Economics Paper 3 November 2022

1. Athe largest firms in each industry, acting together by agreement
2. Bconsumer spending, since profit is highest where demand is strongest
3. Cthe pattern of production the country inherited from earlier years
4. Da planning authority that sets an output target for each industry

1. Athe wishes of the workers the firm has taken on for the season
2. Bthe number of workers the government requires the firm to employ
3. Cthe relative prices of labour and capital, since it must minimise cost
4. Dthe method its closest competitor happens to have adopted already

1. Athe number of people living in that particular household
2. Ba ration determined by the household's assessed level of need
3. Can equal share of national output allotted to every household
4. Dits ability to pay, which rests on the income its factors earn

1. Awanted by too few people for a private firm to find it worth supplying
2. Ba service the law forbids any private company from providing at all
3. Ccheaper to produce in a public undertaking than in a private one
4. Dnon excludable, so a firm cannot charge those who benefit from it

1. Araises revenue the government can spend on other public services
2. Bmakes the external cost count in the firm's own output decision
3. Cremoves the firm's incentive to look for a cleaner method of production
4. Dguarantees the factory a market for the whole of its output

1. Agovernment failure, since a remedy can cost more than the market failure
2. Bthe claim that externalities do not exist in a modern economy
3. Cthe fact that public goods can be supplied profitably by private firms
4. Dthe view that consumers cannot judge what is good for them

1. Aits price rises steadily over time as demand for it increases
2. Bit is found in only one region of the country rather than everywhere
3. Cit must be processed before it can be used in any production
4. Dit exists as a fixed stock, so every unit used cannot be replaced

1. Athe rate of harvesting rises above the rate at which stock regenerates
2. Bthe catch is sold abroad rather than consumed within the country
3. Cthe government charges a licence fee for the right to fish the water
4. Dthe price of fish falls below the cost of running a fishing boat

1. Aan extension of demand, a movement down along the same demand curve
2. Ba rightward shift of the whole demand curve for beef to a new position
3. Ca contraction of demand, a movement up along the same demand curve
4. Da leftward shift of the whole demand curve for beef to a new position

1. Athe price of coffee itself falls in the shops that stock it
2. Bthe quantity of coffee that farmers supply increases sharply
3. Cthe price of tea, a substitute for coffee, rises sharply
4. Dthe price of milk, a complement to coffee, rises sharply

1. Athe marginal utility of each good is the same as the other's
2. Bthe marginal utility per dollar spent is equal across both goods
3. Cthe total utility of the two goods is exactly equal in size
4. Dthe price of the first good is equal to the price of the second

1. Arequires the consumer to buy equal amounts of every good
2. Bcannot explain why a demand curve slopes downward at all
3. Cassumes satisfaction can be counted in measurable units
4. Dapplies only to goods that a household buys very rarely

1. Amoving it up along its existing long run average cost curve
2. Bshifting its whole long run average cost curve upward
3. Cleaving its long run average cost curve exactly where it is
4. Dshifting its whole long run average cost curve downward

1. ALoss of motivation among workers as the firm's workforce grows
2. BBreakdown of communication between the firm's own departments
3. CCongestion of the local roads as the industry concentrates there
4. DDifficulty in coordinating the firm's own expanding branch network

1. Aalways show up as a fall rather than a rise in the firm's unit cost
2. Bcan be removed by moving the firm to a different part of the country
3. Caffect every firm in the industry at the same moment in time
4. Darise from the firm's own size once it passes minimum efficient scale

1. Atrains its workers better than a small local competitor could
2. Bearns foreign currency by exporting at the standards buyers demand
3. Cpays corporation tax, PAYE and duties into the national revenue
4. Demploys on a scale that no small firm in the whole district could match

1. Athe firm buys inputs from small local suppliers around its plant
2. Bthe firm's scale economies are passed to consumers in the form of lower prices
3. Cprofits are repatriated and transfer pricing moves taxable income abroad
4. Dthe firm trains workers who later move to other local employers

1. Aone network avoids the waste of duplicating an expensive grid
2. Bthe state is the only body allowed by law to own a power network
3. Celectricity cannot be stored once it has been generated at a plant
4. Da single seller can charge whatever price it decides to charge

Answer this when you sit the paper.

1. Athe average profit earned across all the firms in the industry
2. Bthe minimum return needed to keep the entrepreneur in the industry
3. Cthe profit a firm earns in a normal year of ordinary trading
4. Dthe profit remaining after every other expense has been settled

1. Aconsumers refuse to buy from a firm they know is earning too much
2. Bthe government taxes any profit above the industry's normal level
3. Cnew firms enter, supply rises and price falls to minimum average cost
4. Dthe existing firms agree among themselves to hold the market price down

1. Athe number of rivals already selling in the same market as it
2. Bthe threat of entry, which needs exit to be possible without loss
3. Cthe level of profit the industry earned in the preceding year
4. Dthe price its nearest competitor has decided to charge this season

1. Abarriers to entry must exist in that industry even if unobserved
2. Bthe industry cannot be described as perfectly competitive at all
3. Cabnormal profit can arise from efficiency rather than from a barrier
4. Dthe firm is charging a price above the one its rivals are charging

1. ABrand loyalty built up by many years of heavy advertising
2. BOwnership of the only deposit of the ore the industry needs
3. CEconomies of scale so large that one firm supplies the market
4. DA patent that reserves the use of a process to one firm

1. Aprotected by artificial barriers, since it is a transfer and a loss
2. Bearned in the short run before new firms have had time to enter
3. Cearned by a firm producing at a lower cost than its rivals
4. Dearned by a firm that has innovated well ahead of its competitors today

Answer this when you sit the paper.

1. Athe rate the central bank announces as its policy rate each quarter
2. Bthe rate of inflation the public expects over the coming year
3. Cthe supply of savings meeting the demand for funds to invest
4. Dthe demand for money set against the stock of money in existence

1. Ashifts the demand curve right, raising the rate and crowding out firms
2. Bshifts the demand curve left, so the rate of interest falls sharply
3. Cleaves both curves where they are, since the state is not a private borrower
4. Dshifts the supply curve right, so the rate of interest falls sharply

1. Aa lower rate of interest and a larger quantity of funds lent
2. Ban unchanged rate of interest and an unchanged quantity of funds
3. Ca higher rate of interest and a smaller quantity of funds lent
4. Da lower rate of interest and a smaller quantity of funds lent

1. Arates are administered and real rates are frequently negative
2. Bthe country has no commercial banks able to take in deposits
3. Cfirms in the country never borrow to finance any investment
4. Dthe theory was written for an economy with no government sector

1. Apriced correctly, since the rate already reflects all of the risk involved
2. Bsupplied perfectly elastically at whatever rate the bank has set
3. Crationed by quantity, because collateral rather than price clears it
4. Ddetermined by the marginal efficiency of capital in that industry

1. Athe age structure of the population and its habits of thrift
2. Bthe level of income, so the supply curve moves whenever income moves
3. Cthe rate of interest a commercial bank offers on a term deposit account
4. Dthe amount of currency the central bank has chosen to issue

1. Asocial costs and benefits, including those falling on third parties
2. Bonly those costs and benefits that fall on the owner of the project itself
3. Cthe money the government must borrow to build the project itself
4. Dthe project's revenue at the price the market currently charges

1. Aits net present value is positive once all effects are discounted
2. Bits total benefits over the whole life exceed its first year cost
3. Cit earns a commercial rate of return on the capital employed
4. Dit costs less to build than any of the alternatives considered

1. Athe analyst wishes to raise the project's net present value
2. Bno market price exists, or the market price is badly distorted
3. Cthe project's output will be sold at a price fixed by the state
4. Dthe contractor has quoted a price higher than the budget allows

1. Aoutput is sold to households rather than to industrial buyers
2. Bconstruction cost is met entirely out of a foreign currency loan
3. Cbenefits arrive far in the future, as with a dam or a forest
4. Dcosts and benefits both occur within the first year of its life

1. Athe poorest households gain more from the project than the rich
2. Bno household will be made worse off by building the project
3. Cthe project's benefits are shared equally among all households
4. Dthe gainers could compensate the losers, not that they will

1. Acost effectiveness analysis, comparing cost per unit of outcome
2. Bcost benefit analysis with a much higher discount rate applied
3. Ca payback calculation based on the programme's first year cost
4. Da commercial appraisal of the revenue the programme will earn

1. Ahalf a tonne of tobacco
2. Bone tonne of tobacco
3. Ctwo tonnes of tobacco
4. Dforty tonnes of tobacco

1. Abetween 1 and 2 tonnes of tobacco per machine
2. Bbetween 0.5 and 1.5 tonnes of tobacco per machine
3. Cbetween 0 and 1 tonne of tobacco per machine
4. Dbetween 2 and 3 tonnes of tobacco per machine

1. Aone country is absolutely more efficient at producing both goods
2. Bboth countries produce exactly the same quantity of each good
3. Cone country has no natural resources of any kind within its borders
4. Dthe two countries have identical opportunity cost ratios in both

1. Adifferences in the opportunity cost of producing cars in each
2. Bthe absolute advantage one of the countries holds in car making
3. Cdifferences in the relative endowment of capital and labour
4. Dscale economies and the consumer's taste for product variety

1. Araise the country's manufacturing output faster than its farming
2. Bguarantee a permanent surplus on the country's current account
3. Cremove all price volatility from the country's export earnings
4. Dlock a country into exports whose terms of trade tend to worsen

1. Athe tariff each country charges on the other's manufactured goods
2. Bthe factor endowments each of the two countries happens to hold
3. Cthe exchange rate between the two countries' national currencies
4. Deconomic size and the distance separating the two countries

1. Awages plus rent plus interest plus profit plus transfer payments
2. BC plus I plus G plus exports minus imports
3. Cthe value of every good produced at each stage of its manufacture
4. DC plus I plus G plus exports plus imports

1. Areceived by households that are no longer in paid employment
2. Btoo small a sum to affect the national total in any way
3. Ca transfer payment, with no output produced in return for it
4. Dpaid out of taxation rather than out of a company's profits

1. Adeducting depreciation of the country's stock of capital goods
2. Badding net property income earned by residents from abroad
3. Cdeducting indirect taxes and then adding back any subsidies
4. Dadding the value of goods households produce for their own use

1. Areal output, since firms can readily hire the workers they need
2. Bthe country's exports, which rise as domestic demand increases
3. Cthe price level, since supply cannot expand much any further
4. Dthe level of unemployment, which falls sharply towards zero

1. Athe marginal propensity to import is large in the economy
2. Bthe marginal propensity to consume is large in the economy
3. Cthe spending is directed at roads, power and irrigation works
4. Dthe economy has a great deal of unused productive capacity

1. Araise the price level, as the money supply grows faster than output
2. Breduce the country's stock of external debt and its future servicing
3. Craise interest rates and crowd private investment out of the market
4. Dleave aggregate demand unchanged because of the balanced budget rule

1. Alends to any household that no commercial bank will lend to
2. Bguarantees every deposit held in every commercial bank in full
3. Cbuys the assets of a bank that has already become insolvent
4. Dlends to a solvent bank that is temporarily short of liquidity

1. Aaudits every government department's accounts at the end of the year
2. Bdecides how much the government may spend in each financial year
3. Cmanages the public debt by issuing and redeeming Treasury Bills
4. Dcollects the income tax due from every firm in the country

1. Aadd to banks' reserves, so lending can expand by a large multiple
2. Braise cash for the government to spend on its own programmes
3. Clower the rate of interest that banks charge on their lending
4. Dcut banks' reserves, so deposits contract by a multiple of the sale

1. Aone divided by the reserve ratio, so a higher ratio cuts it
2. Bthe reserve ratio itself, so a higher ratio raises it as well
3. Cone minus the reserve ratio, so a higher ratio raises lending
4. Done divided by the rate of interest banks charge on a loan

1. Athe central bank is not permitted to change the rate more than yearly
2. Bbanks that never need to borrow from the central bank ignore its rate
3. Ca higher rate would raise the government's own cost of borrowing
4. Dbanks pass the higher rate straight on to their depositors instead

1. Athe central bank is required to finance the government's deficit
2. Btax revenue is collected in foreign currency rather than local
3. Cthe government spends more on wages than on capital projects
4. Dthe government sets the exchange rate rather than the central bank

Answer this when you sit the paper.

1. Athe number of outlets in which the item is on sale
2. Bhow much the item's price has risen since the base year
3. Cthe price of the item in the base year that was chosen
4. Dits share of the spending of a typical household

1. Aunderstate the rate of price increase in the base year itself
2. Boverstate the rise in the cost of living faced by households
3. Cunderstate the rise in the cost of living faced by households
4. Dmeasure the cost of living accurately in every period

1. Athe base year price of a new model is never actually known
2. Ba dearer handset may be a much better handset than before
3. Ca household cannot judge the quality of what it is buying
4. Dquality falls in every year in which prices are rising fast

1. Aa year at least ten years before the index is to be published
2. Ba year in which the country's national income was at its highest
3. Ca normal year, free of drought, war or unusual price shocks
4. Dthe most recent year for which any price data at all exist

1. Athe government to households holding its domestic debt stock
2. Bthe owners of land and property to those on fixed money incomes
3. Csavers and pensioners to borrowers and holders of real assets
4. Dborrowers to lenders, because the real value of a debt rises

1. Arising prices make it easier for the government to raise more tax revenue
2. Bfalling prices reduce the profits earned by firms in the export sector
3. Cfalling prices lead households to postpone purchases and raise real debt
4. Drising prices always raise the real wages of workers in every industry

Answer this when you sit the paper.

1. Aselling foreign reserves and buying up its own currency
2. Bbuying foreign currency and adding to its official reserves
3. Clowering interest rates to encourage capital to flow inward
4. Dprinting more of its own currency and putting it into circulation

1. Athe country's stock of gold and foreign exchange reserves
2. Bthe rate of inflation in the country the currency is pegged to
3. Cthe demand for and supply of the currency in the market
4. Dthe parity the monetary authority has announced and defends

1. Aban residents from holding any foreign currency in a bank account
2. Bintervene occasionally to smooth volatility without defending a parity
3. Cannounce a fixed parity and undertake to hold the rate at it in every market
4. Dleave the rate entirely to the market at every moment of trading

1. Aa pegged currency cannot be used to buy anything at all from abroad
2. Bexpanding money faster than the anchor country drains the reserves
3. Cthe peg makes every imported good permanently cheaper than a local one
4. Dexporters must lower their prices to remain competitive abroad

1. Acan no longer export any of its goods to the anchor country
2. Bmust hold all of its foreign reserves in the form of gold bars
3. Cmust accept a higher rate of inflation than its trading partners
4. Dloses monetary independence, as rates must defend the parity

1. Aa rise in export earnings and a steady build up of the official reserves
2. Ba fall in imports as they become dearer for local households
3. Cuncompetitive exports, cheap imports and a parallel market opening
4. Dan immediate fall in the country's domestic rate of inflation

1. AA budget surplus in every financial year without exception
2. BAn equal money income for every household in the country
3. CThe largest possible number of registered firms in the economy
4. DFull employment of the country's labour force

1. Athe exchange rate is fixed by law rather than left to the market
2. Bpass through from the rate to domestic prices is fast and near complete
3. Cthe country's exports are sold mainly within the region itself
4. Dthe country holds far larger foreign reserves than most large economies do

1. Ainstability is a symptom of deficits and weak exports, not a cause
2. Bno country in the world has ever held its exchange rate steady
3. Ca stable rate raises the local currency cost of servicing foreign debt
4. Da stable rate makes it harder for exporters to plan their contracts

1. Aa large increase in government spending on public sector wages
2. Bthe removal of every tariff and quota on imported manufactures
3. Clow interest rates, which cause the currency to depreciate further
4. Dhigh interest rates and tight money, which cut investment and jobs

1. Aa legal ceiling on the wage increase any employer may award
2. Ban announced exchange rate target defended with the country's reserves
3. Cdirect controls on the prices charged in shops and by firms
4. Dan inflation target, with the exchange rate left to fundamentals

1. Athe number of foreign owned banks licensed to operate in the country
2. Bthe size of the country's population and its rate of growth
3. Ca law making it an offence to trade at any other rate
4. Dfiscal discipline, export growth and the rebuilding of confidence