Welcome to Economics Online - AS Micro-economics

1) Stating that taxes should be raised to help the poor is an example of:
a) A positive economic statement
b) A normative economic statement
c) A testable fact
d) An objective economic statement

2) A PPF can indicate all of the following, except:
a) The effect of an increase in the use of new technology
b) The opportunity cost of increasing production of one good
c) Consumer preferences
d) Economic growth

3) A demand curve can shift to the right by all of the following, except:
a) A fall in price of the good
b) A fall in the price of a complement
c) A rise in the price of a substitute
d) An increased preference for the good

4) A supply curve can shift to the left due to all of the following, except:
a An increase in VAT
b) A reduced subsidy
c) An increase in wages
d) An increase in the use of new technology

5) The price of tomatoes is currently 50p per kilo, and a shop currently sells 1000 kilos per week. It then reduces price to 40p and finds that it now sells 1400 kilos per week. Its PED is:
a) - 0.5
b) + 0.5
c) - 2.0
d) + 2.0

6) The price of tomatoes falls from 50p to 40p, and tomato growers supply the same amount to shops. The PES is: 
a) Zero
b) Infinite
c) Equal to one
d) Impossible to calculate

7) When the price of good X rises the demand for good Y also rises. X and Y are:
a) Inferior goods
b) Complements
c) Substitutes
d) Normal goods

8) When the price of good A rises the demand for good B falls, A and B are:
a) Inferior goods
b) Complements
c) Substitutes
d) Normal goods

9) YED for an inferior good is always:
a) Negative
b) Positive
c) > 1
d) < 1

10) The effect of a fall in the price of a normal good is to:
a) Increase producer surplus
b) Increase consumer surplus
c) Decrease consumer surplus
d) Reduce demand for a complementary good

11) If new firms enter a market, but demand stays the same, it can be predicted that:
a) Consumer surplus will fall
b) Prices are likely to fall
c) There will be reduced economic welfare
d) Prices are likely to rise

12) If an indirect tax is imposed on a good which has a very elastic PED, the burden, or incidence, of the tax is:
a) Mainly on the consumer
b) Mainly on the producer
c) Equally shared
d) All on the producer

13) The effect of a subsidy is to:
a) Shift the supply curve downwards and to the right
b) Shift the supply curve upwards and to the left
c) Reduce demand
d) Reduce consumer surplus

14) If the government imposes a minimum price below the existing market price it will:
a) Cause supply to shift to the left
b) Cause demand to contract
c) Cause supply to contract
d) Have no effect

15) If the government imposes a maximum price below the existing market price it will:
a) Cause supply to expand
b) Cause demand to contract
c) Create a shortage
d) Create a surplus

16) A market can fail in all of the following cases, except:
a) Under-supply of public goods
b) Under-supply of merit goods
c) Not labelling foods which contain unhealthy ingredients
d) Creating incentives through the price mechanism

17) The price mechanism works mainly through:
a) Incentives and signalling
b) Taxes and subsidies
c) Minimum and maximum prices
d) Government spending and welfare benefits

18) Public goods will be under-supplied in a market economy because public goods exhibit:
a) Reject-ability
b) Diminish-ability
c) Non-excludability
d) Zero opportunity cost

19) Road congestion can be reduced by all of the following, except:
a) Subsidising car production
b) Taxing car ownership
c) Pricing road-space
d) Improving public transport

20) Carbon trading helps reduce carbon emissions mainly because:
a) Low polluters buy excess permits to pollute
b) High polluters are fined by the carbon regulator
c) Information failure is increased
d) External costs are internalised by the polluter
21) All of the following could reduce waste, except:
a) Introducing a landfill tax
b) Providing less information
c) Taxing rubbish bags
d) Reducing packaging on products

22) It is reasonable to expect students or their families to contribute to their tuition fees at university because:
a) It will provide the universities with more revenue
b) The State should not contribute to their fees
c) The cost of education continuously rises
d) The average university student derives private benefit

23) Government intervention to correct a market failure will be inefficient if:
a) The cost of implementation is greater than the benefit
b) It causes unemployment
c) Businesses have to close
d) Anyone loses from their actions

24) Highly unstable agricultural prices are often caused by:
a) Governments buying up stock
b) The price mechanism working effectively
c) Supply shocks like diseases
d) Highly elastic demand and supply

25) Buffer stocks can be criticised for all of the following, except:
a) They need a good harvest to start
b) Not all goods can be stored
c) They cost money to manage
d) They can help stabilise prices