Download Revision questions for End of Term, Dec 2015

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Revision questions for End of Term, Dec 2015
Below are the first batch of questions I gave you for revision (1 to 31) together with
additional questions covering Chapters 13 – 19 on govt intervention and market failure.
You will NOT have Ch’s 20 – 21 on the test.
Know the basic answers to these questions and you will pass muster.
Ch’s 1 – 12 (31 questions)
1. Explain, using an example...why correlation is NOT causality.
2. Why is total utility not the same as marginal utility?
3. Explain, with the aid of a suitable diagram, why an economy might not be 100%
allocatively efficient.
4. Explain why the basic economic problem results in us having to make choices.
5. Why is the issue of scarcity so central to our basic economic problem?
6. Using an appropriate diagram, explain the difference between ‘de facto’ and
‘potential’ growth.
7. Explain ‘positive’ statements using an example.
8. Using an index, ‘translate’ China’s growth from a GDP of RMB120 bn to RMB130
bn and USA’s from GDP of USD50 bn to USD52 bn. Which has grown faster?
9. Outline the differences between the market for potatoes and the market for
airline travel.
10. Explain the difference between a monopoly and monopolistic competition.
11. Explain…exemplify the law of demand…law of supply
12. Explain, using a diag, the difference in demand/supply caused by a change in
price…and a change in a non-P variable affecting S/D.
13. How will an increase in the price of sand….affect the price of computers. Use
diags to explain.
14. Explain the concept of ‘mkt equilibrium’ and why markets ultimately move
towards ‘mkt clearing’ price.
15. ***Explain…how the P mechanism allocates resources in a PCM.
16. Evaluate the outcome on the market for cars of an increase in the tax on
gasoline.
17. Explain, using a diagram, how an increase in the price of water would affect the
car-wash market.
18. Evaluate the outcome of ‘administered prices’ being set below market
equilibrium price. Illustrate your answer with a diagram.
19. Explain ‘suboptimal resource allocation’ using the concepts of CS and PS.
20. Explain, using a diagram for support, why one might say that “…no matter what
you pay for a good, if you buy it, you are getting a ‘good deal’…”
21. Why might DW loss arise due to a tax? Underpin your answer with a diagram.
22. Explain, using a diagr, why we tax cigarettes rather than orange juice.
23. HL: Explain why consumers rather than producers would pay more of a new
expenditure tax on alcohol.
24. Using a diagram for support, explain the link between PED and TR.
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25. A businessperson believes that if the market price decreases by 50% he/she will
double his/her revenue. Using a diagram for support, explain why this may or
may not happen.
26. Evaluate the use of an indirect tax on alcohol to decrease consumption on the
market for alcohol.
27. How might government use an expenditure tax on Good X in order to decrease
the demand for Good Y? Use at least one diagram in your answer.
28. Explain, using a diagram, why increased incomes might have different effects on
the market for basic necessities than on the market for luxury goods.
29. Explain why SR prices for commodities or primary goods would fluctuate more
than the price of secondary goods. Use a diagram for support.
30. Explain, using core economic terms and a diagram, why the exchange rate for
the RMB is clearly linked to Chinese exports.
31. Explain, using core economic terms and a diagram, how an increase in the
demand for Chinese exports might affect the exchange rate for the RMB.
Ch’s 13 – 19 (17 questions)
1. Explain how government might intervene on a market to keep the price above
market equilibrium (market clearing).
2. Evaluate the possible effects of govt intervention to keep a price above market
equilibrium.
3. Explain how an expenditure tax might affect stakeholders.
4. Explain the difference between a unit tax on expenditure and an ad valorem tax.
5. Explain why a tax might lead to sub-optimal resource allocation.
6. Explain why producers rather than consumers might benefit the most from a
subsidy.
7. Evaluate the effects of government subsidies on wheat.
8. Explain why a maximum price on a good might negatively affect consumers.
9. Evaluate the implementation of a minimum price on agricultural goods.
10. Explain, using an appropriate diagram, why ‘overprovision’ might be a form of
market failure.
11. Explain why the existence of externalities means sub-optimal resource
allocation.
12. Distinguish between merit goods, demerit goods and public goods.
13. Evaluate the view that governments should always intervene on the market for
tobacco and alcohol.
14. Evaluate ways government might decrease the negative societal effects of inner
city traffic.
15. Evaluate the use of taxes to decrease the negative effects on society associated
with smoking.
16. Evaluate the use of market forces as a way to decrease the negative
externalities associated with pollution.
17. Explain why governments often provide public and merit goods.