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4 Micro-economic factors 50 mins<br />
4.1 In a free market economy, the price mechanism:<br />
A Aids government control<br />
B Allocates resources<br />
C Measures national wealth (1 mark)<br />
4.2 The supply curve of a firm operating in a competitive market is its<br />
A Marginal cost curve above the average variable cost curve<br />
B Marginal cost curve above the average total cost curve<br />
C Average total cost curve beyond the point where the marginal cost curve cuts it from below<br />
D Average variable cost curve below the average revenue curve (2 marks)<br />
4.3 A legal minimum price is set which is below the equilibrium price. What will be the impact of this?<br />
A Excess of demand over supply<br />
B Excess of supply over demand<br />
C Nothing (1 mark)<br />
QUESTIONS<br />
4.4 Which one of the following would cause the supply curve for a good to shift to the right (outwards from<br />
the origin)?<br />
A A fall in the price of the good<br />
B An increase in the demand for the good<br />
C A fall in production costs of the good<br />
D The imposition of a minimum price (2 marks)<br />
4.5 When the price of a good is held above the equilibrium price, the result will be<br />
A Excess demand<br />
B A shortage of the good<br />
C A surplus of the good (1 mark)<br />
4.6 Which one of the following would not lead directly to a shift in the demand curve for overseas holidays?<br />
A An advertising campaign by holiday tour operators<br />
B A fall in the disposable incomes of consumers<br />
C A rise in the price of domestic holidays<br />
D A rise in the price of overseas holidays (2 marks)<br />
4.7 Which of the following is likely to lead to a fall in the price of good Q which is a normal good?<br />
A A rise in the price of good P, a substitute for good Q<br />
B A fall in the level of household incomes generally<br />
C A fall in the price of good T, a complement to good Q<br />
D A belief that the price of good Q is likely to double in the next 3 months (2 marks)<br />
4.8 According to the theory of the firm, which of the following statements describes an oligopoly?<br />
A<br />
B<br />
C<br />
D<br />
There are no barriers to entry into or exit from the market<br />
There is only one producer in the market<br />
There are four producers exerting considerable influence in the market<br />
There are many producers but they each use product differentiation to distinguish themselves<br />
from each other<br />
(2 marks)<br />
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