Category: Economics

An entrepreneur takes out a £500 000 loan at a rate of interest of 10%, and invests a further £500 000 of his own funds to set up a new firm.

In the first year he pays himself a salary of £40 000.

The rate of interest he could have obtained by investing his funds elsewhere is 8%, and the wage he could have earned in alternative employment is £30 000.

By how much will an economist’s calculation of the firm’s first year costs exceed an accountant’s calculation?

Select ONE answer:

1. £20 000
2. £30 000
3. £40 000
4. £50 000

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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

To increase the labour force from 31 to 32 workers, an entrepreneur is forced to increase the daily wage rate from £50 to £53.

What is the marginal cost of labour per day?

Select ONE answer:

1. £2
2. £62
3. £96
4. £146

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – (£50 + £3 * 32 workers)

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

Lucy is a utility-maximising consumer that spends her disposable income on food and clothing.

When her weekly income is £80 she buys 5 units of food at a unit price of £10.

Her marginal utility from food consumption is 10 utility units.

If the price of a clothing unit is £1, the consumer’s marginal utility from clothing is?

Select ONE answer:

1. equal to that derived from food.
2. 1/10 utility unit.
3. 1 utility unit.
4. 10 utility units.

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
4. Not correct

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

An economy is operating at a point inside its production possibility curve.

Why is this described as inefficient?

Select ONE answer:

1. Individuals are enjoying too much leisure.
2. Labour and capital are combined in the wrong proportions.
3. More of one good can be produced without decreasing production of another.
4. There are shortages of some goods and an excess supply of others.

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
4. Not correct

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

In an open economy with a flexible exchange rate, the rate of interest is increased.

Other things being equal, what will be the effect of this increase?

Select ONE answer:

1. There will be a capital outflow.
2. The exchange rate will appreciate.
3. Inflation will rise.
4. Imports will become more expensive.

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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