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Click here to Commence quiz Click here to Commence quiz UNIT 1 Markets & Market Failure 1.3 Production and Efficiency Test 1.

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Presentation on theme: "Click here to Commence quiz Click here to Commence quiz UNIT 1 Markets & Market Failure 1.3 Production and Efficiency Test 1."— Presentation transcript:

1 Click here to Commence quiz Click here to Commence quiz UNIT 1 Markets & Market Failure 1.3 Production and Efficiency Test 1

2 Specialisation results in each of the following with the exception of… APT Initiatives Ltd Correct Incorrect Next question self sufficiency increased output higher living standards higher incomes The last three are the consequences and advantages of specialisation. Self sufficiency, on the other hand, is not possible for specialist workers who depend on exchanging the products of their specialism with that of other specialist producers. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 1

3 The benefits of specialisation depend on … APT Initiatives Ltd Incorrect Next question more competitive businesses that have focused on producing better products more competitive businesses that have focused on producing better products the use of money as a means of exchange the use of money as a means of exchange increased use of technology, which reduces average costs increased use of technology, which reduces average costs managing inflation successfully Specialisation requires us to engage in exchange, and money is a more efficient medium of exchange than relying upon barter (the direct exchange of goods/services without the medium of money). Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 2

4 Which one of the following statements is not a reason why money is a more efficient medium of exchange than barter? APT Initiatives Ltd Incorrect Next question Money provides a common measuring rod of value Money provides a common measuring rod of value The value of money is stable Money is portable and divisible Money overcomes the problem of the double coincidence of wants Money overcomes the problem of the double coincidence of wants A general rise in prices (a process known as inflation) means that the value of money is definitely not stable. What we could say is that price stability is desirable in terms of permitting money to function as an efficient means of exchange, but even with some inflation, money is still a more efficient medium of exchange than barter. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 3

5 Division of labour requires an efficient means of exchange because… APT Initiatives Ltd Correct Incorrect Next question specialist workers are not self sufficient specialist workers achieve high productivity specialist workers achieve high productivity specialist workers produce a surplus exchange is not possible without the use of money as a medium of exchange exchange is not possible without the use of money as a medium of exchange A specialist worker does not produce the full range of goods and services that he / she requires. Therefore, specialists must engage in exchange – goods for goods, goods for money, labour services for money, and so on. B and D are valid statements but do not explain why specialists need to engage in exchange. C is an incorrect statement – exchange can occur without the use of money. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 4

6 The extent of division of labour is determined by… APT Initiatives Ltd Correct Incorrect Next question the size of the market the productive efficiency of the economy the productive efficiency of the economy the productivity of labour the profits of the enterprise The larger the market the greater the opportunities for division of labour. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 5

7 Which of the following statements is incorrect? APT Initiatives Ltd Correct Incorrect Next question Production refers to the total output of goods in the economy Production refers to the total output of goods in the economy Production refers to the total output of goods and services in an economy Production refers to the total output of goods and services in an economy Production is the means by which consumer wants are satisfied Production is the means by which consumer wants are satisfied Production is the process whereby inputs are converted into outputs Production is the process whereby inputs are converted into outputs The term production covers both goods and services. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 6

8 A 5% rise in the workforce in a factory led to a 4% increase in the output of goods. From this we can conclude that… APT Initiatives Ltd Incorrect Correct Next question both output and productivity increased both output and productivity increased productivity increased but output fell both production and productivity fell production increased but productivity fell production increased but productivity fell We are told that output or production rose, which rules out B and D. As output rose by less than the workforce then productivity must have fallen. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 7

9 Labour productivity is defined as… APT Initiatives Ltd Incorrect Correct Next question how many items a workforce produces how many items a workforce produces the value of the output a business produces the value of the output a business produces the average cost of employing someone the average cost of employing someone the output per person per period of time the output per person per period of time Productivity is output per unit of input and so labour productivity is output per worker per time period (day, shift, week, or year). Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 8

10 A production manager has noted higher labour productivity in the factory and, therefore, can confidently look forward to… APT Initiatives Ltd Correct Incorrect Next question reduced cost per unit made increased sales lower total costs more hours being worked If employees produce more per hour then wage costs are spread more thinly over a given wage. This will lead to a fall in average costs. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 9

11 Which one of the following will cause a fall in the productivity of labour? APT Initiatives Ltd Incorrect Correct Next question A reduction in the size of the workforce A reduction in the size of the workforce An improvement in the quality of recruits An improvement in the quality of recruits Investment in training A deterioration in the quality of capital equipment A deterioration in the quality of capital equipment With lower quality capital equipment, labour will be less productive. A causes a reduction in production but not in output per head. B and D will lead to a rise in productivity. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 10

12 Investment in new technologically-advanced capital equipment will result in… APT Initiatives Ltd Incorrect Correct Incorrect Next question increased output a rise in the productivity of labour all the above a rise in the productivity of capital Investment in capital equipment will raise output and will raise the productivity of the workforce. The greater the capital per worker, the greater the output per head. The fact that this investment improves the quality of capital leads to a rise in the productivity of capital. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 11

13 Productive efficiency is defined as… APT Initiatives Ltd Incorrect Next question producing the best quality products the lowest cost per unit of output maximum output per square foot the lowest average cost per person employed the lowest average cost per person employed Efficiency is a measure of output in relation to input. A is incorrect, whereas C and D only deal with partial efficiency. B, on the other hand, deals with total efficiency. If output is produced at the lowest cost per unit then production has reached the point of maximum efficiency. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 12

14 A productively efficient economy is one which… APT Initiatives Ltd Incorrect Correct Incorrect Next question spends heavily on capital goods, in order to ensure that standards of living rise in the future spends heavily on capital goods, in order to ensure that standards of living rise in the future benefits from full employment can only increase output in one product at the expense of output in another can only increase output in one product at the expense of output in another can ensure that consumers welfare is maximised can ensure that consumers welfare is maximised If the economy is productively efficient it is producing on the PPF curve and this means that the output of one good cannot be increased without a reduction in the production of other goods. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 13

15 In a fully employed and productively efficient economy an increase in the productivity of factors of production will result in… APT Initiatives Ltd Incorrect Correct Incorrect Next question a movement along the production possibility frontier a movement along the production possibility frontier a movement from a point inside the production possibility frontier to a point on the frontier a movement from a point inside the production possibility frontier to a point on the frontier a rightward shift of the production possibility frontier a rightward shift of the production possibility frontier a leftward shift of the production possibility frontier a leftward shift of the production possibility frontier From the description of the economy it is clear that it is operating on the PPF. A rise in productivity suggests that more can be produced with available resources and this means that the PPF shifts outwards and to the right. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 14

16 On the production possibility diagram below there are four points identified. Which of the following statements is not valid? APT Initiatives Ltd Incorrect Correct Incorrect Next question A movement to D can be achieved with additional resources A movement to D can be achieved with additional resources A movement to D can be achieved with improved technology A movement to D can be achieved with improved technology At point C resources are fully employed At point C resources are fully employed A and B are points of equal productive efficiency A and B are points of equal productive efficiency If resources were fully employed then the combination of output would be significantly greater than shown at C. Productive efficiency with full employment of resources could take the economy to either of the two points on the production possibility frontier ie A or B. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 15 0 C B D A Consumer goods Capital goods

17 For an individual firm the productively efficient level of output occurs when… APT Initiatives Ltd Incorrect Next question total costs are at their lowest average costs are at their lowest output is maximised profits are maximised Productive efficiency for a firm means making best use of its resources thereby producing at the lowest unit cost. This is not necessarily the point where profits are maximised. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 16

18 Economies of scale refer to lower average costs arising from, for example… APT Initiatives Ltd Incorrect Correct Incorrect Next question increasing output employing more specialised factors producing in a larger factory buying resources from a cheaper supplier buying resources from a cheaper supplier Economies of scale refer to the advantages of increasing the scale of production, eg by moving to larger premises. Increased output could be achieved by increasing the use of existing plant and for this reason D rather than A is correct. B and C are incorrect because they do not relate to an increase in the scale of production. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 17

19 Larger businesses benefit from financial economies of scale, for example by… APT Initiatives Ltd Incorrect Next question producing more efficiently paying lower interest rates on loans buying cheaper materials or components buying cheaper materials or components employing low-wage staff One of the benefits of being a large organisation is that increased scale provides access to more and cheaper forms of finance. This is a category of internal economy of scale known as a financial economy. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 18

20 Some shipping businesses can benefit from economies of increased dimensions because… APT Initiatives Ltd Incorrect Correct Incorrect Next question they can buy fuel in bulk and, therefore, at a lower cost they can buy fuel in bulk and, therefore, at a lower cost they use more technically advanced ships they use more technically advanced ships bigger ships can carry a more than proportionate amount of cargo bigger ships can carry a more than proportionate amount of cargo they can employ more specialised staff they can employ more specialised staff The first three responses are all economies of scale but are not technical economies of increased dimension. Only the final response can be classified as an economy resulting from increased dimension. In essence, it means that a doubling of the size of a ship results in a more than doubling of capacity. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 19

21 A large firm benefits by spreading its advertising budget over a larger volume of output. This is an example of… APT Initiatives Ltd Incorrect Correct Incorrect Next question an external economy of scale a managerial economy of scale a marketing economy of scale a financial economy of scale A marketing economy (also known as a commercial economy) refers to any advantage in terms of buying and selling that a business derives from an increase in the scale of its operations. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 20

22 Workshop employees increase output by 5% per hour and are awarded a pay rise of 3% per hour. Other things remaining equal (ceteris paribus), the labour cost of producing each unit of production will … APT Initiatives Ltd Correct Incorrect Next question fall by 1.90% rise by 1.90% none of the above rise by 1.85% As output per hour rises by more than labour costs per hour, then it is clear that unit costs will fall. Hence, only A or D could be correct. A is, in fact, correct because the average labour cost falls by 1.9% (1.03 / 1.05 = , representing a fall of 1.90%). Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 21

23 Which of the following statements illustrates the concept of economies of scale? A business experiences management difficulties which… APT Initiatives Ltd Incorrect Next question reduces output per hour can be overcome by moving to a larger factory can be overcome by moving to a larger factory adjusts the output level in its factory so that efficiency is improved adjusts the output level in its factory so that efficiency is improved rationalises its two factories into one to save money rationalises its two factories into one to save money Economies of scale are a long term rather than a short term concept. Only B is concerned with a rise in the scale of production. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 22

24 The benefits of external economies of scale can arise when… APT Initiatives Ltd Incorrect Correct Next question investing in training to enable employees to be more productive investing in training to enable employees to be more productive employing specialist managers from outside to improve business efficiency employing specialist managers from outside to improve business efficiency buying more cheaply from overseas suppliers as a means of reducing costs buying more cheaply from overseas suppliers as a means of reducing costs a growing business prompts infrastructure improvements in its vicinity a growing business prompts infrastructure improvements in its vicinity External economies are the benefits that the individual firm gains from an increase in the size of the industry in which it operates. In this case, the infrastructure improvements benefit other (including rival) firms, in the vicinity. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 23

25 Diseconomies of scale can arise when… APT Initiatives Ltd Incorrect Correct Next question the average cost of a business increases the average cost of a business increases total costs increase as scale of a business increases total costs increase as scale of a business increases factor costs increase efficiency suffers because of communication problems among employees efficiency suffers because of communication problems among employees This is the best known example of diseconomies of scale. As the scale of production rises so do the management problems associated with the business. The other three responses might relate to the consequences of diseconomies but not to the reasons why they arise. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 24

26 Which one of the following statements is incorrect? APT Initiatives Ltd Incorrect Correct Exit Increased scale of production leads to economies of scale Increased scale of production leads to economies of scale Increased scale of production can lead to diseconomies of scale Increased scale of production can lead to diseconomies of scale Diseconomies of scale result in a rise in average costs Diseconomies of scale result in a rise in average costs Economies of scale result in a reduction in total costs Economies of scale result in a reduction in total costs Economies of scale do not reduce the total cost of production – instead they reduce the average cost per unit of production. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 25


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