Economics Paper 3 November 2004

Answer this when you sit the paper.

1. AIt is non-excludable and non-rival, so one person's use of it does not reduce its availability to anyone else.
2. BIt is non-rival but excludable, so a price can be charged to keep non-payers from using it, as with a cinema seat.
3. CIt is non-excludable but rival, so overuse by some users can deplete what remains for everyone else, as with an open fishery.
4. DIt is rival and excludable, so it is bought and sold in a market like any ordinary private good.

Answer this when you sit the paper.

1. APrivate health insurance, which more households take out as their earnings increase.
2. BImported luxury cars, which buyers purchase more of as their disposable income grows.
3. CSecond-hand clothing, which many buyers switch away from once they can afford new clothes.
4. DFresh dairy products, whose demand tends to rise broadly in line with rising household income and wages.

Answer this when you sit the paper.

1. AWhen price falls below average fixed cost, so the firm cannot recover its overheads.
2. BWhen price equals average total cost, so the firm earns exactly zero economic profit after covering every explicit and implicit cost of production.
3. CWhen marginal cost exceeds marginal revenue at every possible level of output.
4. DWhen price falls below average variable cost, so operating would fail to cover even variable costs.

1. APrice equal to marginal cost only, the general condition for profit-maximising output at any output level.
2. BPrice equal to average total cost, so total revenue exactly covers all costs including a normal return to capital.
3. CPrice equal to average fixed cost, so overheads are exactly recovered from each unit sold.
4. DPrice equal to average variable cost, the point at which the firm is exactly indifferent between continuing to produce and shutting down altogether.

Answer this when you sit the paper.

Answer this when you sit the paper.

1. Amonopsony
2. Boligopoly
3. Cduopoly
4. Dmonopoly

1. Acompensating wage differential
2. Bstatutory minimum wage floor
3. Cmonopsony-restricted wage rate
4. Doutput-based piece wage rate

1. AAn import tariff placed on competing produce brought in from abroad.
2. BAn extension service that provides farmers with technical advice on planting, irrigation and pest control.
3. CA rural credit scheme that lends farmers money to buy seed and fertiliser.
4. DA price support scheme that sets a minimum price at which farmers can sell their produce.

Answer this when you sit the paper.

1. AThe present value of its total social benefits exceeds the present value of its total social costs.
2. BIts construction costs can be fully recovered from government tax revenue within a single year.
3. CThe number of people who benefit from it is larger than the number of people displaced by it.
4. DIts private financial costs are lower than those of a comparable project undertaken by a private firm.

1. AThe sum of the current account and the capital account.
2. BVisible exports of goods minus visible imports of goods.
3. CExports of goods and services combined minus imports of goods and services combined.
4. DThe trade balance plus net income flows and net current transfers from abroad.

Answer this when you sit the paper.

1. Ainflation falls automatically to the American rate within a single trading season.
2. Bcentral bank accumulates reserves rapidly because importers give up buying foreign goods.
3. Cexports become dearer to foreign buyers, the trade deficit widens and reserves are drained defending the rate.
4. Dexports become steadily cheaper abroad, so the trade surplus grows year after year.

1. Alets the government set the price of every traded good directly at the border.
2. Bremoves the need for the country to hold any foreign exchange reserves at all.
3. Csteadies the price of imports and exports, so producers and investors can plan ahead.
4. Dguarantees that the country will never again run a deficit on its current account.

1. Aexports are manufactured goods sold into a wide range of competitive markets.
2. Bforeign exchange reserves are large enough to cover several months of imports.
3. Ctrading partners hold their own currencies steady against the world's major currencies.
4. Ddemand for imports and foreign demand for its exports are both price inelastic.

1. ATraders gain a clear and honest signal of what foreign currency is really worth.
2. BA parallel market in foreign currency develops and scarce official currency is rationed.
3. CExporters receive more local currency for each dollar they earn, so output expands.
4. DThe country's foreign debt becomes cheaper to service in local currency terms.

1. Agross domestic product
2. Bgross national product
3. Cnet domestic product
4. Ddisposable income

1. AAdding indirect taxes and subtracting subsidies from the market price figure.
2. BSubtracting depreciation of the capital stock from the market price figure.
3. CAdding net property income earned from assets held abroad to the market price figure.
4. DSubtracting indirect taxes and adding subsidies to the market price figure.

Answer this when you sit the paper.

1. AReducing the central bank's policy interest rate.
2. BLowering the reserve requirement ratio for commercial banks.
3. COpen market operations.
4. DRaising government spending on public infrastructure.