Economics Quiz

Draw a perfectly elastic demand curve

• Horizontal

• Positive

• Vertical

• Steep

What is an external cost?

• A cost to a third part outside the transaction

• A legal price floor below which the good cannot be sold

• The portion of government revenue arising from a tax which comes from consumer surplus

• Where demand is greater than supply

Explain 2 causes of an inward shift in the PPF

• Welfare lost from the units which are no longer consumed

• A resource for which the stock level can be replenished naturally over time

• A resource for which the stock level cannot be replenished naturally over time

• Resource depletion (eg natural disaster, war) or resource depreciation (skills atrophy after long-term unemployment, lack of investment)

Explain 2 disadvantages of state provision.

What are the two features of public goods?

• Land, Labour, Capital, Enterprise

• Non-excludability and Non-rivalry

• Specific and Ad Valorem

• A Study of Human Behaviour and Interaction

What values of XED would constitute a substitute?

• Positive

• Negative

• Vertical

• Horizontal

What is the reward for enterprise?

• profit

• good faith

• rent

• wages

What is meant by 'price inelastic supply'?

• Number of subs, proportion of income, degree of luxury/necessity, addictiveness, time period, definition

• Give 2 causes of government failure

• Give 3 factors which influence the PED of a product

• Give 3 conditions (shifters) of supply?

Why is PES more elastic in the long run?

• Politically popular, works with the price mechanism

• Expense, adverse consequences, crowding out, government inefficiency

• Because firms have time to increase capacity

• Utility

What is the difference between consumer goods and capital goods?

• Consumer goods provide utility directly, capital goods do not

• Actual growth is an increase in output, potential growth is an increase in productive capacity

• Specific taxes add a fixed amount, ad valorem taxes add a percentage

• Direct taxes are levied on income, indirect taxes are levied on expenditure.