Economics Multiple Choice Question – 23 August 2017

Following an increase in the price of Product Z by 7%, Product Y saw a decrease in demand by 5 %. Which of the following is true?

Select ONE answer:

  1. The cross elasticity of demand (XED) of Product Y is -0.71; Product Z and Y are complements
  2. The cross elasticity of demand (XED) of Product Y is +0.71; Product Z and Y are complements
  3. The cross elasticity of demand (XED) of Product Y is -1.4; Product Z and Y are substitutes
  4. The cross elasticity of demand (XED) of Product Y is +1.4; Product Z and Y are substitutes
  5. The cross elasticity of demand (XED) of Product Y is +0.71; Product Z and Y are substitutes

What is the definition of a substitute good in economics and give examples?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 1 – Formula for Cross Elasticity of Demand EA, B = % increase in quantity demanded of A / % increase in price of product B i.e. -5% (decrease in Quantity demanded) / +7% (increase in price) = -0.71 which shows the products are complements. In economics, a complementary good or complement is a good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good’s demand is increased when the price of another good is decreased. Conversely, the demand for a good is decreased when the price of another good is increased.

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Economics Multiple Choice Question – 22 August 2017

Which ONE of the following is an example of a government failure when attempting to correct a market failure?

Select ONE answer:

  1. Privatisation of railway networks
  2. Subsidies to firms to assist with regional unemployment
  3. Use of speed cameras to reduce road traffic accidents
  4. Use of education films to reduce the consumption of tobacco
  5. Shortage of available rental properties due to rent-cap legislation

Draw the supply and demand diagram which shows how government intervention fails to correct market failure.
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 5 – Government intervention to resolve market failures can also fail to achieve a socially efficient allocation of resources. Government failure is a situation where government intervention in the economy to correct a market failure creates inefficiency and leads to a misallocation of scarce resources.

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Economics Multiple Choice Question – 21 August 2017

Which ONE of the following is an example of a joint supply?

Select ONE answer:

  1. A car is supplied with tyres from an external contractor
  2. A retailer supplies both printers and print cartridges
  3. The supply of labour is determined by the demand for a product
  4. Sheep can be used for wool, meat and sheepskin
  5. A computer supplied with microchips from a partner company

Give a definition and 3 examples of complimentary supply?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 4 – A joint supply is an economic term referring to a product or process that can yield two or more outputs. Common examples occur within the livestock industry: cows can be utilized for milk, beef and hide; sheep can be utilized for meat, wool and sheepskin.

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Economics Multiple Choice Question – 20 August 2017

Which ONE of the following is an example of a moral hazard?

Select ONE answer:

  1. Failing to regularly service a car
  2. Leaving an insured bicycle unlocked
  3. Installing a home alarm system
  4. A commission-based salary
  5. Driving above the speed limit

Give three more examples of a moral hazard?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 2 – moral hazard is a lack of incentive to guard against risk where one is protected from its consequences, e.g. by insurance.

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Economics Multiple Choice Question – 19 August 2017

The diagram below represents the demand and supply curves for good Y (which is a foodstuff). A recent report suggests that the good has positive externalities in consumption. However, a poor harvest this autumn has resulted in a reduced output.

OCR_Practice_exam_paper_-_OCR_AS_MICRO__A_

 

Which ONE of the following changes to demand, supply and price would occur due to these changes in the market conditions?

Select ONE answer:

Untitled

Explain your answer in a diagram:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 2 – Demand will go up due to the report, but supply will go down due to the poor harvest, leading to an increase in price.

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Economics Multiple Choice Question – 18 August 2017

Which ONE of the following is an example of an external diseconomy of scale?

Select ONE answer:

  1. Lower levels of motivation among workers
  2. Firms experiences loss of managerial direction
  3. Shortage of input factors for an entire industry
  4. Poorer communication with a larger workforce
  5. Higher levels of staff turnover in a business

Draw the representation of a ‘diseconomies of scale’?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – DEFINITION of ‘External Diseconomies Of Scale’ External factors beyond the control of a company increases its total costs, as output in the rest of the industry increases. The increase in costs can be associated with market prices increasing for some or all of the factors of production.

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Economics Multiple Choice Question – 17 August 2017

A firm producing good A finds that it has a fixed cost of £10,000. It calculates that its variable costs when producing 200 units of good A are £8 per unit. What is the average total cost (ATC) at an output of 200 units?

Select ONE answer:

  1. £60
  2. £8
  3. £50
  4. £52
  5. £58

Justify your answer?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 5 – fixed costs of £10,000 divided by 200 units =£50 per unit. The variable cost for 200 units is £8 per unit. Average total cost is, therefore, £50 + £8 = £58

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