Microeconomics June 2010

Please choose one of the following options for each question:

1. Government intervention in a free market economy is most likely to improve the allocation of resources if

2. Which one of the following is the most likely determinant of the elasticity of supply of good X?

3. A good is in composite demand when

4. Which one of the following is supported by the data?

5. Which one of the following is most likely to lead to improvements in labour productivity?

6. The state provides some merit goods free of charge because

7. The increase in price from P1 to P2 is most likely to be a result of

8. Which one of the following is a factor of production?

9. All other things being equal, which one of the above companies is most likely to possess the greatest market power?

10. Which one of the following is most likely to be a source of monopoly power?

11. Government failure is most likely to arise directly from

12. The price of cocoa more than doubled over an 18-month period as a result of increased buying on world markets. Such a development in the cocoa market could be shown on a supply and demand diagram by

13. In the absence of government intervention in this market, a misallocation of resources is likely to occur because

14. The role of prices in a market economy is to

15. Which one of the following combinations, A, B, C or D, is true for a normal good which has a downward sloping demand curve?

16. A shift to the left of a country’s production possibility frontier reflects

17. The shift of the supply curve from S1 to S2 is most likely to have resulted from

18. Diseconomies of scale might arise because

19. The diagram below shows a production possibility frontier for an economy. Which point, A, B, C or D, corresponds to a situation whereby the economy could increase production of consumer goods without forgoing the production of capital goods?

20. The main economic objective of firms in a market economy is most likely to be the

21. The price elasticity of demand for a good made by a firm is –0.6. If the firm raises the price of the good, its revenues will

22. Which one of the projects should the government adopt if it wishes to maximise the economic welfare of the whole community?

23. The demand curve for the merit good shifts from D1 to D2, raising the market price from P1 to P2. To reduce the price back to P1, the government could introduce a

24. Which one of the following is a source of market failure?

25. The government is concerned that the economy is not achieving productive efficiency. To achieve productive efficiency in the economy, the government should introduce policies that