Tag: Tax

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.

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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.

If the market for a particular product is a natural monopoly, then production of the product must be associated with?

Select ONE answer:

1. High marginal costs
2. Low marginal costs
3. Economies of scope acting as a barrier to entry
4. Low fixed costs

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 == > With a natural monopoly, fixed costs will be high, marginal costs will be low, and economies of scale (rather than scope) provide an effective barrier to entry.
3. Not correct
4. Not correct

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

Little Staffie is a normal good which has become increasingly unfashionable during the past year.

What changes to supply, demand and market price should this change in consumer tastes have created?

Select ONE answer:

1. No impact on the demand curve, but a fall in market price and a fall in quantity supplied
2. A shift in the demand curve to the right, a fall in market price and a fall in quantity supplied
3. A shift in the demand curve to the left, a fall in market price and a fall in quantity supplied
4. No impact on the demand curve, no impact on the supply curve but a fall in market price

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 == > A normal good which has become increasingly unfashionable will see its demand curve shift to the left, a fall in market price and a fall in quantity supplied.
4. Not correct

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

A particular brand of cheese is classified as an inferior good.

A business consultant called Keith has made the two statements about that brand of cheese.

Statement 1 Demand for the cheese will rise as incomes rise.

Statement 2 Demand for the cheese only exists because of the effects of advertising.

Are the statements true or false?

Select ONE answer:

1. Statement 1 – True and Statement 2 – False
2. Statement 1 – False and Statement 2 – True
3. Statement 1 – True and Statement 2 – True
4. Statement 1 – False and Statement 2 – False

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 == > Both statements are false. Demand for an inferior good will fall with rises in income as consumers shift to better quality goods that they can now afford with their higher incomes. Demand for the inferior product could exist because of its price and the level of incomes, not just because of advertising.

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