Economics Paper 3 June 2009

1. Agovernment planners directly assign resources to industries according to a fixed national output plan, with prices playing no part in guiding what gets produced.
2. Ba firm operating under weak competitive pressure fails to minimise its production costs, producing above the lowest feasible cost.
3. Cresources are distributed so that price equals marginal cost, meaning no reallocation could make one party better off without making another worse off.
4. Doutput is produced at the lowest point on the firm's long-run average cost curve, regardless of the price charged.

1. Aa firm facing little competitive pressure fails to minimise its production costs, so it operates above the lowest cost technically achievable.
2. Ba market clears so that the quantity supplied always equals the quantity demanded at the prevailing price.
3. Cresources are distributed so that price equals marginal cost, meaning no reallocation could make one party better off without making another worse off.
4. Doutput is produced at the lowest point on the firm's long-run average cost curve, regardless of the price charged.

Answer this when you sit the paper.

1. Athe proportion of a consumer's income spent on the product.
2. Bthe level of subsidy the government pays to producers of the product.
3. Cwhether the product is habit-forming or addictive.
4. Dthe availability and closeness of substitutes that consumers could switch to if the price of the product changed.

1. Avertical merger.
2. Bhorizontal merger.
3. Clateral merger.
4. Dmarket-extension merger.

1. Ahorizontal merger.
2. Bvertical merger.
3. Clateral merger.
4. Dconglomerate merger.

Answer this when you sit the paper.

1. AAn oligopoly has a single dominant seller controlling the whole market, while a monopoly has several large, interdependent firms.
2. BAn oligopoly is a market dominated by a few large, interdependent firms, while a monopoly is a market with a single seller facing high barriers to entry.
3. CAn oligopoly consists of many small firms that are price takers, while a monopoly consists of one large firm that sets the price.
4. DAn oligopoly typically has barriers to entry created by economies of scale, while a monopoly's barriers usually arise from legal protection such as patents.

1. Aany payment to a factor of production above the minimum needed to keep it in its current use.
2. Ba short-run surplus earned by a factor of production that is temporarily fixed in supply.
3. Cthe total wage bill paid to all workers employed in a particular industry.
4. Dthe minimum payment necessary to keep a factor of production in its current use.

1. Athe minimum payment necessary to keep a factor of production in its current use.
2. Bany payment to a factor of production above its transfer earnings, the minimum needed to retain it in its current use.
3. Ca surplus that arises only when a factor's supply is temporarily fixed in the short run.
4. Dthe rent a firm pays to lease land or buildings used directly in its day-to-day production process, recorded as a business expense.

Answer this when you sit the paper.

1. Agovernment intervention in an industry, such as a price ceiling or minimum wage, causes prices to move away from the free-market equilibrium level and creates a shortage or surplus.
2. Ba firm goes out of business because it cannot compete with more efficient rivals.
3. Cthe free market allocates resources in a way that fails to maximise society's welfare, for example through externalities, public goods, or information asymmetry.
4. Dthe price of a good falls so low that producers can no longer cover their costs.

Answer this when you sit the paper.

1. Aadjusting figures using the nominal exchange rate only, without further correction.
2. Bexcluding all forms of government spending, such as spending on health, education, and infrastructure, from the national income calculation before any comparison is made.
3. Cadjusting figures using purchasing power parity (PPP) to account for differences in the cost of living between countries.
4. Dconverting all figures into a single country's currency using the previous year's exchange rate.

1. AIt raises workers' wages directly, increasing their purchasing power and demand for goods.
2. BIt raises the cost of borrowing, which reduces consumer spending and investment, thereby lowering aggregate demand.
3. CIt increases the profitability of exporting firms by raising their overseas sales revenue, which then supposedly lowers the prices those firms charge to domestic consumers.
4. DIt increases the money supply directly, which reduces the value of each unit of currency.

1. Aan increase in investment in capital goods.
2. Bimprovements in technology and production techniques.
3. Cgrowth in the size and skill of the labour force.
4. Da rise in the average propensity to consume among households.

1. Aworkers who are actively searching for a job and are currently without one.
2. Bworkers who have just been made redundant and registered for unemployment benefit.
3. Cschool leavers who have registered with an employment agency while job-searching.
4. Ddiscouraged workers who want a job but have stopped actively searching and so are not counted as unemployed.