NEC preparation 8

The social cost of a good is

• its benefit to the people who buy and consume it.

• its total benefit to everyone in society.

• its cost to everyone in the society that occurs in addition to the private costs.

• the cost paid by the firm that produces and sells it.

 The private benefit of consuming a good is

• its benefit to the people who buy and consume it.

• its total benefit to everyone in the society.

• its cost to everyone in the society.

• the cost paid by the firm that produces and sells it.

The difference between accounting profit and economic profit relates to

• the manner in which revenues are defined.

• how total revenue is calculated.

• the manner in which costs are defined.

• the price of the good in the market.

Monopolies use their market power to

• charge prices that equal minimum average total cost.

• attain normal profits in the long run.

• restrict output and increase price.

• dump excess supplies of their product on the market.

Microeconomics analyses choices in various situations.

Which area of economic study does it not include?

• costs and revenues of a firm

• individual consumer behaviour

• policies for economic growth

• wages for different occupations

What would most likely cause a person to increase their savings?

• a decision to plan for retirement

• a fall in income

• a fall in interest rates

• a reduction in tax-free saving schemes

The diagram shows a shift in a country’s production possibility curve (PPC).

What would cause the shift from X to Y?

• a fall in the unemployment rate

• a fall in consumer demand

• a rise in the rate of inflation

• a rise in the size of the labour force

A farmer decides to grow potatoes instead of wheat.

What is the opportunity cost of growing the potatoes?

• the output of wheat

• the price of seed potatoes

• the profit from growing potatoes

• the time spent preparing the potato field

What is the function of the price mechanism in a market economy?

• allocating resources and guiding choices

• allowing governments to provide price stability

• enabling markets to operate fairly

• preventing competitors from entering a market

Sizable economic profits can persist over time under monopoly if the monopolist

• produces that output where average total cost is at a maximum.

• is protected by barriers to entry.

• operates as a price taker rather than a price maker.

• realizes revenues that exceed variable costs.