tend to rise.
Which of these statements is/are correct?
1 only
2 only
Both
Neither
Products A and B are substitutes. A 5% change in the price of A has resulted in a 4% change in the demand for B.
What is the cross elasticity of demand (XED) between A and В?
+0.8
-0.8
+1.25
-1.25
A shift in the demand curve for a product is caused by changes in the conditions of demand, rather than a change in the price of the product.
Is this statement TRUE or FALSE?
True
False
None
Both
G Co increases the selling price of its only product, the GF1000 by 5%.
This causes a reduction in the number of units it sells by 8%. Is the GF1000's price elasticity of demand likely to be:
Less than 1
Equal to 1
Greater than 1
Negative
H Co manufactures and sells a motor vehicle, the GHF300.
Which of the following would cause an expansion in demand for this product in country M?
A reduction in the selling price of the GHF300
The GHF300 becoming more fashionable with the public
A reduction in direct taxes within country M
An increase in the population of country M
Which of the following is NOT a characteristic of a perfect market?
Large numbers of customers and suppliers
All suppliers provide a wide range of products and service
There is perfect information for customers and suppliers
There are no entry or exit barriers to the market
F operates in a market where it has only two major rivals - each of whom is roughly the same size as F. What type of market is F operating in?
Oligopoly
Monopolistic competition
BOTH
NONE
Which of the following is a feature of monopolistic competition?
Few competitors in the market
Undifferentiated products
No major barriers to entry to or exit from the market
Low advertising expenditure
Which of the following is NOT a factor that affects price elasticity of demand?
The amount of customer income spent on item
Duration of the price change
The necessity of the item to consumers
The initial number of units demanded
L makes a variety of different products, including windows.
Which TWO of the following would cause a decrease in the level of supply of L's windows?
An increase in the level of VAT charged by the government on windows
A new automated assembly system for L's products that reduces L's window manufacturing overheads
Staff negotiations, leading to window production staff adopting a shift-work approach which makes better use of L's production facilities
Staff negotiations, leading to a slight rise in the hourly rate paid to window production workers
E Co manufactures a single product. Which of the following would indicate that the product
will have a low price elasticity of demand?
Customers spend a high proportion of their incomes on the product
Customers don't see the product as being a necessity
Customers tend to buy the product by habit
Customers have a number of substitute products that they can choose from
The government of country X is planning to introduce minimum wage legislation that would
set minimum worker pay at significantly above the current average level of pay in the
country. The labour market in country X is currently regarded as having reached its
equilibrium point. Consider the following two statements regarding this legislation:
1. The legislation will likely increase the unemployment level within country X.
2. Manufacturers within country X will likely wish to make more labour-intensive
products and reduce the amount of automation used within their businesses.
Which of these statements is/are correct?
1 ONLY
2 ONLY
BOTH
NEITHER
Freja is preparing a short-term budget for a cost incurred by her company. She is predicting
that the company will experience significant increases in output during the period. How
would Freja expect to see the average cost per unit change within the short-term?
The cost per unit would be expected to fall for the entire period due to the increased
output
The cost per unit would be expected to initially fall, then start to rise again due to
diseconomies of scale
The cost per unit would be unlikely to change in the short-term
The cost per unit would be expected to initially fall, then start to rise again due to the
law of diminishing returns
Which of the following is the name given to unemployment which is the result of aggregate
demand in the economy being too small to create employment opportunities for all those
willing, and able, to work?
Structural unemployment
Cyclical unemployment
Frictional unemployment
Real wage unemployment
Rapid economic growth may lead to increased demand for imports.
Is this statement TRUE or FALSE?
TRUE
FALSE
Country Y has an increasingly high rate of unemployment. Which of the following
statements is/are correct regarding the effect of this on consumers and businesses?
(i) Businesses may offer lower wages to staff
(ii) Government spending on social security will fall
(iii) Businesses will find it easier to locate new employees
(iv) Businesses may find that demand for their goods and services falls
(ii) and (iii) only
(i), (iii) and (iv) only
(i) and (iii) only
All four are correct
Which of the following would best summarise the effect of expectations on a country's
economy?
Expectations effect has no influence on the economic development
If a government is expecting the citizens' incomes to rise, it will try to adjust the
taxation levels as to decrease the amount to be collected
If a company expects its trade contract to be terminated, it will take actions to find
another customer
If people collectively expect the economy to develop in a certain way, they will act in
a manner that will facilitate this change
What fiscal policy would be best used when trying to address a deflationary gap?
Running a budget surplus
Having a budget deficit
Lowering interest rates
Raising interest rates
Increases in unemployment, reduced demand, falling household incomes and low business
confidence and investment are associated most strongly with which of the following?
High interest rates
Increase in the money supply
A budget deficit
Recession
The balance of payment surplus will result in:
lower rate of economic growth
inflation
unemployment
budget deficit
Which group is usually most adversely affected by high rates of inflation?
The poor and those on fixed incomes
Small businesses
Large businesses
The disadvantages of economic growth include which one of the following:
growth rates may exceed inflation rates
the gap between rich and poor may narrow
growth may exceed population growth
growth may be in 'demerit' goods
Demand side policies are best described as:
a belief that government should manipulate its spending so as to manage aggregate
demand
ensuring that demand is contained so that inflation is controlled
managing down excessive growth by reducing government borrowing
keeping employment levels substantially below full levels
Which of the following would be classified as an expenditure-reducing strategy?
Providing subsidies to exporters
Lowering the currency exchange rate (devaluation)
Running a budget surplus
Import tariffs and quotas
Governments may need to intervene in the economy in order to move it nearer to its
equilibrium point. Increased government expenditure and lower taxes can be used to
stimulate demand and full employment is only possible with a boost from government policy
and public investment.
Which approach to economics do these statements relate to?
Keynesian
Monetarist
