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6. Which one of the following statements referring to the price mechanism is correct?

  • High prices can ration demand for scare goods and services.
  • Films are unable to influence the market demand for their products.
  • Producers and consumers take account of externalities.
  • High prices are always associated with hight profits for producers.

7. Choice is an important element in the basic economic problem because

  • incomes are distributed unequally.
  • high demand leads to high prices.
  • limited resources have alternative uses.
  • wants increase with income.

8. Which one of the following is NOT an example of the use of government fiscal policy? A change in

  • the size of the budget deficit.
  • a tax imposed on imports of goods and services.
  • interest rates.
  • government spending on National Health service.

9. What are goods provided by the government for people who are deemed to need them called?

  • Negative externalities.
  • Demerit goods.
  • Merit goods.
  • Positive externalities.

10. In a market based economy the scarcity of factors of production means that

  • inflation is inevitable.
  • the economy cannot achieve economics growth every year.
  • consumers must inevitably consider the opportunity cost of their choices.
  • the economy cannot produce on its production possibility frontier.

11. Which one of the following is a positive economics statement?

  • The extent of income inequality in the United Kingdom has increased over the last 30 years.
  • The national minimum wage rate should be increased to £5 per hour for all workers.
  • Nurses working the National Health service should be on a maximum working week of 50 hours per week.
  • The rate of unemployment is too high.

12. The level of capital investment spending by private sector businesses tends to vary ______ with interest rates and ______ with business confidence

  • negatively, positively
  • positively, negatively
  • positively, positively
  • negatively, negatively

13. An increase in imports of consumer goods is most likely to have been caused by a

  • rise in household disposable income.
  • rise in direct taxation.
  • fall in the exchange rate.
  • rise in household saving.

14. What are the pure public goods?

  • Street lights, Flood defences and Lighthouses.
  • Education and Health care.
  • Merit and Demerit goods.
  • Capital goods.

15. A decision by the government to introduce and expansionary fiscal policy would be less likely to succeed in reducing unemployment if a country had

  • a high level of cyclical unemployment and spare capacity.
  • a high marginal propensity to import.
  • a high level of business and consumer confidence.
  • a fixed exchange rate.

16. Which one of the following is a measure of productivity?

  • the annual percentage increase in production.
  • output divided by employment.
  • the quantity of capital equipment used divided by its price.
  • the total amount of output produced each month.

17. The price elasticity of supply of a product will depend on

  • the extent to which the product is advertised.
  • the availability of factors of production.
  • whether the product is a luxury or a necessity.
  • the incomes of consumers.

18. Non- excludability is where:

  • people can stop others from using the good.
  • no one can be excluded from the benefiting of a good.
  • people can be excluded from benefiting of a good.
  • the free market left alone fails to deliver an efficient allocation of resources.

19. economics is primarily concerned with the study of

  • allocating scare resources to satisfy unlimited wants.
  • determining how the government should allocate resources.
  • how to make more effective use of resources through reducing wants.
  • how new wants and economic resources are produced.

20. If the short run aggregate supply curve is perfectly elastic, an increase in aggregate demand brought about by a rise in demand for exports is most likely to cause an increase in

  • the level of consumer debt.
  • the rate of price inflation.
  • the level of real national output.
  • the government budget deficit.