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Unit 1Question 1

Resources in an economy:

a) Are always fixedb) Can never decreasec) Always increase over timed) Are limited at any moment in time

Question 2

Human wants are:

a) Always fixedb) Limitedc) Unlimitedd) Likely to decrease over time

Question 3

The sacrifice involved when you choose a particular course of action is called the:

a) Alternativeb) Opportunity costc) Consumer costd) Producer cost

Question 4

Which of the following is not one of the basic economic questions?

a) What to produceb) Who to produce forc) How to produced) How to maximise economic growth

Question 5

The basic economic problems will not be solved by:

a) Market forcesb) Government interventionc) A mixture of government intervention and the free marketd) The creation of unlimited resources

Question 6

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The free market involves:

a) The free provision of productsb) The subsidising of products by the governmentc) Market forces of supply and demandd) All trade via barter

Question 7

A mixed economy:

a) Has supply but not demandb) Has demand but not supplyc) Has supply and demandd) Has market forces and government intervention

Question 8

In a command (planned) economy:

a) The price mechanism acts as an incentiveb) Resources are allocated by market forcesc) Individual firms make decisions for themselves about what to produce and how to produce itd) The The public sector is large

Question 9

The public sector includes:

a) Investors owning companiesb) Government ownership of assetsc) Market forces of supply and demandd) All trade via barter

Question 10

Which of the following is a normative statement in economics?

a) More spending by the government reduces povertyb) Higher taxes lead to less desire to workc) The UK economy is growing fast relative to other European Union membersd) The government should concentrate on reducing unemployment

Unit 2

Question 1

If an economy is productively efficient:

a) Everyone is wealthyb) Resources are unemployedc) More of one product can only be produced if less of another product is producedd) The distribution of income is equal



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Question 2

Economic growth can be shown by:

a) An inward shift of the production possibility frontierb) A movement down the production possibility frontierc) An outward shift of the production possibility frontierd) A movement up the production possibility frontier

Question 3

As resources are shifted from one industry to another this can be shown by:

a) An inward shift of the production possibility frontierb) A movement along the production possibility frontierc) An outward shift of the production possibility frontierd) A outward shift in the demand curve for the products

Question 4

In a free market the combination of products produced will be determined by:

a) Market forces of supply and demandb) The governmentc) The lawd) The public sector

Question 5

If an economy moves from producing 10 units of A and 4 units of B to producing 7 As

and 5Bs, the opportunity cost of the 5th B is:

a) 7Asb) 10Asc) 3Asd) 1A

Question 6

An economy may operate outside the Production Possibility Frontier if:

a) It is not utilising its resources fullyb) It is being productively efficientc) It is a mixed economyd) It is trading with other economies

Question 7

The resources in the economy do not include:



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a) Demandb) Landc) Labourd) Capital

Question 8

The resources in an economy are:

a) Constantly increasingb) Fixed at any momentc) Constantly decreasingd) Able to be transferred easily between industries

Question 9

Any combination of products inside the production possibility frontier is:

a) Allocatively inefficientb) X inefficientc) Consumer inefficientd) Productively inefficient

Question 10

An outward shift of the production possibility frontier may be caused by:

a) An increase in demandb) More government spendingc) Better training of employeesd) Productive inefficiency

Question 1

Which best describes a demand curve?

a) The quantity consumers would like to buy in an ideal worldb) The quantity consumers are willing to sellc) The quantity consumers are willing and able to buy at each and every income all other things unchangedd) The quantity consumers are willing and able to buy at each and every price all other things unchanged

Question 2

A fall in price:

a) Will cause an inward shift of demandb) Will cause an outward shift of supplyc) May be caused by a fall in demandd) Leads to a higher level of production

Question 3



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Demand for a normal product may shift outwards if:

a) Price decreasesb) The price of a substitute fallsc) The price of a complement risesd) Income falls

Question 4

According to the law of diminishing utility:

a) Utility is at a maximum with the first unitb) Increasing units of consumption increase the marginal utilityc) Marginal product will fall as more units are consumedd) Total utility will rise at a falling rate as more units are consumed

Question 5

If marginal utility is zero:

a) Total utility is zerob) An additional unit of consumption will decrease total utilityc) An additional unit of consumption will increase total utilityd) Total utility is maximised

Question 6

A decrease in income should:

a) Shift demand for an inferior product outwardsb) Shift demand for an inferior product inwardsc) Shift supply for an inferior product outwardsd) Shift supply for an inferior product inwards

Question 7

An increase in the price of a complement for product A would:

a) Shift demand for product A outwardsb) Shift demand for product A inwardsc) Shift supply for product A outwardsd) Shift supply for product A inwards

Question 8

An increase in price all other things unchanged leads to:

a) Shift demand outwardsb) Shift demand inwardsc) A contraction of demandd) An extension of demand



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Question 9

If a product is a Veblen good:

a) Demand is inversely related to incomeb) Demand is inversely related to pricec) Demand is directly related to priced) Demand is inversely related to the price of substitutes

Question 10

If a product is an inferior good:

a) Demand is inversely related to incomeb) Demand is inversely related to pricec) Demand is directly related to priced) Demand is inversely related to the price of substitutes

Unit 4

Question 1

Average income increases from £20,000 p.a. to £22,000 p.a. Quantity demanded per

year increases 5000 to 6000 units. Which of the following is correct?

a) Demand is price inelasticb) The good is inferiorc) Income elasticity is -2d) The product is normal

Question 2

The price decreases from £2,000 to £1,800. Quantity demanded per year increases

5000 to 6000 units. Which of the following is correct?

a) The price elasticity of demand is -2b) The good is inferiorc) Income elasticity is + 0.5d) Income elasticity is + 2

Question 3

If the price elasticity of demand is unit then a fall in price:

a) Reduces revenueb) Leaves revenue unchangedc) Increases revenued) Reduces costs

Question 4

If the cross elasticity of demand is -2:



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a) The products are substitutes and demand is cross price elasticb) The products are substitutes and demand is cross price inelasticc) The products are complements and demand is cross price elasticd) The products are complements and demand is cross price inelastic

Question 5

The income elasticity is +2 and income increases by 20%. Sales were 5000 units, what

will they be now?

a) 3000b) 7000c) 5500d) 4500This means that a percentage increase in income will lead to an increase in quantity demanded that is twice as great; this means sales will increase by 40% to 7000 units.

Question 6

The price elasticity of demand is a negative number this means:

a) Demand is price elasticb) Demand is price inelasticc) The demand curve is downward slopingd) An increase in income will reduce the quantity demanded

Question 7

Price increases from 10 to 12 pence and the price elasticity of demand is -0.5. The

quantity demanded was 500 units. What will it be now?

a) 550 unitsb) 500 unitsc) 450 unitsd) 490 unitsThis means that any given percentage fall in price leads to an increase in quantity demanded that is half as much; a 20% price increase will reduce the quantity demanded by 10%. This means the quantity demanded will be 450 units.

Question 8

If demand is price inelastic:

a) An increase in price must raise profitsb) An increase in price decreases revenuec) An increase in price increases revenued) A decrease in price reduces sales

Question 9

For an inferior good:



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a) The price elasticity of demand is negative; the income elasticity of demand is negativeb) The price elasticity of demand is positive; the income elasticity of demand is negativec) The price elasticity of demand is negative; the income elasticity of demand is positived) The price elasticity of demand is positive; the income elasticity of demand is positive

Question 10

For a normal good:

a) The price elasticity of demand is negative; the income elasticity of demand is negativeb) The price elasticity of demand is positive; the income elasticity of demand is negativec) The price elasticity of demand is negative; the income elasticity of demand is positived) The price elasticity of demand is positive; the income elasticity of demand is positive

Unit 5Question 1

Which best describes a supply curve?

a) The quantity consumers would like to buy in an ideal worldb) The quantity producers are willing and able to sell at each and every price all other things unchangedc) The quantity producers are willing and able to sell at each and every income all other things unchangedd) The quantity producers are willing and able to sell at each and every point in time all other things unchanged

Question 2

If a 4% increase in price leads to a increase in the quantity supplied of 8%:

a) Supply is price elasticb) Supply is income elasticc) Price elasticity of demand is -2d) Price elasticity of supply is -2

Question 3

Supply is likely to be more price elastic:

a) In the short run rather than the long runb) If factors of production are relatively immobile between industriesc) If there are very few producersd) If it is easy to expand output

Question 4

A supply curve that starts at the origin has:

a) A price elasticity of supply greater than oneb) A price elasticity of supply equal to onec) A price elasticity of supply less than oned) A positive price elasticity of supply

Question 5



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A contraction in supply occurs when:

a) Demand shifts outwardsb) The supply curve shifts inwardsc) The quantity supplied falls when the price fallsd) The supply curve shifts outwards

Question 6

An increase in the costs of production will:

a) Shift demand outwardsb) Shift demand inwardsc) Shift supply outwards so more is supplied at each and every price, all other things unchangedd) Shift supply inwards

Question 7

An increase in price all other things unchanged leads to:

a) A shift in supply outwardsb) A shift in supply inwardsc) A contraction of supplyd) An extension of supply

Question 8

An increase in productivity should:

a) Lead to a contraction of supplyb) Lead to an expansion of supplyc) Lead to a shift in supply outwards (i.e. more supplied at each and every price)d) Lead to a higher equilibrium and lower equilibrium quantity

Question 9

An increase in price from 25 pence to 30 pence leads to an increase in the quantity

supplied from 40 units to 44 units. The price elasticity of supply is:

a) + 2b) + 0.5c) - 2d) - 0.5Quantity supplied increases 10%; price increases 20%; this means the price elasticity of supply is +0.5.

Question 10

The price elasticity of supply is +4. The price increases by 15%. Sales were originally

200 units. What will they be now?

a) 80 units



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b) 320 unitsc) 60 unitsd) 120 unitsThe change in quantity supplied will be 4*15%=60%; this means the quantity supplied increases by 120 units.

Unit 6

Question 1

If demand increases in a market this will usually lead to:

a) A higher equilibrium price and outputb) A lower equilibrium price and higher outputc) A lower equilibrium price and outputd) A higher equilibrium price and lower output

Question 2

An increase in income will:

a) Lead to a movement along the demand curveb) Shift the supply curvec) Shift the demand curved) Lead to an extension of demand

Question 3

A reduction in the costs of production will:

a) Lead to a movement along the supply curveb) Shift the demand curvec) Shift the supply curved) Lead to an extension of supply

Question 4

A shift in supply will have a bigger effect on price than output if demand is:

a) Income elasticb) Income inelasticc) Price elasticd) Price inelastic

Question 5

Assuming a downward sloping demand curve and upward sloping supply curve, a higher

equilibrium price may be caused by:

a) An fall in demandb) An increase in supplyc) Improvements in production technology



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d) An increase in demand

Question 6

If the price was fixed below the equilibrium price there would be:

a) Excess supplyb) Excess demandc) Equilibriumd) Downward pressure on prices

Question 7

A movement along the demand curve may be caused by:

a) A change in incomeb) A change in the number of buyersc) A change in advertisingd) A shift in supply

Question 8

A subsidy paid to producers:

a) Shifts the supply curveb) Shifts the demand curvec) Leads to a contraction in supplyd) Leads to an extension of supply

Question 9

A movement along the supply curve may be caused by:

a) A change in technologyb) A change in the number of producersc) A shift in demandd) A change in costs

Question 10

The price mechanism cannot:

a) Act as a signalb) Act as an incentivec) Act as a rationing deviced) Shift the demand curve

Unit 7

Question 1

Which best describes consumer surplus?



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a) The price consumers are willing to pay for a unitb) The cost of providing a unitc) The profits made by a firmd) The difference the price a consumer pays for an item and the price he/she is willing to pay

Question 2

The price mechanism does not act as a:

a) Signalb) Incentivec) Rationing deviced) Indicator of income

Question 3

A shift in demand will have more effect on price than quantity if:

a) The price elasticity of supply is price inelasticb) The price elasticity of supply is price elasticc) The price elasticity of supply is perfectly elasticd) The price elasticity of supply is infinity

Question 4

A shift in demand will have more effect on price than quantity if:

a) The price elasticity of supply is + 3b) The price elasticity of supply is + 0.2c) The price elasticity of supply is + 2d) The price elasticity of supply is infinityA shift in demand will have more effect on price than quantity if supply is price inelastic e.g. the price elasticity of supply is + 0.2.

Question 5

A shift in supply will have more effect on price than quantity if:

a) The price elasticity of demand is -3b) The price elasticity of demand is -0.2c) The price elasticity of demand is -2d) The price elasticity of demand is infinityA shift in supply will have more effect on price than quantity if the price elasticity of demand is price inelastic e.g. the price elasticity of demand is -0.2.

Question 6

A decrease in demand for a product should:

a) Increase equilibrium price and quantityb) Decrease equilibrium price and quantityc) Increase equilibrium price and decrease quantityd) Decrease equilibrium price and increase quantity



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Question 7

An increase in demand for a product should:

a) Increase equilibrium price and quantityb) Decrease equilibrium price and quantityc) Increase equilibrium price and decrease quantityd) Decrease equilibrium price and increase quantity

Question 8

"Income inequality can be high in the free market and should be reduced." This is an

example of what?

a) Judicial economic statementb) Positive economic statementc) Formative economic statementd) Normative economic statement

Question 9

A public good will:

a) Be underprovided in the free marketb) Be overprovided in the free marketc) Not be provided in the free marketd) Has no opportunity cost

Question 10

A positive externality occurs when:

a) The social marginal costs are higher than the private marginal costsb) A product is not provided in the free marketc) The social marginal cost equals the social marginal benefitd) The social marginal benefits are higher than the private marginal benefits

Unit 8

Question 1

If the price in a market is fixed by the government below equilibrium:

a) There is excess equilibriumb) There is excess supplyc) There is excess demandd) There is equilibrium



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Question 2

If the price in a market is fixed by the government above equilibrium:

a) There is excess equilibriumb) There is excess supplyc) There is excess demandd) There is equilibrium

Question 3

Merit goods are:

a) Not provided in the free market economyb) Under provided in the free market economyc) Over provided in the free market economyd) Provided free

Question 4

Agricultural prices tend to be unstable because:

a) Supply is price elasticb) Demand is price elasticc) Supply is stabled) Demand and supply are price inelastic

Question 5

When supply increases in an agricultural market farmer's earnings might fall because:

a) Supply is price elasticb) Demand is price inelasticc) The government buys up all the excess productiond) All output must be sold at a maximum price

Question 6

Which of the following is the government most likely to subsidise?

a) Negative externalitiesb) Positive externalitiesc) Monopoliesd) Oligopolies

Question 7

With a positive externality:

a) There is under-consumption in the free marketb) There is over consumption in the free marketc) The government may tax to decrease production



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d) Society could be made off if less was produced

Question 8

A public good:

a) Is provided by the governmentb) Is freec) Has the properties of being non-excludable and non-diminishabled) Has external costs

Question 9

Nationalisation occurs when:

a) The government sells assets to a the private sectorb) The government bans a productc) The government takes control of an industryd) The government taxes a product to a raise its price

Question 10

If a maximum price is set below equilibrium there will be:

a) A price fallb) A price increasec) Excess supplyd) Excess demand

Unit 9

Question 1

Which of the following is true?

a) If the marginal cost is greater than the average cost the average cost fallsb) If the marginal cost is greater than the average cost the average cost increasesc) If the marginal cost is positive total costs are maximisedd) If the marginal cost is negative total costs increase at a decreasing rate if output increases

Question 2

According the law of diminishing returns:

a) The marginal product falls as more units of a variable factor are added to a fixed factorb) Marginal utility falls as more units of a product are consumedc) The total product falls as more units of a variable factor are added to a fixed factord) The marginal product increases as more units of a variable factor are added to a fixed factor

Question 3



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The law of diminishing returns assumes:

a) There are no fixed factors of productionb) There are no variable factors of productionc) Utility is maximised when marginal product fallsd) Some factors of production are fixed

Question 4

When internal economies of scale occur:

a) Total costs fallb) Marginal costs increasec) Average costs falld) Revenue falls

Question 5

The first level of output at which the long run average costs are minimised is called:

a) The Minimum Efficient Scaleb) The Minimum External Scalec) The Maximum External Scaled) The Maximum Effective Scale

Question 6

The average variable cost curve:

a) Is derived from the average fixed costsb) Converges with the average cost as output increasesc) Equals the total costs divided by the outputd) Equals revenue minus profits

Question 7

If marginal cost is positive and falling:

a) Total cost is fallingb) Total cost is increasing at a falling ratec) Total cost is falling at a falling rated) Total cost is increasing at an increasing rate

Question 8

Total increases from £500 to £600 when output increases from 20 to 30 units. Fixed

costs are £200. Which of the following is true?

a) Marginal cost is £20b) Average cost fallsc) Variable cost rises by £100d) Average fixed cost is £10



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Question 9

Total increases from £500 to £600 when output increases from 20 to 30 units. Fixed

costs are £200. Which of the following is true?

a) Marginal cost is £20b) Average cost risesc) Variable cost rises by £200d) Average fixed cost was £10 originally

Question 10

If marginal product is below average product:

a) The total product will fallb) The average product will fallc) Average variable costs will falld) Total revenue will fall

Unit 10

Question 1

If the marginal revenue is less than the marginal cost then to profit maximise a firm

should:

a) Reduce outputb) Increase outputc) Leave output where it isd) Increase costs

Question 2

If the price is less than the average costs but higher than the average variable costs:

a) The firm is making a loss and will shutdown in the short termb) The firm is making a profitc) The firm is making a loss but will continue to produce in the short termd) The firm is making a loss and is making a negative contribution to fixed costs

Question 3

If firms earn normal profits:

a) They will aim to leave the industryb) Other firms will join the industryc) The revenue equals total costsd) No profit is made in accounting terms

Question 4



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In the long term a firm will produce provided the revenue covers:

a) Fixed costsb) Variable costsc) Total costsd) Revenue

Question 5

In the short term a firm will produce provided the revenue:

a) Covers fixed costsb) Covers variable costsc) Covers total costsd) Covers revenue

Question 6

The profit per sale is a measure of:

a) Profitb) Profitabilityc) Feasibilityd) Realism

Question 7

The total costs are £2000 and 10 units are produced. The marginal cost of an 11th unit is

£1300. Which of the following is true?

a) The average cost increases from £20 to £30b) The total costs for 11 units are £700c) The average cost for 10 units is £1300d) The average cost for 11 units is £1300

Question 8

Total revenue equals:

a) Price plus quantityb) Price multiplied by quantity soldc) Price divided by the quantity soldd) Price minus quantity sold

Question 9

If marginal revenue equals marginal cost:

a) No profit is being madeb) Total revenue equals total costc) Profits are maximisedd) Producing another unit would increase profits



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Question 10

Price equals:

a) Total revenue - quantityb) Total revenue / quantity soldc) Total quantity sold * quantity soldd) Total revenue / total cost

Unit 11Question 1

Firms in perfect competition face a:

a) Perfectly elastic demand curveb) Perfectly inelastic demand curvec) Perfectly elastic supply curved) Perfectly inelastic supply curve

Question 2

In perfect competition:

a) The price equals the marginal revenueb) The price equals the average variable costc) The fixed cost equals the variable costsd) The price equals the total costs

Question 3

A profit maximising firm in perfect competition produces where:

a) Total revenue is maximisedb) Marginal revenue equals zeroc) Marginal revenue equals marginal costd) Marginal revenue equals average cost

Question 4


a) The products firm offer are very similarb) Products are heavily differentiatedc) A few firms dominate the marketd) Consumers have limited information

Question 5

In the long run in perfect competition:

a) The price equals the total revenue



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b) Firms are allocatively inefficientc) Firms are productively efficientd) The price equals total cost

Question 6


a) Short run abnormal profits are competed away by firms leaving the industryb) Short run abnormal profits are competed away by firms entering the industryc) Short run abnormal profits are competed away by the governmentd) Short run abnormal profits are competed away by greater advertising

Question 7


a) A few firms dominate the industryb) Firms are price makersc) There are many buyers but few sellersd) There are many buyers and sellers

Question 8

In the short run firms in perfect competition will still produce provided:

a) The price covers average variable costb) The price covers variable costc) The price covers average fixed costd) The price covers fixed costs

Question 9

In the long run in perfect competition:

a) Price = average cost = marginal costb) Price = average cost = total costc) Price = marginal revenue = total costd) Total revenue = total variable cost

Question 10

For a perfectly competitive firm:

a) Price equals marginal revenueb) Price is greater than marginal revenuec) Price equals total revenued) Price equals total cost

Unit 12

Question 1



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X inefficiency occurs when:

a) The price is greater than the marginal costb) The price is greater than the average costc) Costs are higher than they could be due to a lack of competitive pressured) There are external costs

Question 2

The marginal revenue curve in monopoly:

a) Equals the demand curveb) Is parallel with the demand curvec) Lies below and converges with the demand curved) Lies below and diverges from the demand curve

Question 3

In monopoly when abnormal profits are made:

a) The price set is greater than the marginal costb) The price is less than the average costc) The average revenue equals the marginal costd) Revenue equals total cost

Question 4

In monopoly in long run equilibrium:

a) The firm is productively efficientb) The firm is allocatively inefficientc) The firm produces where marginal cost is less than marginal revenued) The firm produces at the socially optimal level

Question 5

Barriers to entry do not include

a) Patentsb) Internal economies of scalec) Mobility of resourcesd) High investment costs

Question 6

In a monopoly which of the following is not true?

a) Products are differentiatedb) There is freedom of entry and exit into the industry in the long runc) The firm is a price takerd) There is one main seller



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Question 7

In monopoly which of the following is true?

a) There are many buyers and sellersb) There is one main buyerc) There is one main sellerd) The actions of one firm do not affect the market price and quantity

Question 8

According to Schumpeter:

a) Monopolies are inefficientb) Monopoly profits act as an incentive for innovationc) Monopolies are alocatively efficientd) Monopolies are productively efficient

Question 9

A welfare loss occurs in monopoly where:

a) The price is greater than the marginal costb) The price is greater than the marginal benefitc) The price is greater than the average revenued) The price is greater than the marginal revenue

Question 10

In the UK the government:

a) Bans monopoliesb) Fines all monopoliesc) Prevents firms acquiring more than 25% of the marketd) Has the right to investigate monopolies and will assess each one on its own merits

Unit 13

Question 1

If a few firms dominate an industry the market is known as:

a) Monopolistic competitionb) Competitively monopolisticc) Duopolyd) Oligopoly

Question 2

In a cartel member firms may be given a fixed amount to produce. This is called a:

a) Limit



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b) Factorc) Quotad) Quotient

Question 3

In the Kinked Demand Curve theory it is assumed that:

a) An increase in price by the firm is not followed by othersb) An increase in price by the firm is followed by othersc) A decrease in price by the firm is followed by othersd) Firms collude to fix the price

Question 4

The Kinked Demand Curve theory assumes:

a) Firms cooperateb) Firms act as part of a cartelc) Firms are competitived) Firms are not profit maximisers

Question 5

In Game Theory:

a) Firms are assumed to act independentlyb) Firms are assumed to cooperate with each otherc) Firms collude as part of a carteld) Firms consider the actions of others before deciding what to do

Question 6

In the kinked demand curve theory:

a) There is a kink in the marginal cost curveb) Demand is price inelasticc) Demand is price elasticd) Non price competition is likely

Question 7

Firms in oligopoly are likely to:

a) Invest heavily in brandingb) Act independently of other firmsc) Try to differentiate its productsd) Try to be a price maker

Question 8

A model of Game Theory of oligopoly is known as the:



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a) Prisoner's Dilemmab) Monopoly Cellc) Jailhouse Sentenced) Jury Box

Question 9

In cartels:

a) Each individual firm profit maximisesb) There may be an incentive to cheatc) The industry as a whole is loss makingd) There is no need to police agreements

Question 10

In a cartel:

a) Firms compete against each otherb) Price wars are commonc) Firms use price to win market share from competitorsd) Firms collude

Unit 14

Instructions

Question 1

In monopolistic competition:

a) Firms face a perfectly elastic demand curveb) All products are homogeneousc) Firms make normal profits in the long rund) There are barriers to entry to prevent entry

Question 2


a) Demand is perfectly elasticb) Products are homogeneousc) Marginal revenue = priced) The marginal revenue is below the demand curve and diverges

Question 3

In monopolistic competition firms profit maximise where:

a) Marginal revenue = Average revenueb) Marginal revenue = Marginal costc) Marginal revenue = Average costd) Marginal revenue = Total cost



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Question 4

Which of the following is not one of the four Ps in marketing?

a) Productb) Pricec) Placed) Presence

Question 5

Effective branding will tend to make:

a) Demand more price inelasticb) Supply more price inelasticc) Demand more income elasticd) Supply more income elastic

Question 6

In monopolistic competition if firms are making abnormal profit other firms will enter and:

a) The marginal cost will shift outwardsb) The demand curve will shift inwardsc) The average cost will shift downwardsd) The average variable cost will increase

Question 7

In Porter's five forces model conditions are more favourable for firms within an industry

if:

a) Buyer power is highb) Supplier power is highc) Entry threat is lowd) Substitute threat is high

Question 8

If a firm takes over a competitor then, according to Porter's 5 forces model,:

a) Buyer power is higherb) Supplier power is higherc) Substitute threat is higherd) Rivalry is lower

Question 9

In marketing "USP" stands for:



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a) Unique Selling Propositionb) Underlying Sales Pitchc) Unit Sales Pointd) Under Sales Procedure

Question 10


a) There are few sellersb) There are few buyersc) There is one sellerd) There are many sellers

Unit 15

Question 1

Barriers to entry:

a) Do not exist in monopolyb) Cannot exist in oligopolyc) Do not exist in monopolistic competitiond) Do exist in perfect competition

Question 2

Which best describes price discrimination?

a) Charging different prices for different productsb) Charging the same prices for different productsc) Charging the same prices for the same productsd) Charging different prices for the same products

Question 3

For a firm operating in two markets and price discriminating the profit maximising

condition is:

a) Marginal revenue in A = Price Bb) Marginal revenue in A = Marginal revenue B = Price A = Price Bc) Marginal revenue in A = Marginal revenue B = Marginal costd) Marginal revenue in A = Marginal revenue B = Average cost

Question 4

If the price elasticity of demand for a product in market A is -0.2 and in market B is -3 a

price discriminator will charge:

a) The higher price in market Ab) The higher price in market Bc) The same price in both marketsd) Cannot tell which price will be higher



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Question 5

In perfect price discrimination:

a) Consumer surplus is maximisedb) Produce surplus is zeroc) Community surplus is maximisedd) Consumer surplus is zero

Question 6

A benefit to consumers of price discrimination is that:

a) Some products are produced that would not otherwise be producedb) Producer surplus increasesc) Consumer surplus decreasesd) Firms' profits increase

Question 7

In perfect price discrimination:

a) The demand curve is the marginal cost curveb) The average revenue equals the average costc) The marginal cost is the average cost curved) The demand curve is the marginal revenue

Question 8

In price discrimination abnormal profits are made if:

a) Average revenue is greater than average variable costb) Average revenue is greater than average costc) Average revenue is greater than marginal revenued) Average revenue is greater than average fixed cost

Question 9

Barriers to entry:

a) Enable abnormal profits to be made in the long runb) Enable losses to be made in the long runc) Enable abnormal profits to be made in the short run onlyd) Occur in perfect competition

Question 10

If the price elasticity is -0.3 this means:

a) Demand is upward slopingb) Demand is price elastic



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c) A price fall would increase revenued) Demand is price inelastic

Unit 16Question 1

If one car company takes over another car company this is an example of which type of

integration?

a) Verticalb) Horizontalc) Conglomerated) Literal

Question 2

If a car company takes over a clothes business this is an example of which type of

integration?

a) Verticalb) Horizontalc) Conglomerated) Literal

Question 3

Horizontal integration may lead to internal economies of scale. Which of the following is

not a type of internal economy of scale?

a) Purchasingb) Technicalc) Financiald) Safety

Question 4

Acquisition and merger are examples of:

a) Internal growthb) External growthc) Organic growthd) Underlying growth

Question 5

Unfair competition does not include:



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a) Price cuttingb) Predatory pricingc) Cartelsd) Price fixing

Question 6

If firms join together to set prices and quantities this is known as what?

a) Interactionb) Conglomeratec) Collusiond) Integration

Question 7

In the Ansoff matrix a strategy focusing on new products and new markets is known as:

a) New product developmentb) Diversificationc) Market developmentd) Market penetration

Question 8

A monopoly in the UK can be investigated if it has a market share of:

a) 100%b) 10% or overc) 25% or overd) 33% or over

Question 9

Anti-competitive behaviour in the UK can lead to fines of up to:

a) 10% of profitsb) 10% of turnoverc) 10% of costsd) 25% of market share

Question 10

An example of backward vertical integration is:

a) A supermarket buying a farmb) A supermarket buying another supermarketc) A supermarket buying an insurance companyd) A supermarket buying a car rental business

Unit 17Question 1



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To maximise sales revenue a firm should produce where:

a) Marginal cost is zerob) Marginal revenue is maximisedc) Marginal revenue is zerod) Marginal revenue equals marginal cost

Question 2

To maximise growth without making a loss a firm should produce the highest output

where:

a) Average revenue equals marginal costb) Average revenue equals average costc) Marginal revenue equals marginal costd) Average cost equals marginal cost

Question 3

Profit is measured by:

a) Revenue - fixed costsb) Fixed cost + revenuec) Revenue - salesd) Revenue - total costs

Question 4

When marginal revenue equals marginal cost:

a) Total revenue equals total costb) There is the biggest positive difference between total revenue and total costc) There is the biggest negative difference between total revenue and total costd) Profits are zero

Question 5

To be allocatively efficient a firm must produce where:

a) The total cost equals demandb) The average revenue equals the marginal revenuec) The price equals the average costd) The price equals the marginal cost

Question 6

To be productively efficient a firm must produce where:

a) Marginal costs are maximisedb) Marginal costs are minimisedc) Average costs are minimisedd) Average revenue is maximised



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Question 7

Normal profit occurs when:

a) Average revenue equals average variable costb) Marginal revenue equals marginal costc) Average revenue equals marginal costd) Average revenue equals average cost

Question 8

If the marginal revenue is positive:

a) Selling another unit will increase total revenueb) Selling another unit will increase profitsc) Selling another unit will increase costsd) Selling another unit will increase average revenue

Question 9

Companies in the private sector are owned by:

a) The governmentb) Shareholdersc) Employeesd) The community

Question 10

An independent assessment of the impact of firm's activities on society is called a:

a) Financial auditb) Balance sheetc) Profit and loss accountd) Social audit

Unit 18Question 1

An increase in the wage rate:

a) Will usually lead to more people employedb) Will decrease total earnings if the demand for labour is wage elasticc) Is illegal in a free marketd) Will cause a shift in the demand for labour

Question 2

The Marginal Revenue Product is likely to be wage inelastic if:

a) Labour costs are a high percentage of total costsb) Demand for the final product is price inelastic



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c) It is relatively easy to substitute capital for labourd) There are many substitutes for the final product

Question 3

A fall in demand for labour is likely to lead to:

a) A lower equilibrium wage and lower quantity of labourb) A lower equilibrium wage and higher quantity of labourc) A higher equilibrium wage and higher quantity of labourd) A higher equilibrium wage and lower quantity of labour

Question 4

A decrease in the supply of labour is likely to lead to:

a) A lower equilibrium wage and lower quantity of labourb) A lower equilibrium wage and higher quantity of labourc) A higher equilibrium wage and higher quantity of labourd) A higher equilibrium wage and lower quantity of labour

Question 5

The Marginal Revenue Product is:

a) Upward sloping due to the law of demandb) Upward sloping due to the law of marginal utilityc) Downward sloping due to the law of diminishing returnsd) Downward sloping due to the law of supply

Question 6

Demand for labour is more likely to be wage inelastic if:

a) Wages are a small proportion of total costsb) Demand for the final product is price elasticc) It is easy to replace labourd) Capital is a good substitute for labour

Question 7

A profit maximising firm will employ labour up to the point where:

a) Marginal revenue = marginal productb) Marginal cost = marginal productc) Marginal revenue product = average cost of labourd) Marginal revenue product = marginal cost of labour

Question 8



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In a perfectly competitive labour market firms are wage takers and the marginal cost of

labour equals:

a) The average cost of labourb) The marginal productc) The marginal revenued) The total cost of labour

Question 9

If employees cannot accept a job because of the costs of moving this is known as:

a) Occupational immobilityb) Cyclical unemploymentc) Structural immobilityd) Geographical immobility

Question 10

If the minimum wage is set above the equilibrium wage rate, then other things

unchanged:

a) There will be equilibrium in the labour marketb) There will excess demand in the labour marketc) There will be excess supply in the labour marketd) More people will be employed

Unit 19Question 1

Which of the following is a macroeconomic issue?

a) The price of houses in Oxfordb) The wage rate for plumbers in Londonc) Your decision to work or stay at homed) The level of unemployment in the UK

Question 2

What is meant by an objective?

a) A policyb) A way of reaching a targetc) A targetd) A strategy

Question 3

Which of the following is not involved with fiscal policy?

a) Income taxb) National insurance



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c) VATd) Interest rates

Question 4

Which does the government not control directly?

a) Spending on healthb) Spending on defencec) Firms' investment decisionsd) Spending on education

Question 5

Which of the following is not a macroeconomic issue?

a) Unemploymentb) Inflationc) The wages paid to footballersd) Economic growth

Question 6

Which of the following can the government not use directly to control the economy?

a) Pay rates within the private sectorb) Pay rates in the public sectorc) Investment in educationd) Benefits available for the unemployed and sick

Question 7

Which of the following is a policy instrument as opposed to a government objective?

a) Lower interest ratesb) A better balance of trade positionc) Faster economic growthd) Lower unemployment

Question 8

Which of the following is a possible government objective as opposed to a policy?

a) Lower interest ratesb) Lower taxation ratesc) Lower government spendingd) Lower inflation

Question 9

Which of the following is not likely to be a government objective?



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a) Increasing employmentb) Increasing economic growthc) Increasing government spendingd) Increasing the level of exports

Question 10

"Reducing inflation is a more important objective than economic growth" is an example

of:

a) Normative economicsb) Positive economicsc) Objective economicsd) Reality economics

Unit 20

Question 1

a) Decrease aggregate demandb) Always equal savingsc) Always equal national incomed) Include investment and export spending

Question 2

An increase in national income is:

a) Likely to increase exportsb) Likely to decrease savingsc) Likely to decrease investmentd) Likely to increase spending on imports

Question 3

An increase in national income is likely to:

a) Decrease tax receiptsb) Worsen the balance of tradec) Automatically cause an increase in government spendingd) Cause an increase in injections into the economy

Question 4

A significant increase in the government budget deficit is likely to:

a) Reduce injections into the economyb) Reduce national incomec) Move the economy away from full employmentd) Boost aggregate demand

Question 5



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If injections are greater than withdrawals:

a) National income will increaseb) National income will decreasec) National income will stay in equilibriumd) Prices will fall

Question 6

Injections are:

a) Assumed to be exogeneousb) Assumed to be a function of national incomec) Decrease aggregate demandd) Decrease the investment into an economy

Question 7

For equilibrium in an open four sector economy:

a) Actual injections = actual withdrawalsb) Planned injections = planned withdrawalsc) Savings = investmentd) Government spending = tax revenue

Question 8

A deflationary policy could include:

a) Increasing injectionsb) Reducing taxation ratesc) Reducing interest ratesd) Reducing government spending

Question 9

A reflationary policy:

a) Increases aggregate supplyb) Increases aggregate demandc) Decreases the price leveld) Increases full employment

Question 10

Which of the following is an injection into the economy?

a) Investmentb) Savingsc) Taxationd) Import spending

Unit 21



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Question 1

Gross National Product equals:

a) Net National Product adjusted for inflationb) Gross Domestic Product adjusted for inflationc) Gross Domestic Product plus net property income from abroadd) Net National Product plus net property income from abroad

Question 2

Net National Product equals:

a) Gross National Product adjusted for inflationb) Gross Domestic Product adjusted for inflationc) Gross Domestic Product plus net property income from abroadd) Gross National Product minus depreciation

Question 3

The standard of living is often measured by:

a) Real GDP per capitab) Real GDPc) Real GDP * populationd) Real GDP plus depreciation

Question 4

In a recession:

a) Unemployment is likely to be lowb) Prices are likely to increasec) Growth is negatived) Growth is slow

Question 5

In a boom:

a) Surpluses are likely to occurb) Prices are likely to fallc) Supply will increase immediately to match demandd) Shortages may occur

Question 6

GDP plus net property income from abroad equals what?

a) GNPb) NNP



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c) Depreciationd) Real GDP

Question 7

To adjust GDP from market prices to factor cost:

a) Add indirect taxesb) Subtract subsidiesc) Deduct indirect taxes and subsidiesd) Deduct indirect taxes and add subsidies

Question 8

To adjust from Gross National Product to Net National Product:

a) Deduct depreciationb) Deduct indirect taxesc) Deduct subsidiesd) Add inflation

Question 9

In a recession a government:

a) Is likely to want to increase demand in the economyb) Is likely to want to decrease demand in the economyc) Is likely to want to stabilise demand in the economyd) Is likely to want to increase supply in the economy

Question 10

A higher GDP per capita may not mean that the quality of life has really improved

because:

a) It measures wealth not incomeb) It measures Gross Domestic Productc) It does not measure the quality of the items producedd) It is only measured every five years

Unit 22Question 1

Economic growth can be measured by:

a) The CPIb) The CBIc) GDPd) MPC

Question 2



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In a boom:

a) Unemployment is likely to fallb) Prices are likely to fallc) Demand is likely to falld) Imports are likely to grow

Question 3

In a recession, GDP:

a) Grows negativelyb) Grows slowlyc) Grows by 0%d) Grows rapidly

Question 4

If labour productivity per week is 200 units and there are 5 employees what is the total

output?

a) 40 unitsb) 195 unitsc) 1000 unitsd) 200 units

Question 5

Labour productivity measures:

a) The output per workerb) The output per machinec) Total outputd) Marginal output

Question 6

Potential growth measures:

a) The growth of the fastest economy in the worldb) The fastest growth an economy has ever achievedc) The present rate of growth of an economyd) The rate of growth that could be achieved if resources were fully employed

Question 7

Economic growth can be seen by an outward shift of:

a) The Production Possibility Frontierb) The Gross Domestic Barrierc) The Marginal Consumption Frontierd) The Minimum Efficient Scale



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Question 8

The socially optimal rate of growth is:

a) Zerob) Negativec) Where the marginal social benefit = the marginal social costd) Total social costs are minimised

Question 9

To anticipate what the economy is going to do next the government will look at:

a) Lagging indicatorsb) Flashing indicatorsc) Coincidental indicatorsd) Leading indicators

Question 10

When an economy first begins to grow more slowly:

a) GDP increasesb) Inflation is likely to increasec) Stock levels are likely to increased) Investment in equipment is likely to increase

Unit 23

Question 1

A shift in aggregate supply is likely to:

a) Reduce the general price level and reduce national incomeb) Reduce the general price level and increase national incomec) Increase the general price level and reduce national incomed) Increase the general price level and increase national income

Question 2

Aggregate demand will increase if:

a) Consumption fallsb) Investment fallsc) Exports falld) Imports fall

Question 3

An increase in aggregate demand will have most effect on prices if:

a) Aggregate supply is price inelastic



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b) Aggregate supply is price elasticc) Aggregate supply has a unitary price elasticityd) Aggregate demand is price inelastic

Question 4

Which of the following would increase aggregate demand?

a) Increased savingb) Increasing import spendingc) Increased taxation revenued) Increased investment

Question 5

Which of the following would decrease aggregate demand?

a) Increased consumptionb) Increasing export revenuec) Increased taxation revenued) Increased investment

Question 6

Improved training of employees would:

a) Shift aggregate supply to the rightb) Shift aggregate supply to the leftc) Shift aggregate demand to the rightd) Shift aggregate demand to the left

Question 7

Increased unemployment benefits and less incentive to work would:


Question 8

Increased levels of consumption:


Question 9

Increased levels of spending on imports:



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Question 10

An increase in aggregate demand if aggregate supply is totally inelastic will:

a) Increase price but not outputb) Increase output but not pricec) Increase output and priced) Decrease output and price

Unit 24

Question 1

If the marginal propensity to consume on domestic products is 0.9 the size of the

multiplier is:

a) 10b) 1c) 9d) 0.1The multiplier is (1/1-mpc) so if the mpc is 0.1 the multiplier is 10.

Question 2

An increase in the marginal propensity to consume will:

a) Increase the size of the multiplierb) Increase the marginal propensity to savec) Decrease national incomed) Reduce injections into the economy

Question 3

If the Keynesian consumption function is C = 10 + 0.8 Yd then when disposable income

is £1000, total consumption is what?

a) 0.8b) 800c) 810d) 0.81If the Keynesian consumption function is C = 10 + 0.8 Yd then when disposable income is £1000, total consumption = 10 + 0.8(1000) = 810

Question 4


is £1000, the marginal propensity to consume is what?



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a) 0.8b) 800c) 810d) 0.81If the Keynesian consumption function is C = 10 + 0.8 Yd then when disposable income is £1000, the marginal propensity to consumer is 0.8.

Question 5


is £1000, the average propensity to consume is what?

a) 0.8b) 800c) 810d) 0.81If the Keynesian consumption function is C = 10 + 0.8 Yd then when disposable income is £1000, the average propensity to consume = 810/1000=0.81

Question 6

As income increases:

a) The average propensity to consume gets nearer in value to the marginal propensity to consumeb) The average propensity to consume diverges in value from the marginal propensity to consumec) The average propensity to consume fallsd) The average propensity to consume always approaches 0

Question 7

An increase in consumption at any given level of income is likely to lead to:

a) A fall in savingsb) An increase in exportsc) A fall in taxation revenued) A decrease in import spending

Question 8

Lower interest rates are likely to:

a) Decrease consumptionb) Increase cost of borrowingc) Encourage savingd) Increase spending

Question 9

Friedman's theory of consumption focuses on:

a) Past incomeb) Current incomec) Disposable income



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d) Permanent income

Question 10

The marginal propensity to consume is equal to:

a) Total spending / total consumptionb) Total consumption / total incomec) Change in consumption / change in incomed) Change in consumption / change in savings

Unit 25

Question 1

An increase in investment is most likely to be caused by:

a) Lower interest ratesb) Lower national incomec) A decrease in the marginal propensity to consumed) An increase in withdrawals

Question 2

An outward shift in the Marginal Efficiency of Capital should:

a) Decrease consumptionb) Increase aggregate demandc) Reduce aggregate supplyd) Slow economic growth

Question 3

An increase in interest rates:

a) Is likely to reduce savingsb) Is likely to reduce the external value of the currencyc) Leads to a shift in the MEC scheduled) Leads to a movement along the MEC schedule

Question 4

The accelerator assumes:

a) The marginal propensity to consume is constantb) The economy is at full employmentc) There is a constant relationship between net investment and the rate of change of outputd) The multiplier is constant

Question 5

Investment depends mainly on:



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a) Past levels of incomeb) Future expected profitsc) Present national income levelsd) Historic data

Question 6

A profit maximising firm will invest up to the level of investment where:

a) The cost of borrowing equals the marginal efficiency of capitalb) The cost of borrowing is greater than the marginal efficiency of capitalc) The cost of borrowing is less than the marginal efficiency of capitald) The cost of borrowing equals the marginal propensity to consume

Question 7

Investment is:

a) An injection that increases aggregate demandb) A withdrawal that increases aggregate demandc) An injection that decreases aggregate demandd) A withdrawal that decreases aggregate demand

Question 8

Investment is an unstable element of aggregate demand because is depends heavily on:

a) Government policyb) Expectationsc) National incomed) Historic trends

Question 9

If an increase in investment leads to a bigger increase in national income this is called

the:

a) Acceleratorb) Aggregate demandc) Monetarismd) Multiplier

Question 10

The difference between gross investment and net investment is:

a) Depreciationb) Accelerationc) Decelerationd) Capital investment

Unit 26



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Question 1

An expansionist fiscal policy could include:

a) Lower interest ratesb) Increased lending by the banksc) An increase in corporation taxd) An increase in discretionary government spending

Question 2

If the economy grows the government's budget position will automatically:

a) Worsenb) Improvec) Stay the samed) Increase with inflation

Question 3

Fiscal drag occurs when:

a) Tax bands do not increase with inflationb) Tax rates move inversely with inflationc) Government spending falls to reduce aggregate demandd) Tax bands increase with inflation

Question 4

If the marginal rate of tax is 40% and consumers' income increase from £10,000 to

£12,000:

a) The amount of tax paid will increase by £4,800b) The amount of tax paid will increase by £4,000c) The amount of tax paid will increase by £800d) The total tax paid will be £4,800The extra tax paid is £800 (= 40%*£2000).

Question 5

Imagine there is no tax on income up to £10000; after that, there is a tax of 50%. What is

the average tax rate on an income of £20000?

a) £5000b) 20%c) 25%d) £10,000The total tax paid is £5000; this means that the average tax is 25% (£5000 out of £20,000).

Question 6



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The marginal rate of tax paid is:

a) The total tax paid / total incomeb) Total income / total tax paidc) Change in the tax paid / change in incomed) Change in income / change in tax paid

Question 7

In a regressive tax system:

a) The amount of tax paid increases with incomeb) The marginal rate of tax decreases with more incomec) The average rate of tax falls as income increasesd) The average rate of tax is constant as income increases

Question 8

The Public Sector Net Cash Requirement (PSNCR) is:

a) A measure of the country's trade positionb) A measure of the country's budget positionc) A measure of the country's total debtd) A measure of the government's monetary stance

Question 9

A government might use tax to:

a) Discourage consumption of positive externalitiesb) Discourage consumption of public goodsc) Discourage consumption of merit goodsd) Discourage consumption of negative externalities

Question 10

As an economy grows:

a) The government's budget position should automatically improveb) The government's budget position should automatically worsenc) This will have no effect on the government's budget positiond) This will reduce the government's tax revenue

Unit 27

Question 1

If people are made unemployed because of a fall in aggregate demand this is known as:

a) Frictional unemploymentb) Seasonal unemploymentc) Cyclical unemployment



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d) Structural unemployment

Question 2

Supply side policies are most appropriate to cure:

a) Involuntary unemploymentb) Cyclical unemploymentc) Voluntary unemploymentd) A fall in aggregate demand

Question 3

The natural rate of unemployment is likely to fall if:

a) Unemployment benefits increaseb) Income tax increasesc) More training is available for the unemployedd) Geographical immobility increases

Question 4

If the real wage is too high in the labour market:

a) The quantity demanded of labour is higher than the quantity suppliedb) The quantity demanded of labour equals the quantity suppliedc) The quantity demanded of labour is lower than the quantity suppliedd) It will automatically adjust in the short run to bring about equilibrium

Question 5

If there is cyclical unemployment in the economy the government might:

a) Increase interest ratesb) Encourage savingsc) Cut taxesd) Reduce government spending

Question 6

Occupational immobility of labour occurs if:

a) People lack informationb) People do not want to workc) People do not have the right skills to workd) People cannot afford to move location

Question 7

Which of the following is not a supply side measure?

a) Increased training



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b) Providing more informationc) Helping individuals to move location to find workd) Increasing spending on existing industries

Question 8

Reducing involuntary unemployment:

a) Helps the economy move on to the Production Possibility Frontierb) Helps shift the economy's Production Possibility Frontier outwardsc) Helps the economy move along its Production Possibility Frontierd) Helps the economy move inside the Production Possibility Frontier

Question 9

Less demand in the economy may increase unemployment; this may lead to less

spending which may reduce demand further. This is called:

a) The upward acceleratorb) The downward multiplierc) The upward PPFd) The downward mpc

Question 10

To reduce cyclical unemployment the government might:

a) Increase the budget surplusb) Increase the balance of payments deficitc) Reduce interest ratesd) Reduce government expenditure

Unit 28

Question 1

The precautionary demand for money is:

a) An idle balanceb) An active balancec) Directly related to interest ratesd) Inversely related to income

Question 2

The liquidity trap occurs when the demand for money:

a) Is perfectly interest elasticb) Is perfectly interest inelasticc) Means that an increase in money supply leads to a fall in the interest rated) Means that an increase in the money supply leads to an increase in the interest rate



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Question 3

A fall in interest rates is likely to:

a) Increase aggregate demandb) Increase savings) Decrease consumptiond) Decrease exports

Question 4

According to the quantity theory of money an increase in the money supply is most likely

to lead to inflation if:

a) The velocity of circulation decreasesb) The number of transactions decreasesc) There is deflationd) The velocity of circulation and the number of transactions is constant

Question 5

A reduction in the money supply is likely to:

a) Reduce the interest rateb) Increase the interest ratec) Increase inflationd) Decrease deflation

Question 6

To reduce the supply of money the government could:

a) Reduce interest ratesb) Buy back government bondsc) Sell government bondsd) Encourage banks to lend

Question 7

The speculative demand for money occurs when:

a) Individuals hold money just in case an emergency happensb) Individuals hold money to buy thingsc) Individuals hold money rather than other assets because they are worried about the price of the other assets fallingd) Individuals hold money to shop

Question 8

An outward shift in the demand for money, other things being equal should lead to:



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a) A lower interest rate but the same quantity of moneyb) A higher interest rate but the same quantity of moneyc) A higher quantity of money but lower interest ratesd) A higher quantity of money but the same interest rate

Question 9

The interest rate in the UK is determined by:

a) The governmentb) The electoratec) The Monetary Policy Committeed) The Federal Reserve Board

Question 10

Open Market Operations occur when the government:

a) Reduces the interest rateb) Buys and sells bonds and securitiesc) Increases taxationd) Increases the exchange rate

Unit 29

Question 1

Demand pull inflation may be caused by:

a) An increase in costsb) A reduction in interest ratec) A reduction in government spendingd) An outward shift in aggregate supply

Question 2

Inflation:

a) Reduces the cost of livingb) Reduces the standard of livingc) Reduces the price of productsd) Reduces the purchasing power of a pound

Question 3

An increase in injections into the economy may lead to:

a) An outward shift of aggregate demand and demand pull inflationb) An outward shift of aggregate demand and cost push inflationc) An outward shift of aggregate supply and demand pull inflationd) An outward shift of aggregate supply and cost push inflation

Question 4



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An increase in aggregate demand is more likely to lead to demand pull inflation if:

a) Aggregate supply is perfectly elasticb) Aggregate supply is perfectly inelasticc) Aggregate supply is unit elasticd) Aggregate supply is relatively elastic

Question 5

An increase in costs will:

a) Shift aggregate demandb) Shift aggregate supplyc) Reduce the natural rate of unemploymentd) Increase the productivity of employees

Question 6

The effects of inflation on the price competitiveness of a country's products may be

offset by:

a) An appreciation of the currencyb) A revaluation of the currencyc) A depreciation of the currencyd) Lower inflation abroad

Question 7

Menu costs in relation to inflation refer to:

a) Costs of finding better rates of returnb) Costs of altering price listsc) Costs of money increasing its valued) Costs of revaluing the currency

Question 8

In the short run unemployment may fall below the natural rate of unemployment if:

a) Nominal wages have risen less than inflationb) Nominal wages have risen at the same rate as inflationc) Nominal wages have risen more than inflationd) Nominal wages have risen less than unemployment

Question 9

According to the Phillips curve unemployment will return to the natural rate when:

a) Nominal wages are equal to expected wagesb) Real wages are back at equilibrium levelc) Nominal wages are growing faster than inflationd) Inflation is higher than the growth of nominal wages



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Question 10

The Phillips curve shows the relationship between inflation and what?

a) The balance of tradeb) The rate of growth in an economyc) The rate of price increasesd) Unemployment

Unit 30

Question 1

If the value of the pound in other currencies is strong:

a) The price of UK products abroad in foreign currency will fallb) The price of UK products abroad in foreign currency will risec) The price of UK products in the UK will rised) The price of UK products in the UK will fall

Question 2

If the value of the pound in other currencies rises:

a) The spending on UK exports in pounds must riseb) The spending on UK exports in foreign currency will rise if demand is price elasticc) The demand for UK exports will rised) The spending on UK exports in foreign currency will fall if demand for UK exports is price elastic

Question 3

The supply of pounds to the currency market will be upward sloping if:

a) The demand for UK exports is price elasticb) The demand for UK exports is price inelasticc) The demand for imports into the UK is price elasticd) The demand for imports into the UK is price inelastic

Question 4

A fall in the value of the pound is likely to decrease spending on imports if:

a) The price elasticity of demand for imports is price elasticb) The price elasticity of demand for imports is price inelasticc) The price elasticity of demand for imports has a unit price elasticityd) The price elasticity of demand for exports is price elastic

Question 5

If the exchange rate is above the equilibrium level:

a) There is excess demand and the exchange rate will fall



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b) There is excess supply and the exchange rate will fallc) There is excess demand and the exchange rate will rised) There is excess supply and the exchange rate will rise

Question 6

If the exchange rate is below the equilibrium level:

a) There is excess demand and the exchange rate will fallb) There is excess supply and the exchange rate will fallc) There is excess demand and the exchange rate will rised) There is excess supply and the exchange rate will rise

Question 7

To prevent the exchange rate rising the government could:

a) Sell its own currencyb) Increase interest ratesc) Buy its own currencyd) Sell foreign currency

Question 8

A depreciation of a currency occurs when:

a) The value of the currency fallsb) The value of the currency increasesc) Inflation fallsd) The balance of payments improves

Question 9

An appreciation of the currency may occur if:

a) Domestic interest rates fallb) There is an increase in demand for importsc) There is an increase in demand for exportsd) There is an increase in the balance of payments deficit

Question 10

A fall in the external value of a currency:

a) May cause an outward shift in the demand for the currencyb) May cause an inward shift in the supply for the currencyc) May lead to a movement along the demand curve for a currencyd) May be due to a increase in demand for the country's exports

Unit 31



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Question 1

Which of the following is not an argument for protectionism?

a) To protect infant industriesb) To increase the level of importsc) To protect strategic industriesd) To improve the balance of payments

Question 2

A demand switching policy could be

a) Higher interest ratesb) Higher income taxc) Tariffsd) Reduced government spending

Question 3

Free trade is based on the principle of:

a) Comparative advantageb) Comparative scalec) Economies of advantaged) Production possibility advantage

Question 4

If a country can produce 10 of product A or 4 of product B the opportunity cost of 1B is:

a) 0.4Ab) 2.5Ac) 10Ad) 1BIf a country can produce 10 of product A or 4 of product B the opportunity cost of 1B is 2.5A.

Question 5

Tariffs:

a) Decrease the domestic price of a productb) Increase government earnings from taxc) Increase the quantity of importsd) Decrease domestic production

Question 6

The terms of trade measure:

a) The income of one country compared to another



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b) The GDP of one country compared to anotherc) The quantity of exports of one country compared to anotherd) Export prices compared to import prices

Question 7

In a floating exchange rate system:

a) The government intervenes to influence the exchange rateb) The exchange rate should adjust to equate the supply and demand of the currencyc) The Balance of Payments should always be in surplusd) The Balance of payments will always equal the government budget

Question 8

The marginal propensity to consume is equal to:

a) Total spending / total consumptionb) Total consumption / total incomec) Change in consumption / change in incomed) Change in consumption / change in savings

Question 9

If there is a balance of payments deficit then in a floating exchange rate system:

a) The external value of the currency would tend to fallb) The external value of the currency would tend to risec) The injections from trade are greater than the withdrawalsd) Aggregate demand is increasing

Question 10

To prevent the external value of the currency from falling the government might:

a) Reduce interest ratesb) Sell its own currencyc) Buy its own currency with foreign reservesd) Increase its own spending

Unit 32

Question 1

Members of the European Union:

a) Have the same interest ratesb) Have one set of lawsc) All have the euro currencyd) Have common tariffs against non members

Question 2



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Which of the following is not a member of the European Union?

a) Franceb) Russiac) Bulgariad) Poland

Question 3

The population of the European Union is approximately what?

a) 50 millionb) 450 millionc) 1000 milliond) 2000 million

Question 4

Within the European Union:

a) There are no tariffs between member countriesb) All member countries have the euro currencyc) All member countries have the same taxation policiesd) All member countries have the same defence policy

Question 5

Belonging to the European Union:

a) Encourages trade with non member countriesb) Encourages trade with member countriesc) Encourages protectionism within the uniond) Encourages countries to act independently

Question 6

The UK:

a) May join the European Union in the futureb) Relies on the European Union for all of its tradec) Relies on the European Union for much of its tax revenued) Joined the European Union in 1973

Question 7

The CAP is:

a) The Common Agricultural Policyb) The Common Alien Policyc) The Community Agricultural Premiumd) The Cost And Price agreement



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Question 8

By having a bigger target market within the European Union a firm might benefit from

economies of scale. Which of the following is not an economy of scale?

a) Purchasingb) Financialc) Manageriald) Allocative efficiency

Question 9

Which of the following is not a European institution?

a) European Parliamentb) European Commissionc) European Congressd) European Council

Question 10

Which of the following could be a problem of being a member of the European Union?

a) Greater competitionb) More customersc) Easier access to marketsd) Greater uniformity in markets

Unit 33

Question 1

Which of the following is not a way of helping developing economies?

a) Aidb) Loansc) Protectionism of developed marketsd) Training and education programmes

Question 2

Developing economies usually have:

a) Low GDP per capitab) Low CPIc) Large balance of payments surplusesd) Large budget surpluses

Question 3

Demand for primary products is likely to be:



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a) Very sensitive to priceb) Price elasticc) Unit elasticd) Income inelastic

Question 4

Developing economies usually:

a) Have large industrialised sectorsb) Are dependent on primary productsc) Have high levels of wealthd) Earn more from exports than is spent on imports

Question 5

Earning from primary products are often unstable because:

a) Demand is price elasticb) Supply is price elasticc) Supply conditions are relatively stabled) Supply conditions are unstable

Question 6

Over time the price of primary products tends to fall because:

a) Demand is income elasticb) Supply is income elasticc) Of outward shifts in supplyd) Demand is price elastic

Question 7

Less Developed Countries tend to have:

a) A high average ageb) A slow population growth ratec) High life expectancyd) A low literacy rate

Question 8

In a Less Developed Country:

a) The infrastructure is likely to be goodb) Real wages are likely to be highc) Unemployment is likely to be lowd) The primary sector is likely to be significant

Question 9



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An injection of funds into a Less Developed Country might set off the:

a) Multiplerb) Marginal propensity to savec) Average propensity to consumed) The Laffer effect

Question 10

The marginal propensity to consume in a Less Developed Country is likely to be:

a) Less than 0b) Nearly 0c) Highd) Low

Unit 34

Question 1

Which of the following is not a global organisation?

a) IMFb) World Bankc) Competition Commissiond) WTO

Question 2

Globalisation is likely to increase with:

a) More protectionismb) An increase in tariffsc) More trade within countriesd) Greater trade flows between countries

Question 3

A multinational business:

a) Sells products abroadb) Produces in more than one countryc) Imports from abroadd) Sells only domestically

Question 4

Which of the following best describes the selling of a production licence to another firm?

a) Hands over all rights to its productsb) Sells its products abroadc) Sells the right to produce to another businessd) Sells the business to another business



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Question 5

Globalisation is made more difficult by:

a) The actions of the World Trade Organisationb) The removal of protectionist measuresc) Exchange rate instabilityd) More free trade agreements

Question 6

Finding a partner to work with abroad is called a:

a) Takeoverb) Mergerc) Acquisitiond) Joint venture

Question 7

Some pressure groups oppose globalisation. The best economic reason for opposition

would be:

a) World trade may increaseb) The marginal social benefits of globalisation are less than the marginal social costsc) Global standards of living may rised) World income inequality may increase

Question 8

The UK would not have attracted inward investment because:

a) It is within the European Unionb) English is a common world wide languagec) It has a stable economic systemd) A strong pound may have made it cheaper for foreign buyers to purchase UK companies

Question 9

Why might a country resist globalisation?

a) Greater choice of final productsb) Greater choice of suppliesc) Greater competition for domestic firmsd) More markets to sell to

Question 10

World trade has been increasing due to:



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a) Increased tariffsb) Increased legal barriersc) Increased embargoesd) Reduced protectionism



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