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Y13 Micro C5 MCQ Mastery

Total questions: 153

Worksheet time: 8hrs 32mins

Name
Class
Date
1.

In a neoclassical competitive labour market, the demand curve for labour is given by which one of the following?

a)

Marginal revenue product

b)

Total physical product

c)

Marginal physical product

d)

Total revenue product

2.

A monopsony type of market failure is said to occur for which one of the following?

a)

Suppliers of labour have market power

b)

Suppliers of products have market power

c)

Buyers of products have market power

d)

Buyers of labour have market power

3.

Which one of the following describes a state of the labour market which is most likely to be linked to a lower wage for those employed?

a)

Bilateral monopoly

b)

Strong trade unions

c)

Monopsony

d)

Natural monopoly

4.

What is a labour market structure in which the marginal cost of labour curve will lie above the average cost of labour curve?

a)
Monopsony
b)

Perfectly competitive labour market

c)

Perfect competition

d)

Oligopoly

5.

The addition to total revenue from employing the last person is best described as

a)

Marginal physical product

b)

Marginal revenue

c)

Marginal revenue product

d)

Marginal utility

6.

When economists refer to labour demand as a derived demand, they mean

a)

Its demand is derived from the demand for the good or service workers contribute to producing

b)

Its demand is found by taking the first derivative of the total revenue function

c)

Its demand is derived from the historical precedent of compensation for comparable jobs

d)

Its demand is derived from supply

7.

Firms' primary objective is often

a)

Output maximisation

b)

Utility maximisation

c)

Profit maximisation

d)

Respect maximisation

8.

In economic theory with perfect information models, the profit maximising output occurs where

a)

Average revenue equals average costs

b)

Marginal revenue equals marginal costs

c)

A firm’s customer goodwill is maximised

d)

Total revenue equal total costs

9.

The Marginal Product of Labour (MPL) represents the

a)

Additional sales generated by increasing labour by one unit

b)

Additional output generated by increasing labour by one unit

c)

Additional output generated by increasing capital by one unit

d)

Additional output generated by increasing both labour and capital such that the factor proportions used in the production process are unaltered

10.

A critical assumption economists make about the relationship between the quantity of labour hired and the marginal product of labour is that

a)

The MPL increases as additional units of labour are added to the production process

b)

The MPL diminishes to an irreducible minimum, then increases (i.e., the MPL curve is u-shaped)

c)

The two variables are totally unrelated

d)

The MPL diminishes as additional units of labour are added to the production process

11.

If two inputs (capital and labour) are gross substitutes in the production process, an increase in the price of labour will have what impact on the market for capital?

a)

The demand curve for capital will shift outward

b)

The demand curve for labour will shift inward

c)

The capital market will only be affected if entrepreneurial ability is not an input in the production process

d)

The price of capital will necessarily fall as well

12.

The word monopsony means

a)

One buyer

b)

One market

c)

One seller

d)

One equilibrium

13.

In a monopsonistic labour market

a)

There is one profit-maximising quantity of labour the firm should hire

b)

The marginal expense of labour curve is the labour supply curve

c)

The marginal revenue product of labour curve will necessarily be horizontal

d)

The marginal expense of labour curve lies above the labour supply curve

14.

A monopsonist pays a wage

a)

Equal to the marginal revenue product of labour

b)

Lower than the government-mandated minimum wage

c)

Between the wage determined in a competitive market and the marginal expense of labour

d)

Lower than the wage determined in a competitive labour market

15.

The substitution effect of a wage change could be considered

a)

A) A function of the income effect

b)

B) Positive or negative

c)

C) Infinitely elastic

d)

D) The difference between the total effect and the income effect

16.

Which of the following can not explain the reduction in wage discrimination against women since the mid-1970s?

a)

The Equal Pay Act

b)

Increasing demand for skills possessed by women

c)

The increasing supply of women in the labour market

d)

Equal Opportunities legislation

17.

Consider a bilateral monopoly model. At what level should the trade union wage be if the aim were to maximise employment?

a)

The wage at which the demand curve intersects the average cost of labour

b)

The wage at which the demand curve intersects the marginal cost of labour

c)

A wage below the monopsonist wage

d)

A wage where MCL cuts the demand for labour curve

18.

In practice, firms have some degree of monopsony power in the labour market if

a)

Workers cannot costlessly search for alternative employment

b)

Workers form an effective trade union

c)

No supernormal profits are being earned

d)

None of the above obtains

19.

Card & Krueger found that a minimum wage hike raised employment in the fast food industry. However, why might this not necessarily be true of all durable goods industries too?

a)

Employers are exempt from minimum wage legislation

b)

Skills shortages prevent employers from increasing the number of workers employed

c)

Wage hikes may not so easily be passed on to consumers due to product market competition across jurisdictions

d)

Wage hikes may not so easily be passed on to consumers due to retail price inertia

20.

According to Machin & Manning's study of minimum wages in the UK during the 1980s, the reduction in the 'toughness' of the minimum wage (decrease in the strength of the wage compared to median income)

a)

Served to increase employment

b)

Did not serve to increase employment

c)

Increased the average duration of unemployment

d)

Decreased the average duration of unemployment

21.

Which of the following is a criticism of PPF's?

a)

In reality, businesses and macroeconomies are concerned with the production of more than just two goods

b)

The macroeconomy rarely/never operates on a PPF as full employment is rarely achieved in peacetime

c)

In reality, contrary to Says law, production can be driven by demand and PPF's reveal little about consumer confidence and demand

d)

All of these answers

22.

As an increasing number of units of Terry's chocolate orange bars are consumed, which of the following descriptions is likely to be most accurate?

a)

Total utility decreases, marginal utility decreases

b)

Total utility decreases, marginal utility increases

c)

Total utility increases, marginal utility decreases

d)

Total utility increases, marginal utility increases

23.

To say that long life UHT milk is an inferior good means that the income elasticity

a)

is definitely greater than 1

b)

is negative

c)

is positive but could be greater than or less then (or equal to) 1

d)

is definitely between 0 and 1

24.

A substitute good has...

a)

A) A negative YED coefficient

b)

B) A positive YED coefficient

c)

C) A positive XED coefficient

d)

D) A negative XED coefficient

25.

The demand curve for a normal good shifts leftward if income X or the expected future price Y

a)

decreases; falls

b)

increases; rises

c)

increases; falls

d)

decreases; rises

26.

Which of the following definitions is inaccurate?

a)

A) Derived demand - Demand for a factor of a production which arises not from the factor or the good itself but from the goods it produces

b)

B) Joint demand - Demand for goods which are interdependent, such that they are demanded together

c)

C) Composite demand - Demand for a good that has multiple sources of supply

d)

D) Competitive demand - Demand for goods that are in competition with each other (also known as substitute goods)

27.

Prices can guide resources to where there are scarcities and surpluses. This is best described by

a)

The signalling function of prices

b)

The incentive function of prices

c)

The rationing function of prices

d)

The allocating function of prices

28.

Prices can encourage firms to supply more or fewer goods. This is best described by

a)

The signalling function of prices

b)

The incentive function of prices

c)

The rationing function of prices

d)

The allocating function of prices

29.

Prices can allocate resources by increasing or decreasing demand through willingness and ability to pay. This is best described by

a)

The signalling function of prices

b)

The incentive function of prices

c)

The rationing function of prices

d)

The allocating function of prices

30.

Prices can ultimately help to allocate resources amongst competing uses. This is best described by

a)

The signalling function of prices

b)

The incentive function of prices

c)

The rationing function of prices

d)

The allocating function of prices

31.

Which of the following is not a disadvantage of introducing the price mechanism into some areas of human activity?

a)

Firms in imperfectly competitive markets can abuse their market power and charge higher prices

b)

Markets can exclude some consumers through ability to pay which is a problem if markets are made for essential merit goods with price inelastic demand

c)

Government failure can lead to unintended consequences and misallocated resources

d)

In some markets economic rent (unearned income) can be extracted

32.

In AQA A-level economics complete market failure describes

a)

Misallocated resources

b)

Missing markets

c)

Government failure

d)

Information failure

33.

In AQA A-level economics partial market failure describes

a)

Misallocated resources

b)

Missing markets

c)

Government failure

d)

Information failure

34.

Public goods are

a)

Rivalrous and excludable

b)

Non-rivalrous and non-excludable

c)

Rivalrous and non-excludable

d)

Excludable and non-rivalrous

35.

Public goods are

a)

Rivalrous and excludable

b)

Non-rivalrous and non-excludable

c)

Rivalrous and non-excludable

d)

Excludable and non-rivalrous

36.

Private goods are

a)

Rivalrous and excludable

b)

Non-rivalrous and non-excludable

c)

Rivalrous and non-excludable

d)

Excludable and non-rivalrous

37.

Governments provide public goods principally because

a)

Public goods are non-rivalrous

b)

Information failure exists

c)

They can produce positive or negative externalities

d)

The free-rider problem exists

38.

One reason a flood barrier can be considered a public good is because

a)

No-one can be excluded from deriving its benefits

b)

Anyone can benefit from it

c)

Households and firms do compete as rivals to consume the benefits

d)

It is possible to reject the benefits it brings

39.

One reason a lighthouse can be considered a public good is because

a)

Any ship can derive benefits from it

b)

It is provided by government and is free at the point of consumption for all ships

c)

The benefits it brings to one ship do not prevent the next ship from also deriving benefits

d)

It is likely to be located on public land

40.

One reason an M&S Big Daddy chocolate bar (1600+ cals) can be considered a private good is because

a)

There is a free rider problem

b)

It is not provided by the government

c)

It is rivalrous

d)

It is non-excludable

41.

One reason a vaccination can be considered a private good is because

a)

It is not always provided by government

b)

It is excludable and rivalrous

c)

It is non-excludable and non-rivalrous

d)

It is nearly always provided by government

42.

Could an MP3 file be considered a public good?

a)

Maybe yes, as could be made by government

b)

No as it is often created, modified and shared privately

c)

Maybe yes, as it can be shared at zero marginal cost it could be non-rivalrous and non-excludable

d)

No as it is rivalrous like an audio CD

43.

Quasi public goods

a)

Demonstrate one but not both features of a public good

b)

Demonstrate both features of a public good and are non-rejectable

c)

Demonstrate neither feature of a public good

d)

Are rivalrous and excludable

44.

Which description best argues that fireworks are a quasi public good?

a)

No-one can be excluded from fireworks displays and one person’s enjoyment does not harm the next person’s enjoyment

b)

People can be excluded from being in close proximity to fireworks displays and one person’s enjoyment does not harm the next person’s enjoyment

c)

People can be excluded from being in close proximity to fireworks displays and if the display becomes too crowded one person’s enjoyment could harm the next person’s enjoyment

d)

Firework displays can be provided by a local council but don’t have to be

45.

A situation where individuals act through self-interest and behave contrary to the common good of all users, by depleting or spoiling common access resources describes which controversial concept of Hardin's?

a)

Public goods

b)

Free rider problem

c)

Tragedy of the commons

d)

3 certainties in life: death, taxes and Man Utd penalties

46.

Hardin's concept of the tragedy of the commons argues is most frequently used to argue in favour of which policy?

a)

Subsidies

b)

Extension of private property rights

c)

Nationalisation

d)

Regulation

47.

Which A-level behavioural economics concepts best explain why it may not necessarily be a 'rational'-utility maximising decision for an individual to have as many animals as she can grazing on commons land?

a)

Loss aversion and anchoring

b)

Loss aversion and bounded self-control

c)

Social norms and altruism

d)

Anchoring and priming

48.

Why can the tragedy of the commons not occur for anything considered to be a public good?

a)

Due to the free rider problem

b)

Due to non-excludability

c)

Due to non-rivalry

d)

Due to private goods

49.

A cost incurred by an individual (firm or consumer) as part of its production or other economic activities is a

a)

Private cost

b)

External cost

c)

Spillover cost

d)

Social cost

50.

A cost that is associated with an individual’s (a firm or household’s) production or other economic activities which is borne by a third party is a

a)

Private benefit

b)

Private cost

c)

Spillover cost

d)

All answers

51.

A cost that is associated with an individual’s (a firm or household’s) production or other economic activities which is borne by a third party is a

a)

All answers

b)

External cost

c)

Spillover cost

d)

Negative externality

52.

Marginal social cost is equal to

a)

MSC-MPC

b)

MSC+MSB

c)

MPC+MEC

d)

MEC+MEB

53.

Marginal external cost is equal to

a)

MSC+MPC

b)

MSC-MPC

c)

MPC+MEC

d)

MSC-MSB

54.

The benefits directly accruing to a particular action. I.e. Utility (a neoclassical concept, where MU = Price)

a)

Spillover benefit

b)

Social benefit

c)

Private benefit

d)

External benefit

55.

The benefits that accrue as a consequence of externalities to third parties is a

a)

Private cost

b)

Private benefit

c)

Spillover benefit

d)

All answers

56.

The benefits that accrue as a consequence of externalities to third parties is a

a)

All answers

b)

External benefit

c)

Spillover benefit

d)

Positive externality

57.

Marginal social benefit is equal to

a)

MSB-MPB

b)

MSB+MSC

c)

MPB+MEB

d)

MEB+MEC

58.

Marginal external benefit is equal to

a)

MSB+MPB

b)

MSB-MPB

c)

MPB+MEB

d)

MSB-MSC

59.

When MSB > MSC it best describes

a)

Positive externalities

b)

Negative externalities

c)

Merit goods

d)

Demerit goods

60.

When MSC > MSB it best describes

a)

Positive externalities

b)

Negative externalities

c)

Merit good

d)

Demerit good

61.

When MSC>MPC it best describes

a)

Negative externalities of production

b)

Negative externalities of consumption

c)

Positive externalities of production

d)

Positive externalities of consumption

62.

When MSC < MPC it best describes

a)

Negative externalities of production

b)

Negative externalities of consumption

c)

Positive externalities of production

d)

Positive externalities of consumption

63.

When MSB>MPB it best describes

a)

Negative externalities of production

b)

Negative externalities of consumption

c)

Positive externalities of production

d)

Positive externalities of consumption

64.

When MSB < MPB it best describes

a)

Negative externalities of production

b)

Negative externalities of consumption

c)

Positive externalities of production

d)

Positive externalities of consumption

65.

On neoclassical externalities diagrams, the free market quantity is found where

a)

MPC equals MSC

b)

MPC equals MPB

c)

MSC equals MSB

d)

MSC equals MPC

66.

On neoclassical externalities diagrams, the socially optimal quantity is found where

a)

MPC equals MSC

b)

MPC equals MPB

c)

MSC equals MSB

d)

MSC equals MPC

67.

Which policies typically shift supply leftwards?

a)

A) Information provision and indirect tax

b)

B) Subsidies and max pricing

c)

C) Indirect tax and regulation

d)

D) Indirect tax and min pricing

68.

Which of the following best describes an indirect tax?

a)

A tax levied on goods and services

b)

A tax on business profits

c)

A tax on worker income

d)

A tax levied on consumers

69.

Which of the following best describes an ad-valorem indirect tax?

a)

An indirect tax set as a percentage of the selling price

b)

An indirect tax set as a percentage of the costs of production

c)

A direct tax on business profits

d)

A direct tax on worker income

70.

An indirect tax

a)

Lowers firms' costs of production

b)

Raises firms' costs of production

c)

Directly addresses the problem of underconsumption

d)

Directly addresses externalities caused by merit goods

71.

On the diagram for a per unit indirect tax there is a

a)

Rightwards shift in supply with two parallel curves

b)

Leftwards shift in supply with two parallel curves

c)

Rightwards shift in supply with an increasing gap between the two curves

d)

Leftwards shift in supply with a increasing gap between the two curves

72.

On the diagram for an ad-valorem indirect tax there is a

a)

Rightwards shift in supply with two parallel curves

b)

Leftwards shift in supply with two parallel curves

c)

Rightwards shift in supply with an increasing gap between the two curves

d)

Leftwards shift in supply with an increasing gap between the two curves

73.

The size of a per unit tax is shown by

a)

The horizontal distance between two demand curves

b)

The horizontal distance between two supply curves

c)

The vertical distance between two demand curves

d)

The vertical distance between two supply curves

74.

What should indirect taxes do to price and quantity respectively?

a)

Increase in price and increase in quantity

b)

Increase in price and decrease in quantity

c)

Decrease in price and increase in quantity

d)

Decrease in price and decrease in quantity

75.

Indirect taxes best address

a)

The free-rider problem

b)

Negative externalities produced by demerit goods

c)

Positive externalities produced by merit goods

d)

Underconsumption of inferior goods

76.

When an indirect tax is applied there is

a)

Extension along the demand curve

b)

Extension along the supply curve

c)

Contraction along the demand curve

d)

Contraction along the supply curve

77.

The consumer burden of an indirect tax is shown on the indirect tax diagram by:

a)

(P2-P1)*Q2

b)

(P2-P1)*Q1

c)

(Q1-Q2)*P2

d)

 (Q1-Q2)*P1

78.

Which of the following is not an advantage of indirect taxation?

a)

Indirect tax works through the price mechanism to internalise firms' external costs

b)

Indirect tax can be considered equitable ('polluter pays principle')

c)

Indirect taxes are regressive

d)

In neoclassical theory, indirect taxes are thought to be 'hypothecated'

79.

If demand for a good or service has price inelastic demand, the imposition of an indirect tax should lead to

a)

A) A fall in demand that is proportionately larger than the decrease in price

b)

B) A fall in demand that is proportionately smaller than the decrease in price

c)

C) A fall in demand that is proportionately larger than the increase in price

d)

D) A fall in demand that is proportionately smaller than the increase in price

80.

If demand for a good or service has price elastic demand, the imposition of an indirect tax should lead to

a)

A) A fall in demand that is proportionately larger than the decrease in price

b)

B) A fall in demand that is proportionately smaller than the decrease in price

c)

C) A fall in demand that is proportionately larger than the increase in price

d)

D) A fall in demand that is proportionately smaller than the increase in price

81.

Which of the following are difficulties setting indirect tax at 'the right' level?

a)

External costs are difficult to identify and express in monetary terms

b)

All answers

c)

If the tax is set too low then firms may not fully internalise their external costs

d)

If the tax is set too high then the tax could damage the industry and there could be unintended consequences

82.

Cross-border shopping, fly-tipping and black market cigarette consumption are all examples of

a)

Unintended consequences from the imposition of a subsidies

b)

Unintended consequences from the imposition of indirect taxes

c)

Tax avoidance

d)

Tax evasion

83.

Indirect taxes can be considered regressive because

a)

They take up a larger percentage of higher incomes

b)

They take up a larger percentage of lower incomes

c)

They take a larger nominal sum from higher income earners

d)

They take a smaller nominal sum from higher income earners

84.

Which of the following is an example of an unpopular regressive indirect tax?

a)

None of these answers

b)

Thatcher's Poll Tax

c)

Brown's reduction of the basic rate of income tax from 25% to 20%

d)

Osbornes's reduction of the annual allowance from £50,000 to £40,000

85.

With the imposition of an indirect tax, the more price inelastic the demand the greater the

a)

Fall in quantity demanded

b)

Proportionate decrease in quantity demanded

c)

Consumer burden of the tax

d)

Producer burden of the tax

86.

With the imposition of an indirect tax, the more price elastic the demand the greater the

a)

Rise in quantity demanded

b)

Proportionate increase in quantity demanded

c)

Consumer burden of the tax

d)

Producer burden of the tax

87.
A subsidy
a)
Lowers firms' costs of production
b)
Raises firms' costs of production
c)
Directly addresses the problem of overconsumption
d)
Directly addresses externalities caused by demerit goods
88.
On the diagram for a subsidy there is a
a)
Rightwards shift in supply with two parallel curves
b)
Leftwards shift in supply with two parallel curves
c)
Rightwards shift in supply with an increasing gap between the two curves
d)
Leftwards shift in supply with a increasing gap between the two curves
89.
The size of a subsidy per unit is shown by
a)
The horizontal distance between two demand curves
b)
The horizontal distance between two supply curves
c)
The vertical distance between two demand curves
d)
The vertical distance between two supply curves
90.
What should subsidies do to price and quantity respectively?
a)
Increase in price and increase in quantity
b)
Increase in price and decrease in quantity
c)
Decrease in price and increase in quantity
d)
Decrease in price and decrease in quantity
91.
Subsides best increase
a)
The free-rider problem
b)
Negative externalities produced by demerit goods
c)
Positive externalities produced by merit goods
d)
Overconsumption of normal goods
92.
When a subsidy is employed there is
a)
Extension along the demand curve
b)
Extension along the supply curve
c)
Contraction along the demand curve
d)
Contraction along the supply curve
93.
The consumer benefit of a subsidy is shown on the subsidy diagram by:
a)
(P1-P2)*Q1
b)
(P1-P2)*Q2
c)
(Q2-Q1)*P2
d)
(Q2-Q1)*P1
94.
Which of the following is not an advantage of subsidies?
a)
Subsidies work through the price mechanism to increase the production of merit goods
b)
Subsidies can be increase equity by reducing exclusion through ability to pay
c)
Subsidies encourage firms to be more productively efficient
d)
Subsidies could help subsidised domestic firms to be more competitive in export markets
95.
If demand for a good or service has price inelastic demand, the imposition of a subsidy should lead to
a)
A rise in demand that is proportionately larger than the decrease in price
b)
A rise in demand that is proportionately smaller than the decrease in price
c)
A rise in demand that is proportionately larger than the increase in price
d)
A rise in demand that is proportionately smaller than the increase in price
96.
If demand for a good or service has price elastic demand, the imposition of a subsidy should lead to
a)
A rise in demand that is proportionately larger than the decrease in price
b)
A rise in demand that is proportionately smaller than the decrease in price
c)
A rise in demand that is proportionately larger than the increase in price
d)
A rise in demand that is proportionately smaller than the increase in price
97.
Which of the following are difficulties setting subsidies at 'the right' level?
a)
External benfits are difficult to identify and express in monetary terms
b)
All answers
c)
If the subsidy is set too low then production and consumption may not increase to the socially optimal level
d)
If the subsidy is set too high then too much of the subsidy could be absorbed by the firm for less equitable uses such as stock buy-backs
98.
Subsidies could
a)
Increase the price of the product above the marginal cost of production, leading to allocative inefficiency
b)
Increase the incentive for firms to raise fixed costs and be productively inefficient
c)
Increase the average cost of the product above the marginal cost of production, leading to allocative inefficiency
d)
Reduce the incentive for firms to lower LRAC and be productively efficient
99.
One drawback of subsidies at a macroeconomic level is
a)
There can be a rise in long-run average cost
b)
There can be a real-resource opportunity cost
c)
There can be a rise in export costs
d)
There can be a rise in short-run average cost
100.
Which of the following is an example of government failure resulting from subsidies
a)
Bank subsidies for banks that are 'too big to fail' not being used to support households and firms in 'the real economy'
b)
Subsidies for electric cars making the domestic firms more price competitive on world markets
c)
Subsidies for loft insulation increasing the energy efficiency of Norwegian homes
d)
Child care subsidies increasing the number of 2nd income earners undertaking paid employment
101.
State provision can be described as the act of provision or supply by the government...
a)
Free at the point of production
b)
Free at the point of consumption
c)
Free at the point of entrance
d)
Free for all
102.
On the state provision diagram, the supply curve is
a)
Unitarily price elastic
b)
Perfectly price elastic
c)
Perfectly price inelastic
d)
Relatively price inelastic
103.
On the state provision diagram, all demand past Q1 is
a)
A shortage of demand even with underfunding
b)
Excess demand if the service is underfunded
c)
A shortage of demand due to overfunding
d)
Excess demand even if the service is overfunded
104.
Which of the following is not an advantage of direct state provision?
a)
There is no exclusion through inability to pay
b)
State provision can help to address underconsumption by low income households in markets
c)
State provision could build and maintain institutions that help to reduce income and wealth inequality
d)
External costs to society can be maximised
105.
Which of the following is not a disadvantage of state provision?
a)
What should and should not be provided free at the point of consumption involves a value judgment
b)
If there is excess demand due to underfunding, difficult decisions need to be made to allocate resources
c)
Some individuals may be excluded through the price mechanism
d)
There can be a government failure argument, e.g. Wastefulness, excessive bureaucracy or unintended consequences
106.
Which of the following models could be used as complementary analysis to advocate state provision?
a)
Positive externalities of consumption
b)
Negative externalities of consumption
c)
Negative externalities of production
d)
Functions of prices demand and supply analysis
107.
Regulations can be described as
a)
The act of provision or supply by the government free at the point of consumption
b)
Rules and controls which restrict market freedom but provide minimum standards
c)
A tax levied on goods and services
d)
A grant given by the government to producers to encourage production of a good or service by lowering firms’ costs of production
108.
For the regulation diagram the X curve shifts Y
a)
Demand rightwards
b)
Demand leftwards
c)
Supply leftwards
d)
Any of the above depending upon the case study
109.
Regulations that improve housing standards and food standards
a)
Increase firms' costs of production
b)
Decrease firms' tax obligations
c)
Cause extension along the demand curve
d)
Aim to solve the problem of underconsumption
110.
Which of the following is not an advantage of regulations?
a)
Regulations set a specific limit on emissions
b)
Regulations can bring about regulatory capture
c)
Unlike tax, regulations on emissions do not depend upon PED
d)
Regulations can be imposed with fast effect. WEAR YOUR MASK!
111.
Which of the following is not a disadvantage of regulations?
a)
Regulations can bring about regulatory capture
b)
Regulations have policing costs
c)
Regulations can be legally binding
d)
Global agreement may be needed when dealing with big challenges such as climate change and global pandemics
112.
Which of the following is not a disadvantage of regulations?
a)
Regulations can have unintended consequences
b)
Regulations can incentivise the emergence of black markets
c)
Regulations work directly through the market price mechanism
d)
Regulations often have associated policing costs
113.
Minimum prices can be described as
a)
The highest price that can legally be charged, and to be effective should fall below the free-market equilibrium price
b)
The highest price that can legally be charged, and to be effective should fall above the free-market equilibrium price
c)
The lowest price that can legally be charged, and to be effective should fall above the free-market equilibrium price
d)
The lowest price that can legally be charged, and to be effective should fall below the free-market equilibrium price
114.
To be effective a minimum price should be imposed
a)
Above the neoclassical equilibrium price
b)
Below the neoclassical equilibrium price
c)
To the left of the neoclassical equilibrium quantity
d)
To the right of the neoclassical equilibrium quantity
115.
Minimum prices aim to solve the problem of
a)
Overconsumption
b)
Underconsumption
c)
Underproduction
d)
The free rider problem
116.
Which of the following is not an advantage of minimum prices?
a)
Demerit goods are less likely to be consumed in the same volume
b)
Minimum prices can reduce negative externalities
c)
Minimum prices can reduce the free rider problem
d)
Minimum prices for agricultural products can reduce price volatility and income volatility for farmers
117.
Which of the following best describes deregulation?
a)
Removing rules and controls which 'restrict market freedom' but provide minimum standards
b)
Increasing rules and controls which 'restrict market freedom' but provide minimum standards
c)
Decreasing competition in a market in an attempt to increase efficiencies
d)
A grant given to producers to lower their costs of production and increase production of a particular good or service
118.
In theory, deregulation should lead to an X in price and Y in consumer surplus
a)
Decrease, decrease
b)
Decrease, increase
c)
Increase, increase
d)
Increase, decrease
119.
In theory, deregulation should lead to an X in productive efficiency and Y in allocative efficiency
a)
Decrease, decrease
b)
Decrease, increase
c)
Increase, increase
d)
Increase, decrease
120.
Examples of deregulation in the UK include
a)
Abolishment of bank liquidity ratios (minimum proportion of liquid assets)
b)
Market for parcels (since 2006)
c)
Low cost airline industry
d)
All answers
121.
Regulatory capture best describes:
a)
How rules can be ignored by large corporations
b)
How regulatory agencies can come to be dominated by the interest they are charged with regulating
c)
How rules can increase in volume and complexity
d)
How taxes levied on goods and services can be avoided and evaded
122.
Which of the following is not a disadvantage of a government undertaking deregulation?
a)
Regulations exist to ensure minimum standards
b)
Deregulation can lead to duplication of services
c)
There is no guarantee firms will live up to their promises
d)
Global agreement may be needed
123.
Which of the following best describes nationalisation?
a)
Removing rules and controls which 'restrict market freedom' but provide minimum standards
b)
Increasing rules and controls which 'restrict market freedom' but provide minimum standards
c)
The process of transforming private assets into state-owned public assets
d)
The process of transforming state-owned public assets into private ownership and control
124.
Which of the following does not present a compelling case for nationalisation of a key industry?
a)
Natural monopoly argument
b)
Under production partial market failure argument
c)
Shareholders can benefit from privately owned services
d)
(Institutional) Equity argument
125.
Which of the following is least likely to be a relevant diagram to help analyse a case for nationalisation?
a)
Natural monopoly
b)
Monopolistic competition
c)
Positive externalities of production
d)
Positive externalities of consumption
126.
'Too Big to Fail' describes how
a)
Banks cannot fail because they are too profitable
b)
Banks cannot fail because they experience economies of scale that are too great compared to smaller businesses
c)
Banks undertake reckless risk because they know governments cannot allow them to fail
d)
Banks undertake too little risk because they don't need to
127.
Economist Mazzucato argues that most significant innovation occurs in the public sector. However, there is convincing empirical evidence that private provision can perform better in areas such as
a)
Generous wage packages & equity
b)
Wage cost minimisation & distribution
c)
Consumer surplus & equity
d)
Wage maximisation & distribution
128.
Nationalisation reduces
a)
Share ownership of key industries
b)
Public ownership
c)
Business ownership
d)
State ownership
129.
Which of the following best describes privatisation?
a)
Removing rules and controls which 'restrict market freedom' but provide minimum standards
b)
Increasing rules and controls which 'restrict market freedom' but provide minimum standards
c)
The process of transforming private assets into state-owned public assets
d)
The process of transforming state-owned public assets into private ownership and control
130.
Which of the following is not an argument in favour of privatisation?
a)
The potential for greater innovation in terms of distribution and product development
b)
Some people will become shareholders
c)
Lower prices for consumers (in some industries)
d)
(Institutional) Equity argument
131.
Which of the following is least likely to be a relevant diagram to help analyse a case for privatisation?
a)
Competition Policy diagram
b)
Demand and supply with functions of prices analysis
c)
Deregulation
d)
Negative externalities of consumption
132.
Which of the following is least likely to be a relevant diagram to help evaluate the case against privatisation?
a)
Negative externalities of consumption
b)
Demand and supply with functions of prices analysis
c)
Natural monopoly
d)
Negative externalities of production
133.
Market failure arguments can create a case against
a)
Nationalisation
b)
Privatisation
c)
Direct state provision
d)
Subsidies of merit goods
134.
Privatisation is least likely to lead to lower prices if it results in
a)
An unregulated private monopoly market
b)
Perfectly competitive markets
c)
Monopolistically competitive markets
d)
Oligopolistic markets
135.
Which of the following best describes competition policy?
a)
Policies that aim to promote competition by encouraging investment, efficiency, innovation and growth
b)
Increasing rules and controls which 'restrict market freedom' but provide minimum standards
c)
The process of transforming private assets into state-owned public assets
d)
The process of transforming state-owned public assets into private ownership and control
136.
Which of the following is not an example of competition policy?
a)
The imposition of maximum prices
b)
Investigations of mergers and acquisitions
c)
The reduction of corporation tax rates
d)
Investigations of collusion
137.
Price caps are a form of competition policy that are particularly effective in which type of market structure?
a)
Private monopoly market
b)
Perfectly competitive markets
c)
Monopolistically competitive markets
d)
Oligopolistic markets
138.
A competition policy price cap should X price and Y output
a)
Decrease, decrease
b)
Decrease, increase
c)
Increase, increase
d)
Increase, decrease
139.
A competition policy price cap should X output and Y supernormal profit
a)
Decrease, decrease
b)
Decrease, increase
c)
Increase, increase
d)
Increase, decrease
140.
If under competition policy, X-efficiency savings are set too low, it could indicate
a)
The free rider problem
b)
Regulatory capture
c)
Excessive state power
d)
Productive efficiency
141.
Private property rights is best described as:
a)
Policies that aim to promote competition by encouraging investment, efficiency, innovation and growth
b)
Increasing rules and controls which 'restrict market freedom' but provide minimum standards
c)
The process of transforming private assets into state-owned public assets
d)
A legal designation for the ownership of property by non-governmental legal entities
142.
A situation where individuals act through self-interest and behave contrary to the common good of all users, by depleting or spoiling common access resources describes
a)
Hardin's tragedy of the commons
b)
Hardin's public good theory
c)
Robinson's monopsony model
d)
Privatisation
143.
Which of the following is not an argument in favour of extending private property rights?
a)
The incentive not to exploit common access resources through the tragedy of the commons
b)
Negative externalities could be internalised
c)
More citizens can benefit from shared institutions such as universal healthcare and state education
d)
Some degree of private property rights can be considered essential for economic growth
144.
'Listed' firms with private ownership of land have pressure to increase their profits and possibly use land unsustainably. This is because
a)
There is a pressure to keep share prices rising and dividend payments flowing
b)
Some firms produce positive externalities
c)
No firms produce negative externalities
d)
All firms produce negative externalities
145.
Why can there be a real-resource opportunity cost if property rights are extended?
a)
Land has a next best alternative use and private security costs increase
b)
Land has a next best alternative use and there are more state institutions
c)
There is no next best alternative use of land but there is for the labour that protects it
d)
There is no next best alternative use for the labour that protects land but there is for the use of the land itself
146.
The three functions of the environment can each create an argument against the extension of private property rights (without terms attached). Which of the following is not a function of the environment?
a)
The environment as an absorber of waste
b)
The environment as a provider of gold and coal
c)
The environment as provider of amenities
d)
The environment as a provider of resources
147.
Tradable pollution permits can be
a)
Sold to other polluters
b)
Used as permits to pollute
c)
Partially used and partially sold to other polluters
d)
All answers
148.
China has pledged that its carbon emissions will
a)
Peak by 2030 and that it will achieve carbon neutrality by 2060
b)
Peak by 2050 and that it will achieve carbon neutrality by 2060
c)
Peak by 2100 and that it will achieve carbon neutrality by 2150
d)
Peak by 2200 and that it will achieve carbon neutrality by 2300
149.
Which of the following statements about tradable pollution permits is not true?
a)
TPP's are a market based approach to the task of limiting pollution emissions
b)
The governing body needs to be able to predict the market price of the permits with a high degree of accuracy
c)
TPP's aim to internalise the external costs generated by forcing the polluter to pay
d)
TPP's aim to incentivise the creation and sale of carbon reducing technology between firms
150.
Which of the following is not a direct potential advantage of tradable pollution permits?
a)
The policy can help to make firms internalise their external costs by making the polluter pay
b)
The policy can incentivise carbon reduction measures within firms
c)
The policy can incentivise better pay for workers
d)
The policy can incentivise the creation and sale of carbon reducing technology between firms
151.
Some tradable pollution permits can be traded internationally. This can be a problem because
a)
LEDC's may be obliged to sell permits to MEDC's
b)
There are many languages
c)
Fraudulent permits are often created
d)
Post is slow
152.
Which of the following is not a reason why the issuance of too many permits is a problem?
a)
There will be a lack of scarcity
b)
If the market price of permits is too low it may not incentivise CO2 reductions
c)
If the market price of permits is too low it may not incentivise the redirection of real resources towards markets that deal in carbon reducing technology
d)
If the market price of permits is too high it may not incentivise CO2 reductions
153.
Which of the following is not a pro-market economic idea?
a)
Creative destruction
b)
Dynamic efficiency
c)
Natural monopoly
d)
Functions of prices

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