Economics Paper 3 November 2006

1. Athe combined total of a firm's explicit and implicit production costs
2. Bthe total monetary expenditure incurred in producing a particular good
3. Cthe market price that a consumer must pay to acquire a good or service
4. Dthe value of the next best alternative forgone when a choice is made

Answer this when you sit the paper.

1. Ainelastic, because primary products are necessities with few close substitutes
2. Belastic, because primary products face many close substitutes in the market
3. Cunitary, because quantity demanded changes in exact proportion to price changes
4. Dhighly variable, because a small number of large buyers dominate primary product markets

1. Athe marginal product of the variable factor eventually declines
2. Btotal output falls in absolute terms with every extra unit added
3. Cthe fixed factor becomes unnecessary and can be withdrawn from production
4. Doutput rises in exact proportion to each additional unit added

Answer this when you sit the paper.

1. Aany revenue earned above total cost once normal profit has already been covered
2. Bthe minimum return needed to keep a firm operating in its current line of business
3. Cthe accounting profit remaining after corporate tax has been deducted from revenue
4. Dthe amount of profit a firm is required to reinvest into research and development

Answer this when you sit the paper.

1. Ato correct market failures such as externalities and the underprovision of public goods
2. Bto redistribute income and promote greater equity across the population
3. Cto fix identical profit margins for every private firm in the economy
4. Dto regulate monopoly power and prevent the abuse of market dominance

1. Acosts a firm incurs directly when purchasing raw materials and other production inputs
2. Bsubsidies that government pays directly to firms to encourage greater production
3. Cthe numerical difference between a firm's total revenue and its total costs
4. Dcosts or benefits from production that fall on third parties outside the decision

Answer this when you sit the paper.

1. AIt raises the real value of wages for workers whose pay is fixed in money terms.
2. BIt improves a country's export competitiveness by lowering the relative price of its goods abroad.
3. CIt erodes the purchasing power of money and redistributes income between creditors and debtors.
4. DIt increases the real value of fixed-income households' savings held in cash over time.

1. AFiscal policy
2. BMonetary policy
3. CSupply-side policy
4. DExchange rate policy