Tag: ACA

An analyst with Big Staffie plc has constructed a supply curve for one of the company’s major products, the Little Staffie.

The curve is is, vertical straight line.

This indicates that supply of the Little Staffie is, therefore?

Select ONE answer:

1. Perfectly inelastic
2. Of unitary elasticity
3. Perfectly elastic
4. One

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

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

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > A vertical straight line implies that the supply of the Little Staffie is fixed, whatever price is offered.
2. Not correct
3. Not correct
4. Not correct

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The UK government has recently imposed a maximum price on Big Staffie which is set at a level lower than its equilibrium price.

In future, therefore, it can be expected that there will be?

Select ONE answer:

1. Excess supply of the product
2. Excess demand for the product
3. No effect on supply but an increase in demand
4. No effect on demand but a decrease in supply

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

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

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct == > A price below the market equilibrium price will attract demand but deter suppliers.
3. Not correct
4. Not correct

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

The price of Big Staffie has fallen by 4% in the last quarter, whilst in the same period demand for Little Staffie where there has been no price change, has risen by 6.5%.

The cross elasticity of demand between the two products is therefore?

Select ONE answer:

1. – 1.625
2. – 0.62
3. 1.625
4. 0.62

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

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

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > +0.065/-0.04 = -1.625
2. Not correct
3. Not correct
4. Not correct

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

The cross elasticity of demand between the Big Staffie product and the Little Staffie product is zero.

It can, therefore, be deduced that the two products are?

Select ONE answer:

1. Complements
2. Substitutes
3. Veblen goods
4. Unrelated

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

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

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > Zero cross-elasticity means the goods are unrelated.

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

Which of the following is an example of government intervention to correct a market failure?

Select ONE answer:

1. An increase in corporation tax during an economic boom
2. An increase in the rate of VAT on all goods and services
3. The taxation of goods with negative externalities
4. The taxation of Giffen goods

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

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

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == > Negative externalities are an example of market failure because they represent situations where the private costs of an activity differ from the social costs of the activity. Economic booms, VAT increases and Giffen goods are not market failures.
4. Not correct

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