Transcript File
UNIT 1 Markets & Market Failure Click here to Commence quiz 1.1 The Economic Problem Test 2 © APT Initiatives Ltd AQA AS Economics Unit 1 – Markets & Market Failure Question 1 Housework is an economic activity because… it is undertaken free of charge Incorrect it requires the use of scarce resources Correct there is no opportunity cost incurred Incorrect it increases consumer well-being Incorrect APT Initiatives Ltd Housework, even if undertaken by the householder, involves the use of time and resources and, therefore, incurs an opportunity cost. When the householder undertakes household work resources are being diverted from the production of other goods and services. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 2 Macroeconomics includes the study of… the causes of changes in demand for many consumer products Incorrect the measures government can take to encourage businesses to invest. Correct how well different markets operate in the interests of consumers Incorrect how bankers’ pay levels are determined Incorrect APT Initiatives Ltd Macroeconomics (which is the subject matter of unit two) concerns the economy as a whole. Microeconomics, on the other hand, focuses on behaviour in a single market, a single firm, or a single product. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 3 Which of the following issues would not be the subject of microeconomic analysis? The significance of economies of scale in bank mergers over recent years Incorrect The impact of civil war in central Africa on worldwide copper prices Incorrect The impact of a fall in the £ exchange rate on investment levels in the UK Correct The features of a tradable permit scheme designed to reduce pollution levels Incorrect APT Initiatives Ltd The impact of exchange rate movements is the only one of the four responses which does not concern a specific product, market or firm. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 4 Economic resources are those which… maximise the output of goods in the long term Incorrect increase economic efficiency Incorrect are plentiful Incorrect can contribute to increased production Correct APT Initiatives Ltd An economic resource is scarce rather than plentiful and contributes to production today and not just the future. Whether it increases economic efficiency depends on how it is used. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 5 The factor of production, labour does not include… teachers Incorrect vicars Incorrect premiership footballers Incorrect students Correct APT Initiatives Ltd Many students offer their labour part-time but whilst engaged in the activity of studying, they are consuming education and / or investing in their human capital. Therefore, they are not contributing to today’s production. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 6 A tractor can be categorised as capital in the context of factors of production because… the buyer needs capital to buy it Incorrect it is a resource that has been manufactured Correct it helps a farmer make a profit. Incorrect it is an economic resource and therefore has an opportunity cost Incorrect APT Initiatives Ltd Each of the statements by themselves are accurate but only B correctly follows on from the stem. Capital refers to manmade resources used in production. It should be remembered that whilst in everyday language we use the word capital to mean money to set up a business, in Economics we reserve the word capital to mean real resources. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 7 The function of the factor of production known as enterprise includes… organising resources Incorrect motivating employees Incorrect risk taking Correct selling to customers Incorrect APT Initiatives Ltd Many entrepreneurs are personally engaged in organising, motivating and selling, but in large businesses these functions are delegated to paid managers. Risk taking, on the other hand, is the essential characteristic of being an entrepreneur. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 8 A firm, in making a business decision, is least likely to take account of… the impact on unemployment Correct its effect on efficiency Incorrect the reaction of competitors Incorrect customer reaction Incorrect APT Initiatives Ltd A profit maximising entrepreneur will not be concerned about the impact on jobs generally, but will be concerned with efficiency and the reactions of competitors and customers. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 9 Government, when making economic decisions, is least likely to take account of… Incorrect the impact on exports how the defence budget is spent Incorrect possible changes in average incomes Incorrect the wages in particular industries Correct APT Initiatives Ltd Governments will consider the impact of decisions on the economy in general, but are very unlikely to consider the impact on a particular group of workers. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 10 In economic theory it is assumed that employees seek to… maximise company profits Incorrect maximise their wage Correct maximise their spending Incorrect minimise the interest on savings Incorrect APT Initiatives Ltd The factor of production known as labour (human resources used in production) is rewarded by a wage. It is reasonable to assume that employees will seek the highest wage possible. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 11 The numerical difference between revenue and cost is known as… profit Correct interest Incorrect bonus Incorrect rent Incorrect APT Initiatives Ltd Profit, the reward paid to the entrepreneur, is sales revenue minus costs. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 12 The economic problem has, at its core, the issue of choice because… our income determines what we can choose Incorrect resources are finite Correct as consumers we are free to choose what we want Incorrect the more we earn the more we can choose Incorrect APT Initiatives Ltd The essential economic problem is that resources are scarce and finite. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 13 In the context of economics, free goods are those which… generate no external costs Incorrect can also be called merit goods Incorrect are not scarce Correct are offered at no charge at the point of purchase Incorrect APT Initiatives Ltd Free goods should be seen as gifts of nature and, as free goods are not scarce, there is no opportunity cost involved in their consumption, eg fresh air. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 14 As increasing numbers of the world’s population are attracted to towns and cities, there is increasing concern that the natural environments in their vicinity are being degraded. This suggests that… using the natural environment has an opportunity cost Correct urbanisation imposes a private cost on society Incorrect the natural environment is a free good Incorrect the natural environment imposes external costs Incorrect APT Initiatives Ltd The natural environment is a scarce resource and its use involves an opportunity cost. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 15 High wage rises in expanding industries are needed to ensure… banks lend to business Incorrect workers move to areas of labour shortage Correct consumers buy British goods Incorrect firms achieve high profits Incorrect APT Initiatives Ltd The reward to labour is known as a wage and firms seeking to expand will offer pay rises to secure new recruits of labour. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 16 Economic growth refers to… an increase in productive efficiency Incorrect an improvement in technology Incorrect an increase in the output of goods and services Correct a reduction in negative externalities Incorrect APT Initiatives Ltd Economic growth is an increase in the productive potential of an economy and is illustrated by an outward shift of the production possibility curve. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 17 A point on a production possibility curve indicates… the latest technology has not been employed Incorrect an output choice which uses available resources most efficiently Correct an output combination of two products which cannot be achieved Incorrect indicates that there is an opportunity cost Incorrect APT Initiatives Ltd Any point on the production possibility curve illustrates the productive potential of the economy when all resources are most efficiently employed. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 18 A straight-line production possibility frontier, for an economy, indicates that… an improvement in technology would be of equal benefit to the two product options Incorrect resources are allocated equally between the two product options Incorrect changing to a different product combination would not incur an opportunity cost Incorrect its resources are equally suited to the production of all products Correct APT Initiatives Ltd As the resources are equally suited to the production of all products, then increasing output of one product is not at the expense of a progressively greater decrease in the output of the other. Hence, in this case, the PPF is a straight line rather than concave. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 19 The diagram below, a production possibility curve, shows various output choices A, B, C, D and E. Which combination of capital and consumer goods could this country choose to produce? EDC Incorrect ADB Incorrect EDB Incorrect Capital Goods E A D C O DBAC B Consumer Goods Correct APT Initiatives Ltd A, D and B are all on the PPC and are possible combinations of goods and services that can be produced. C is also possible because it is inside the curve. E, on the other hand, is outside the productive potential of the economy – given existing resources and technology. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 20 In the context of a country’s production possibility curve, increased factor specialisation means that… some output choices are excluded Incorrect factors are more likely to be employed Incorrect any movement along the curve incurs an increasing opportunity cost Correct any shift outwards from new technology is likely to be small Incorrect APT Initiatives Ltd Progressive increases in the output of one product has an increasing opportunity cost in terms of reduced output of the other product. It is for this reason that the typical PPC is shown as concave to the origin. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 21 Opportunity cost is an important concept in Economics because… it explains the nature of economic decision-making Correct consumers have infinite wants Incorrect cost is a reflection of the value of resources used to make an economic good Incorrect cost has implications not just for a business but for society as a whole Incorrect APT Initiatives Ltd B, C and D are accurate statements but do not follow on from the stem. Opportunity cost is a concept that is central to economics – whenever we make a decision we sacrifice an alternative. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 22 A student has earned £200 from a temporary job. He is weighing up whether to spend it on some new clothes or on a holiday with friends. He decides to spend it on clothes. The opportunity cost of this decision is… the cost of the new clothes Incorrect the benefits of the new clothes Incorrect the cost of the holiday Incorrect the benefits of the holiday Correct APT Initiatives Ltd The opportunity cost of the decision he makes is the alternative he sacrifices. He forgoes the benefits of going on holiday with friends in order to get the new clothes. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 23 Which of the following statements is correct? A normative statement is one which is useful in the context of economic analysis Incorrect A positive statement is one which expresses an opinion Incorrect A positive statement is one which is based on the evidence available Correct A normative statement is one which can be proven true or false Incorrect APT Initiatives Ltd Positive statements can be tested against the evidence available and, therefore, by reference to the facts. They are either correct or incorrect. Normative statements are opinions which are neither correct nor incorrect. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 24 Which of the following statements is not a normative statement? Interest rates are effective at controlling inflation Correct Unemployment should be reduced if we are to increase economic growth Incorrect We ought to focus on increasing national income rather than how to share it Incorrect Fair trade is better than free trade Incorrect APT Initiatives Ltd A is a positive statement which can be tested by reference to the facts. All the other alternatives are opinions. Next question AQA AS Economics Unit 1 – Markets & Market Failure Question 25 Which of the following is a positive statement? 1. 2. 3. 4. Smoking causes disease and premature death. Smoking should be banned. Tobacco should be heavily taxed. The tax on tobacco has done little to reduce smoking. 1 and 4 only Correct 1 only Incorrect 2 and 3 only Incorrect 1, 2 and 4 only Incorrect APT Initiatives Ltd 1 is an indisputable fact. 4 is disputable but can be tested against real world data. Therefore, both are positive statements, whereas 2 and 3 are based on opinions. Exit