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Economics: Market failure Unit 1

Pregunta 1 de 21

1

Choice is an important element in the basic economic problem because

Selecciona una de las siguientes respuestas posibles:

  • limited resources have alternative uses.

  • wants increase with income.

  • Incomes are distributed unequally

  • High demand leads to high prices

Explicación

Pregunta 2 de 21

1

A misallocation of resources is most likely to occur in monopoly if

Selecciona una de las siguientes respuestas posibles:

  • A other firms enter the industry.

  • B higher prices are charged than under competitive conditions.

  • C market output increases.

  • D there are economies of scale

Explicación

Pregunta 3 de 21

1

An economy is always productively efficient if it

Selecciona una de las siguientes respuestas posibles:

  • A continually increases its average standard of living.


  • B maximises investment in capital goods.

  • C is operating with full employment of labour.

  • D can only produce more of one good by producing less of another.

Explicación

Pregunta 4 de 21

1

Which one of the following would shift the supply curve for a good to the left?
A decrease in

Selecciona una de las siguientes respuestas posibles:

  • A demand for the good

  • B subsidies granted to producers

  • C the rate of growth of labour productivity

  • D the elasticity of supply of the good

Explicación

Pregunta 5 de 21

1

Negative externalities exist in a market for a good giving rise to a misallocation of resources.
This misallocation is most likely to have resulted from

Selecciona una de las siguientes respuestas posibles:

  • A the product being over-priced.

  • B over-production of the product.

  • C too little consumption of the product.

  • D too few resources devoted to producing the product

Explicación

Pregunta 6 de 21

1

In a buffer-stock scheme

Selecciona una de las siguientes respuestas posibles:

  • A an organisation might buy in the open market to maintain a minimum price in the
    market for a product.

  • B governments restrict supplies of a product coming onto an open market in order to lower
    prices of the product.

  • C buffer stocks are kept to sell if the price of a product starts to fall.

  • D buffer stocks are sold when there are surpluses in the market.

Explicación

Pregunta 7 de 21

1

Which one of the following situations would lead to an increase in equilibrium price?

Selecciona una de las siguientes respuestas posibles:

  • A Demand is perfectly inelastic and a firm’s labour costs fall.

  • B Demand is perfectly elastic and a firm’s labour costs rise.

  • C Supply is perfectly elastic and the price of a substitute good falls.

  • D Demand is perfectly inelastic and a firm’s labour costs rise.

Explicación

Pregunta 8 de 21

1

Which one of the following is true?

Selecciona una de las siguientes respuestas posibles:

  • A A positive statement is one which can be tested against the facts.

  • B A positive statement is one which never contains words such as ‘could’ or ‘should’.

  • C A normative statement is one which can be scientifically proven to be true or false.

  • D A normative statement is one which never contains words such as ‘is’ or ‘will’ or
    ‘always’.

Explicación

Pregunta 9 de 21

1

The price mechanism helps to allocate resources efficiently because

Selecciona una de las siguientes respuestas posibles:

  • A it results in lower rewards being paid to factors of production when demand for the
    output they produce increases.

  • B it will lead to a distribution of output amongst individuals on the basis of greatest need.

  • C the prices of non-renewable resources will tend to rise as the stock of such resources
    nears depletion.

  • D it will always ensure that competition between firms prevents high profits being earned.

Explicación

Pregunta 10 de 21

1

The cross elasticity of demand between two complementary products is always

Selecciona una de las siguientes respuestas posibles:

  • A negative.

  • B positive.

  • C zero.

  • D greater than 1.

Explicación

Pregunta 11 de 21

1

Which one of the following is an appropriate form of government intervention for the problem
identified?

Selecciona una de las siguientes respuestas posibles:

  • A The introduction of pollution permits to limit positive externalities

  • B The use of a buffer-stock scheme to stabilise the price of a public good

  • C The imposition of a maximum price for a merit good


  • D The provision of a subsidy for a product which generates negative externalities

Explicación

Pregunta 12 de 21

1

Which one of the following is associated with a missing market?

Selecciona una de las siguientes respuestas posibles:

  • A A monopoly restricting output

  • B The production of a negative externality

  • C A firm deciding to produce a private good


  • D A government subsidising agricultural production

Explicación

Pregunta 13 de 21

1

At current levels of output, the marginal social benefit of a good is greater than its marginal
private benefit. As a result, there are likely to be

Selecciona una de las siguientes respuestas posibles:

  • A positive externalities in consumption.

  • B positive externalities in production.

  • C negative externalities in consumption.

  • D negative externalities in production

Explicación

Pregunta 14 de 21

1

An airline announces that it is ‘slashing fares on all of its flights’. Given a fare reduction of
35%, what would be the expected percentage rise in demand for those flights if the company
has estimated their price elasticity of demand is -2.0?

Selecciona una de las siguientes respuestas posibles:

  • A 17.5

  • B 175.0

  • C 7.0

  • D 70.0

Explicación

Pregunta 15 de 21

1

‘Electricity suppliers are required to buy a growing amount of electricity from renewable
energy generators. By 2010, this must amount to at least 10 per cent of total electricity bought
from all generators. Green energy generators are paid more for their electricity because there is
a scarcity of supply of electricity generated from renewable resources.’
It can be deduced from the data above that

Selecciona una de las siguientes respuestas posibles:

  • A the government is subsidising the production of renewable energy.

  • B the social cost of electricity generated from renewable resources is greater than the
    private cost.

  • C the government is subsidising the negative externalities arising from the production of
    ‘green energy’.

  • D electricity suppliers are paying higher average prices for their electricity because some
    of the electricity is generated from ‘green sources’.

Explicación

Pregunta 16 de 21

1

One reason why specialisation raises labour productivity is because

Selecciona una de las siguientes respuestas posibles:

  • A specialisation shifts the production possibility boundary to the left.

  • B labour replaces capital to produce goods and services.

  • C specialisation requires an economy to produce on its production possibility boundary.

  • D the division of labour makes it cost-effective to provide workers with specialist
    equipment.

Explicación

Pregunta 17 de 21

1

Two products are in joint supply when

Selecciona una de las siguientes respuestas posibles:

  • A a fall in the output of one product is accompanied by a decrease in the output of the
    other product.

  • B an increase in the demand for one product reduces the supply of the other product.

  • C a rise in the quantity supplied of one product reduces the supply of the other product.

  • D a fall in the price of one product reduces the cost of supplying the other product.

Explicación

Pregunta 18 de 21

1

Government failure always occurs when

Selecciona una de las siguientes respuestas posibles:

  • A government intervention leads to a net welfare loss compared to the free market
    solution.

  • B social costs in a market are greater than social benefits.

  • C the government fails to intervene in the market.

  • D externalities exist in a market.

Explicación

Pregunta 19 de 21

1

The marketing department of a company manufacturing and selling washing machines has
found that its product has a price elasticity of demand equal to ñ0.75. This suggests that if the
company raises the price of washing machines

Selecciona una de las siguientes respuestas posibles:

  • A the quantity demanded will fall by 75%.

  • B the amount consumers spend on the product will increase.

  • C the quantity demanded will increase by 75%.

  • D the amount consumers spend on the product will fall.

Explicación

Pregunta 20 de 21

1

A market is defined as being in equilibrium when

Selecciona una de las siguientes respuestas posibles:

  • A there is maximum output at minimum cost.

  • B prices are at their lowest possible level.

  • C there is no tendency for the market price to change.

  • D consumer satisfaction is maximised

Explicación

Pregunta 21 de 21

1

ëAccording to the Environment Secretary, the country has to ìface up to the need to make
some difficult choicesî on reducing its growing mountain of waste. Household waste is
growing at about 3% a year, creating a need for a doubling of waste disposal capacity by
2020. But landfill and incineration are unpopular, while the introduction of recycling and
composting has been hampered by a lack of demand for recycled materials.í
It can be inferred from the data that

Selecciona una de las siguientes respuestas posibles:

  • A the opportunity cost of landfill is incineration.

  • B greater composting of waste would reduce the annual rate of growth of waste.

  • C the private cost of waste disposal is greater than the social cost.

  • D prices for recycled materials are low.

Explicación

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