Economics- Chapter 1

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A student decides to stay in her room to do some work rather than going to the cinema. What is the opportunity cost of her decision?
A the enjoyment she would have derived from a visit to the cinema
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What would prevent a firm gaining the maximum benefit from the division of labour?
high production costs
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What is the most abundant form of money (measured by value) in a developed economy?
bank deposits
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A financial investigation by a private firm finds that a new railway line would not be profitable. A cost-benefit analysis finds that the line is worth constructing.what could explain this difference?
There are external benefits not included in the financial investigation
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1 The steel required for the construction of a new car-assembly plant in a fully employed economy is obtained by increasing the output of the domestic steel industry. What is the opportunity cost of producing the steel?
the alternative benefits forgone by diverting additional resources to steel manufacture
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What is meant by the ceteris paribus assumption?
an assumption that other factors are held constant
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What explains why the social cost of developing tourism on a remote island is greater than the private cost?
the harm to the environment caused by the tourists
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What would not be included in a cost-benefit analysis of a proposed new university?
the future staffing costs of other universities
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What will cause an immediate rise in the size of a country’s labour force?
an increase in the age of retirement
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A consumer allocates his expenditure over time. What would cause an increase in the opportunity cost of current consumption to the consumer?
an increase in interest rates
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A government proposes to introduce a road congestion charge which would require private motorists to pay a toll for road use. Which statement relating to the proposal is normative?
The proposal will be unfair to motorists who have no alternative means of transport.
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What would encourage the growth of the international division of labour?
an improvement in transport systems
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In which situation are there definitely positive externalities?
Social benefits exceed private benefits.
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Correct use of cost-benefit analysis should produce an outcome where
marginal social benefits equal marginal social costs.
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A lighthouse is considered to be a public good. Which characteristic contributes to this?
It is non-excludable.
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Card 2

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What would prevent a firm gaining the maximum benefit from the division of labour?

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high production costs

Card 3

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What is the most abundant form of money (measured by value) in a developed economy?

Back

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Card 4

Front

A financial investigation by a private firm finds that a new railway line would not be profitable. A cost-benefit analysis finds that the line is worth constructing.what could explain this difference?

Back

Preview of the front of card 4

Card 5

Front

1 The steel required for the construction of a new car-assembly plant in a fully employed economy is obtained by increasing the output of the domestic steel industry. What is the opportunity cost of producing the steel?

Back

Preview of the front of card 5
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