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Click here to Commence quiz Click here to Commence quiz © APT Initiatives Ltd UNIT 1 Markets & Market Failure 1.1 The Economic Problem Test 2.

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Presentation on theme: "Click here to Commence quiz Click here to Commence quiz © APT Initiatives Ltd UNIT 1 Markets & Market Failure 1.1 The Economic Problem Test 2."— Presentation transcript:

1 Click here to Commence quiz Click here to Commence quiz © APT Initiatives Ltd UNIT 1 Markets & Market Failure 1.1 The Economic Problem Test 2

2 Housework is an economic activity because… APT Initiatives Ltd Incorrect Next question it is undertaken free of charge it requires the use of scarce resources it increases consumer well-being there is no opportunity cost incurred 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. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 1

3 Macroeconomics includes the study of… APT Initiatives Ltd Incorrect Next question the causes of changes in demand for many consumer products the causes of changes in demand for many consumer products the measures government can take to encourage businesses to invest. the measures government can take to encourage businesses to invest. how bankers’ pay levels are determined how well different markets operate in the interests of consumers how well different markets operate in the interests of consumers 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. AQA AS Economics Unit 1 – Markets & Market Failure Question 2 Correct

4 Which of the following issues would not be the subject of microeconomic analysis? APT Initiatives Ltd Incorrect Correct Next question The significance of economies of scale in bank mergers over recent years The significance of economies of scale in bank mergers over recent years The impact of civil war in central Africa on worldwide copper prices The impact of civil war in central Africa on worldwide copper prices The features of a tradable permit scheme designed to reduce pollution levels The features of a tradable permit scheme designed to reduce pollution levels The impact of a fall in the £ exchange rate on investment levels in the UK The impact of a fall in the £ exchange rate on investment levels in the UK The impact of exchange rate movements is the only one of the four responses which does not concern a specific product, market or firm. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 3

5 Economic resources are those which… APT Initiatives Ltd Incorrect Correct Incorrect Next question maximise the output of goods in the long term maximise the output of goods in the long term increase economic efficiency can contribute to increased production can contribute to increased production are plentiful 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 4

6 The factor of production, labour does not include… APT Initiatives Ltd Incorrect Correct Incorrect Next question teachers vicars students premiership footballers 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 5

7 A tractor can be categorised as capital in the context of factors of production because… APT Initiatives Ltd Incorrect Next question the buyer needs capital to buy it it is a resource that has been manufactured it is a resource that has been manufactured it is an economic resource and therefore has an opportunity cost it is an economic resource and therefore has an opportunity cost it helps a farmer make a profit. 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. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 6

8 The function of the factor of production known as enterprise includes… APT Initiatives Ltd Incorrect Correct Next question organising resources motivating employees selling to customers risk taking 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 7

9 A firm, in making a business decision, is least likely to take account of… APT Initiatives Ltd Correct Incorrect Next question the impact on unemployment its effect on efficiency customer reaction the reaction of competitors 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 8

10 Government, when making economic decisions, is least likely to take account of… APT Initiatives Ltd Incorrect Correct Incorrect Next question the impact on exports how the defence budget is spent the wages in particular industries possible changes in average incomes 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 9

11 In economic theory it is assumed that employees seek to… APT Initiatives Ltd Incorrect Next question maximise company profits maximise their wage minimise the interest on savings maximise their spending 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. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 10

12 The numerical difference between revenue and cost is known as… APT Initiatives Ltd Correct Incorrect Next question profit interest rent bonus Profit, the reward paid to the entrepreneur, is sales revenue minus costs. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 11

13 The economic problem has, at its core, the issue of choice because… APT Initiatives Ltd Incorrect Next question our income determines what we can choose our income determines what we can choose resources are finite the more we earn the more we can choose the more we earn the more we can choose as consumers we are free to choose what we want as consumers we are free to choose what we want The essential economic problem is that resources are scarce and finite. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 12

14 In the context of economics, free goods are those which… APT Initiatives Ltd Incorrect Correct Next question generate no external costs can also be called merit goods are offered at no charge at the point of purchase are offered at no charge at the point of purchase are not scarce 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 13

15 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… APT Initiatives Ltd Correct Incorrect Next question using the natural environment has an opportunity cost using the natural environment has an opportunity cost urbanisation imposes a private cost on society urbanisation imposes a private cost on society the natural environment imposes external costs the natural environment imposes external costs the natural environment is a free good the natural environment is a free good The natural environment is a scarce resource and its use involves an opportunity cost. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 14

16 High wage rises in expanding industries are needed to ensure… APT Initiatives Ltd Incorrect Next question banks lend to business workers move to areas of labour shortage workers move to areas of labour shortage firms achieve high profits consumers buy British goods The reward to labour is known as a wage and firms seeking to expand will offer pay rises to secure new recruits of labour. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 15

17 Economic growth refers to… APT Initiatives Ltd Incorrect Correct Next question an increase in productive efficiency an improvement in technology a reduction in negative externalities an increase in the output of goods and services an increase in the output of goods and services Economic growth is an increase in the productive potential of an economy and is illustrated by an outward shift of the production possibility curve. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 16

18 A point on a production possibility curve indicates… APT Initiatives Ltd Incorrect Next question the latest technology has not been employed the latest technology has not been employed an output choice which uses available resources most efficiently an output choice which uses available resources most efficiently indicates that there is an opportunity cost indicates that there is an opportunity cost an output combination of two products which cannot be achieved an output combination of two products which cannot be achieved Any point on the production possibility curve illustrates the productive potential of the economy when all resources are most efficiently employed. Correct AQA AS Economics Unit 1 – Markets & Market Failure Question 17

19 A straight-line production possibility frontier, for an economy, indicates that… APT Initiatives Ltd Incorrect Correct Incorrect Next question an improvement in technology would be of equal benefit to the two product options an improvement in technology would be of equal benefit to the two product options resources are allocated equally between the two product options resources are allocated equally between the two product options its resources are equally suited to the production of all products its resources are equally suited to the production of all products changing to a different product combination would not incur an opportunity cost changing to a different product combination would not incur an opportunity cost 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 18

20 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? APT Initiatives Ltd Incorrect Correct Incorrect Next question EDC ADB DBAC EDB 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 19 Capital Goods Consumer Goods E A C O B D

21 In the context of a country’s production possibility curve, increased factor specialisation means that… APT Initiatives Ltd Incorrect Correct Next question some output choices are excluded factors are more likely to be employed any shift outwards from new technology is likely to be small any shift outwards from new technology is likely to be small any movement along the curve incurs an increasing opportunity cost any movement along the curve incurs an increasing opportunity cost 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 20

22 Opportunity cost is an important concept in Economics because… APT Initiatives Ltd Correct Incorrect Next question it explains the nature of economic decision-making it explains the nature of economic decision-making consumers have infinite wants cost has implications not just for a business but for society as a whole cost has implications not just for a business but for society as a whole cost is a reflection of the value of resources used to make an economic good cost is a reflection of the value of resources used to make an economic good 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 21

23 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 … APT Initiatives Ltd Incorrect Correct Incorrect Next question the cost of the new clothes the benefits of the new clothes the benefits of the holiday the cost of the holiday 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 22

24 Which of the following statements is correct? APT Initiatives Ltd Incorrect Correct Next question A normative statement is one which is useful in the context of economic analysis A normative statement is one which is useful in the context of economic analysis A positive statement is one which expresses an opinion A positive statement is one which expresses an opinion A normative statement is one which can be proven true or false A normative statement is one which can be proven true or false A positive statement is one which is based on the evidence available A positive statement is one which is based on the evidence available 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 23

25 Which of the following statements is not a normative statement? APT Initiatives Ltd Correct Incorrect Next question Interest rates are effective at controlling inflation Interest rates are effective at controlling inflation Unemployment should be reduced if we are to increase economic growth Unemployment should be reduced if we are to increase economic growth Fair trade is better than free trade We ought to focus on increasing national income rather than how to share it We ought to focus on increasing national income rather than how to share it A is a positive statement which can be tested by reference to the facts. All the other alternatives are opinions. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 24

26 Which of the following is a positive statement? 1. Smoking causes disease and premature death. 2. Smoking should be banned. 3. Tobacco should be heavily taxed. 4. The tax on tobacco has done little to reduce smoking. APT Initiatives Ltd Correct Incorrect Exit 1 and 4 only 1 only 1, 2 and 4 only 2 and 3 only 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. Incorrect AQA AS Economics Unit 1 – Markets & Market Failure Question 25


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