tackle all parts
1. The diagram below shows a firm operating under conditions of perfect competition in the short run. Price (a) What is represented by the lines numbered 1 to 3? Use the answer box provided. Number Name 2 3 Quantity (b) (i) Show clearly on the diagram the total supernormal profit of the firm. (ii) Explain the term supernormal profit (16 marks) 2. Define the Law of Diminishing Marginal Returns and illustrate this with a suitable example. Definition Example (16 marks) 3. Outline two ways the Irish government could improve the mobility of labour in order to reduce unemployment. (i) (ii) (16 marks) Page 2 of 12 SECTION A (continued) 4. Firms within the aircraft industry can benefit from economies of scale. Explain the term economies of scale and provide one example for a firm in the aircraft industry. Explanation Example (16 marks) 5. (a) Outline two possible effects on the Irish economy of high levels of youth unemployment.6. The table below shows the annual average level of income in a country and the corresponding demand for Product A for two years. Year Income (E) Product A (units) Year 57,000 0 Year 2 63,000 200 (i) Calculate the income elasticity of demand (YED) for Product A. Show your workings. Workings: (ii) Using your knowledge of YED, explain the economic meaning of this figure you calculated in (i) above. Answer: (17 marks) Page 3 of 12 SECTION A (continued) 7. The primary aim of the ECBs monetary policy is to maintain price stability. (a) Define the term monetary policy. (b) Outline two benefits of price stability for the Irish economy. (i) (ii) (17 marks) 8. (a) Outline two possible economic effects of the Irish government introducing a levy on home insurance premiums to help address damage caused by the recent flooding crisis in Ireland. (i) (ii) b) Suggest one alternative method for addressing the flooding crisis in Ireland. (17 marks) "The national minimum wage is increased by 50 cent, bringing it to (9.15 in a bid to make work pay." (Source: Irish Independent, October 2015) Outline three possible economic impacts of this measure on the Irish economy. (1)_1. (a) (1) Define the economic terms: individual (consumer) demand; market demand. (ii) Explain, with the aid of labelled diagrams, the relationship between individual (consumer) demand and market demand. (20) (b) (i) Distinguish between the economic meanings of a 'movement along a demand curve' and a 'shift in a demand curve' for concert tickets. Illustrate your answer using diagrams. (ii) State and explain two factors that would cause a shift in a demand curve for concert tickets. In each case explain how the factor affects the demand curve. (30) (c) The Law of Diminishing Marginal Utility states that as more of a product is consumed, eventually each additional unit of the good provides less additional utility (marginal utility). (i) Explain two assumptions underlying the Law of Diminishing Marginal Utility. A consumer in equilibrium buys 6 health bars at 60.80 each and 9 cartons of juice at 61.50 each. The marginal utility of the 6" health bar is 40 utils. (ii) Using the Equi-Marginal Principle of Consumer Behaviour calculate the marginal utility of the ninth carton of juice. (Show all your workings.) (25) [75 marks] 2. (a) Some Telecoms' analysts believe the main mobile operators in Ireland - Vodafone, 02, Meteor and 3 - control an oligopoly and have little reason to make the market really competitive. (The Irish Times, November, 2010) (i) Outline three key features of an oligopolistic market. Firms in an oligopolistic market may have objectives other than profit maximisation. (ii) Outline two objectives firms in oligopoly may have, other than achieving the maximum level of profits. (25) (b) Using one clearly labelled diagram: (ii) Explain the shape of the 'kinked' demand curve facing a firm in oligopoly. Explain the long run equilibrium position of this firm. (25) (c) It is suggested that consumers prefer price competition in the market place, yet there are benefits for consumers arising from non-price competition. Explain two reasons why consumers may prefer price competition. (ii) Describe two benefits to consumers of non-price competition. (25) [75 marks] Page 4 of 8 3. (a) (i) Define the term Marginal Revenue Productivity (MRP) of a factor of production. (ii) State and explain two factors that can influence MRP. (iii) Outline two difficulties that may arise in measuring MRP. (25) (b) Capital Investment has been an important driver of economic advancement in Ireland over the past ten years, providing the capacity and scope for growth'. (The National Recovery Plan 201 1 - 2014) (i) State and explain three reasons why investment is important for the Irish economy. (ii) Describe three factors that currently influence the level of investment in the Irish economy. (30) (c) Advise the Minister for Transport on two possible economic advantages and two possible economic disadvantages of investing in public transport, rather than investing in the construction of new roads. (20)The table below shows the short run production costs for a small firm producing and selling kitchen furniture. Number of units Fixed Costs Variable Costs Total Costs of output E E E 400 600 1,000 W N - 400 1,200 1,600 400 1,850 2,250 2.900 3,300 400 4,100 4,500 (a) (i) Using the information in the table above calculate the following: The marginal cost of producing the 4" unit. . The average cost of producing 5 units. The profit earned by the firm selling 5 units of output at E1,200 per unit. (Show your workings.) (ii) Using the information in the table above, draw the firm's short run average cost (AC) curve. Explain the reasons for its shape. (30) (b) "The cost of doing business in Ireland is falling. However, some costs continue to increase or remain relatively high'. (National Competitiveness Council Report, 2010) (i) Discuss the economic advantages of falling costs of production for the Irish economy. (ii) Outline possible restrictions on the growth of businesses in the Irish economy at present. (30) (c) The British Petroleum (BP) oil spill in the Gulf of Mexico in 2010 is estimated to have cost a total of $40 bn. Identify two costs for BP and two costs to society associated with this oil spill. (15) [75 marks] Page 5 of 8 5. (a) The Budget is a statement of the Government's fiscal policy. The Irish Government, in its National Recovery Plan 2011-2014 committed to reducing the General Government Deficit to under 3% of GDP by 2014. 1) Explain the underlined term. (ii) State and explain four possible economic effects on the Irish economy of the government's plan to significantly reduce the deficit over the next four years. (30) (b) It has been suggested that in order to reduce the National Debt the government should privatise state owned companies in the coming years. (1) Explain the term "privatisation'. (ii) Outline four economic arguments in favour of privatisation OR outline four economic arguments against privatisation. (25) (c) "The number of staff in the Irish public sector grew by 15.5% from 2001 to 2008, according to OECD statistics'. (Report on the Sources of Ireland's Banking Crisis, 2010) Discuss four measures the Minister for Finance could take to reduce the public sector wage bill. (20) [75 marks] 6. (a) Money is usually defined by reference to the functions it performs. (i) Outline four functions of money. (ii) Explain the term 'Monetary Policy'. (iii) Explain a central bank's function as 'lender of last resort'. (35)6. (a) Money is usually defined by reference to the functions it performs. (i) Outline four functions of money. (ii) Explain the term 'Monetary Policy'. (iii) Explain a central bank's function as "lender of last resort'. (35) (b) Many believe that a lack of supervision ('light-touch regulation') of financial institutions in Ireland contributed significantly to the banking crisis. Discuss the economic reasons why commercial banks in Ireland should be regulated. (20) (c) It is being suggested that the ECB will increase interest rates in the 2011/2012 period. Explain the economic effects of rising interest rates on the Irish economy. (20) [75 marks] Page 6 of 8 7. (a) (i) Define the following terms: . Gross Domestic Product at Current Market Prices; . Gross National Product at Factor Cost. (ii) Explain two reasons why GDP in Ireland at present is larger than GNP. (30) (b) (i) Explain what is meant by the term 'Multiplier'. (ii) It has been estimated that in the Irish economy: MPT = 0.22, MPM = 0.30, MPS 0.28. Calculate the value of the Multiplier in the Irish economy. (iii) Outline briefly how taxes affect the value of the Multiplier. (25) (c) "The Irish Government predicts that the rate of economic growth in 201 1 will be 1.75%'. (The National Recovery Plan 2011-2014) Discuss the economic effects of an increase in the rate of economic growth on the Irish economy. (20) [75 marks] 8. (a) Discuss the economic uses of the 2011 Census of Population data for Government and Business. (20) (b) 'Ireland is experiencing the highest level of net outward migration since 1989'. (The Central Statistics Office, 2010) Discuss the reasons why Ireland is now experiencing a high level of net outward migration. (25) (c) 'The unemployment rate in Ireland in December 2010 was 13.6%'. (The Central Statistics Office) (i) Discuss two economic measures which the Government could take in order to reduce the level of unemployment in Ireland. At the end of the year 2010, the EU and the IMF agreed 685bn of financial support for Ireland. (ii) Discuss the economic effects of this financial support on the Irish economy. (30)1. (a) Explain, with the aid of a diagram, the long run equilibrium position of a monopoly firm. (25 marks) (b) If firms wish to enter a monopoly market they will face barriers to entry. Explain THREE of these barriers. (15 marks) (c) If a monopoly firm wishes to engage in price discrimination, certain conditions must apply. State and explain THREE of these conditions. (15 marks) (d) Irish semi-state transport companies are facing increasing competition. Discuss ONE possible advantage and ONE possible disadvantage of this development for: . Consumers; AND - Employees of semi-state transport companies. (20 marks) [75 marks] 2. (a) Define the following types or degrees of price elasticity of demand: (i) Perfectly elastic demand; (ii) Perfectly inelastic demand; (iii) Elastic demand; (iv) Unitary elastic demand. (20 marks) (b) State and explain FIVE factors that affect price elasticity of demand. (25 marks) (c) A consumer spends (120 per month on a product when its unit price is 80c, and continues to spend (120 per month on this product when its unit price increases to El. (i) Using the formula below, calculate the consumer's price elasticity of demand. Show all your workings. AQ x Pi + P2 AP Q1 + Q2 (ii) Is demand for this product elastic, inelastic or unitary elastic? (iii) Should the seller make any changes in the selling price of this commodity to increase overall revenue? Explain your answer. (30 marks) [75 marks] Page 4 of 7 3. (a) State the Law of Diminishing Marginal Returns. (ii) Using the table below, state after which level of employment diminishing marginal returns set in. Explain your answer. Number of persons employed 2 3 5 Total Output (in units) 14 30 50 64 76 Marginal Output (in units) 14 (15 marks) (b) The short-run average cost curve of a firm initially slopes downwards and afterwards slopes upwards. Explain why this is the pattern of short-run average costs. (15 marks) (c) It is generally agreed that the long-run average cost curve initially slopes downwards due to economies of scale and then slopes upwards due to diseconomies of scale. These economies and diseconomies can be both internal and external. (i) Define the underlined terms. (ii) Distinguish between internal and external economies of scale, giving TWO examples in each case. (30 marks) (d) While there can be advantages from producing on a large scale, the majority of firms in Ireland are small. Explain THREE reasons why small firms survive in the Irish economy.4. (a) In relation to the factor of production Enterprise: (1) Distinguish between insurable risks and non-insurable risks and state TWO examples in each case. (ii) Explain TWO reasons why 'enterprise' is considered to be a unique factor of production. (25 marks) (b) ) Explain what is meant by the term Marginal Efficiency of Capital (MEC). (ii) Discuss FOUR factors, other than MEC, which influence the level of investment by entrepreneurs. (30 marks) (c) Discuss the role of profits in promoting development in a modern market economy. (20 marks) [75 marks] Page 5 of 7 5. Discuss how economic development in less developed countries (LDCs) might be promoted: (i) by their own governments; (ii) by foreign governments / agencies. (30 marks) (b) (i) Discuss THREE economic benefits of economic development to LDCs. (ii) Discuss THREE economic costs of economic development to LDCs. (30 marks) (c) Discuss steps which could be taken to solve the debt crisis which LDCs are experiencing. (15 marks) [75 marks] 6. (a) Explain the following terms which are commonly used in estimating the National Income statistics of a country: (i) Incomes-in-kind; (ii) Transfer Payments; (iii) Net Factor Income from the Rest of the World. (20 marks) (b) The table below shows the levels of National Income, Consumption, Investment, Exports and Imports at the end of Year 1 and Year 2. (For the purpose of this question you may ignore the government sector.) Year National Income Consumption Investment Exports Imports E5,000 64,300 E500 E600 E400 2 65,600 (4,750 E650 (750 Calculate the following, showing all your workings: The level of Imports in Year 2. ( ii) The Marginal Propensity to Import. (iii) The Marginal Propensity to Save. (iv) The size of the Multiplier. Explain the economic meaning of this figure. (25 marks) (c) National Income statistics provide important information, but are subject to certain limitations. (1) Explain THREE reasons why it is useful to have these statistics. (ii) Explain THREE limitations as to the use of these statistics. (30 marks)7. (a) Explain FOUR assumptions underlying the Law of Comparative Advantage. (20 marks) (b) Ireland relies heavily on international trade. Explain THREE factors which affect the competitiveness of Irish-based firms in international trade. Use examples to support your answers. (30 marks) (c) The enlargement of the European Union (EU) to include many new countries will be economically significant for Ireland. Outline the main economic opportunities and challenges for the Irish economy following enlargement of the EU. (25 marks) [75 marks] 8. (a) Outline, using appropriate figures, how the Irish economy performed in the past twelve months in each of the following areas: employment; (ii) price inflation; (Hii) economic growth; (iv) government spending. (20 marks) (b) In recent years Ireland's National Debt as a percentage of Gross Domestic Product (GDP) has declined. Discuss the economic consequences of this development for the Irish Economy. (25 marks) (c) (i) Outline the main sources of government revenue. (ii) Discuss the economic consequences of a government policy to increase public service charges (e.g. road tolls, bin charges, TV, licences) rather than raise tax levels for the Irish economy.(3) Appalled by the answer to the previous questions, you set your scientists to work again. They concoct another breakthrough technology that raises medical expenditures without having any effect on death rates. A truly remarkable achievement. Now you have lower death rates and higher medical expenditures. The new yearly medical expenditures per person are: Age Expenditures Young $0 Old $1,500 Very Old $6,000 Will the Medisure trust fund ever go bankrupt now? If so, when? (4) Suppose the breakthroughs never happened so that the original death rates and schedule of yearly medical expenditures per person holds. Since your scientists are apparently no help, you decide that the right way to save Medisure is to raise the retirement age from old to very old. Now the old work and are taxed $1,000 per person, just like the young, while consuming $0 of Medisure health care (hopefully, they have other sources of insurance). Everything else stays the same. Will the Medisure trust fund ever go bankrupt now? If so, when? (5) People (especially the old) hate your decision to raise the retirement age and they force you to lower it again. As a firm leader, you consider raising taxes to $2,000 per year on each of the young. While this is bound to be unpopular in the short run, if you save Medisure, it might establish your legacy. Will the Medisure trust fund ever go bankrupt now? If so, when? (6) Well, increasing taxes proved more unpopular than you could have imagined, and you were forced to lower them again to $1,000 per year on each of the young. Ever resourceful, you hit upon another strategy - invest the trust fund in the stock market instead of those horrible Treasury bonds that earn no interest. You are confident that with the right investments, you can earn 10% per year on the trust fund. Will the Medisure trust fund ever go bankrupt now? If so, when? (7) Alas, the stock market venture didn't work out quite as well as you might have liked - you earn 0% interest on the trust fund. You are truly desperate now, so you do the unthinkable. You allow 200 extra young workers to immigrate to your island and force them to pay the Medisure tax (thus making 300 young workers in total). To mitigate the political impact, you force them to leave your island before they become old and start using health care. Will the Medisure trust fund ever go bankrupt now? If so, when
