Provide the correct answer as well as explanations for each of the following questions.
The problem of scarcity in economics: A exists only in economies which rely on the market mechanism could be eliminated if we force prices to fall C means that there are shortages of some goods D exists because there are insufficient resources to satisfy human wants [154] 2 Which of the following would NOT cause an increase in demand for a normal good? A An increase in income. B An increase in the price of a substitute. C A decrease in the price of a substitute. D A decrease in the price of a complement 3 Revenues from the sale of a good will decrease if: A income increases and the good is normal B its price rises and demand is clastic C its price rises and demand is inclastic D income falls and the good is inferior [154] The price elasticity of demand for a product is -3. A reduction in price from 30 pence do 29 pence will result in an increase in demand of: A B C 10.0% 5 If the cross elasticity of demand between goods X and Y is positive them: X and Y are complements X and Y are substitutes the demand for X and Y are both price clastic the demand for X and Y are both price inclasticThe problem of moral hazard: A describes the situation in which those who know they are particularly bad risks are more inclined to take out insurance than those who know they are good risks B reduces the cost of insurance for low risk people C describes the situation in which those with insurance act in a way which makes the insured event more likely D reduces the cost of insurance for high risk people [14] 7 A firm's marginal product of labour is positive but diminishing. In the short run, the employment of additional units of labour will cause: A toul product to fall at an increasing rate B total product to fall at a decreasing rate total product to rise at an increasing rule D total product to rise at a decreasing rate [154] If the price of a fixed factor of production increases by 30%%, what effect would this have on the marginal costs facing a firm? A Marginal costs would increase by 5016. B Marginal costs would increase by less than 30%%. C Marginal costs would increase by more than 30%%. D No effect. Which of the following DOES NOT describe both perfect competition and monopolistic competition? A Each firm produces an identical product. Normal profits are made in the long run. The demand curve for the industry as a whole slopes down.10 Which of the following is NOT a barrier to entry in oligopoly? A Product proliferation. Investment in spare capacity. C Constant retums to scale. D High advertising expenditure. [154] 11 Which of the following taxes is indirect? A A tax on expenditure. B A tax on earned income. A tax on investment income. A tax on rent received. [154] 12 If a profit maximising firm's marginal revenue is less than its marginal cost, the firm: A must be experiencing economic losses B must be making supernormal profits C should decrease its output should increase its output [154] 13 A firm with fixed costs of $100 per week and a constant average variable cost of {} per unit of output, has the following information about its weekly sales. Torad Rewauc 30 240 40 300 310 Which of the following quantities of sales per week produces the highest level of profits? A 30 units. B 40 units. C 50 units. 60 units.14 Net National Product is defined as Gross National Product minus: transfer payments depreciation retained corporate earnings [15] 15 Which of the following is an example of an injection into the circular flow of income? A Investment B Saving C Taxation Imports [154] 16 Which of the following factors helps explain why the aggregate demand curve has a negative slope? As the price level falls A domestic consumers have an incentive to purchase more of the cheaper goods and services B the central bank will have to increase the supply of money which will lead to an increase in the amount purchased C the government will have to reduce taxes which will lead to an increase in the amount purchased D the real balances of people holding a fixed quantity of money increases causing them to expand their purchases 17 If a household's disposable income increases from $15,000 to $20,000 and as a result its consumption increases from $12.000 to $15,000, what is the household's marginal properaity to consume? A 0.8 B 0.75 0.7
