Month: September 2017

Which ONE of the following is an example of market failure?

1. The price of a good falling to clear the market when there is excess supply
2. The over consumption of cigarettes owing to consumers’ lack of information
3. A rise in unemployment caused by an increase in the minimum wage
4. Consumers experiencing diminishing marginal utility
5. Companies increase the price of petrol following in oil prices

The UK government allocated £39 billion to defence in 2012/2013. Explain why defence is a public good:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 2 – In economics, a market failure is a situation in which the allocation of goods and services is not efficient. Smoking is a de-merit good. A demerit good is defined as a good which can have a negative impact on the consumer – but these damaging effects may be unknown or ignored by the consumer. Demerit goods also usually have negative externalities – where consumption causes a harmful effect to a third party.The classification of demerit goods is a normative judgment. In defining demerit goods we may assume that people are irrational and make poor choices – often consuming goods which are harmful, degrading or damaging in the long-term. This may be due to poor information or poor decision making. In other words, people may under-estimate the private costs and over-estimate the private benefits. Demerit goods have these two characteristics: a) Harmful, unhealthy to individual consumer & b) have negative externalities i.e. Costs imposed on third parties.

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The diagram shows a production possibility frontier (PPF) for an economy.

The opportunity cost of a movement from point X to point Y is:

Select ONE answer:

1. 10 units of consumer goods
2. 20 units of capital goods
3. 30 units of capital goods
4. 80 units of capital goods
5. 90 units of consumer goods

Define the term ‘production possibility frontier’:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – By moving from point X to point Y, and extra 10 units of consumer goods have been produced at an opportunity cost of 30 units of capital goods as at Z they can produce 80 capital goods but only 50 capital goods at Y.

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Which ONE of the following best describes the two statements below?

• Statement 1: The UK government increased education spending from £87 billion in 2012 to £88 billion in 2013.
• Statement 2: The government should allocate an additional £2 billion to schools to improve the quality of education.

Select ONE answer:

Statement 1               Statement 2

1. Positive                    Positive
2. Positive                    Normative
3. Normative               Positive
4. Normative               Normative
5. Definite                    Normative

 

With reference to the statements above explain what is meant by external benefits in relation to Education.

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 2 – Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements do not have to be correct, but they must be able to be tested and proved or disproved. Normative economic statements are opinion based so they cannot be proved or disproved. Statement 1 is fact based, whilst statement 2 is an opinion (use of the word ‘should’ in the sentence).

This work is licensed under a Creative Commons Attribution 4.0 International License.