mss, mba, b.ed economics, business studies, bangladesh

Mohammad Ziaul Alam, MSS, MBA, B.ed; Teacher: Economics, Business Studies, Bangladesh Studies Cell: 01712524004, 01972524004; Mail: [email protected], [email protected], zia-academy.com

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For 16-18, Economics, Paper-4

1. Basic economic ideas and resource allocation - Efficient

resource allocation • Externalities and market failure • Social costs and benefits; cost-benefit analysis

W2002

1. 3 (a) Explain what is meant by productive and allocative efficiency. [10]

(b) ‘A firm should be encouraged to maximise profits because this makes it efficient.’ Discuss whether this

argument is true for a firm operating in an imperfect market. [15]

2. 4 (a) Explain, with examples, the meaning of the terms public good and merit good. [8]

(b) Discuss how a government might increase the provision of public and merit goods. [12]

s2003

3. 2 It was reported in June 2001 that Vietnam was ‘on the verge of liberalising state control of the arts by

allowing privately run museums’. (a) Explain the sources of market failure. [12]

(b) In the light of the existence of market failure, discuss whether the operation of museums can be left to the

private sector. [13]

W2003

4. 2 In 2001 in the UK a widespread disease among cattle and sheep closed off large parts of the countryside.

The government decided to give aid to agriculture but not to tourism, both of which were badly affected.

Comment on the government’s actions in terms of allocative efficiency and equity. [25]

S2004

5. 5 In many cities the level of traffic congestion is causing increased concern.

(a) Discuss whether the existence of traffic congestion in cities might be considered as evidence of market

failure. [12]

(b) Analyse what might be done when market failure does exist. [13]

W2004

6. 2 Discuss whether economic efficiency as described in text books is likely to be able to be achieved in

practice. [25]

7. 4 (a) Explain the meaning of ‘public good’ and ‘private good’. [8]

(b) Discuss whether economic actions by individuals always result in a net benefit to society. [12]

w2005

8. 2 The French government stated that it was keen to achieve economic efficiency through policies that

encouraged a free market. Despite this, in 2003, it bought 30% of a private French industrial group, which was

facing bankruptcy. The company is one of France’s major engineering groups and employs over 110 000

people.

(a) Explain what is meant by efficient resource allocation in a free market. [10]

(b) Would you agree that in some circumstances it is best to accept decisions such as that of the French

government and abandon the search for economic efficiency through the free market? [15]

9. 2 (a) Explain the effects of externalities on the allocation of resources. [8]

(b) Discuss the use of indirect taxes and subsidies by governments to deal with externalities. [12]

s2005

10. 6 Discuss the assertion that the market system is not able to allocate resources efficiently. [25]

S2006

11. 3 (a) Explain, with examples, the difference between a demerit good and a merit good. [8]

(b) Discuss two methods that a government might use to influence the consumption of demerit goods. [12]

12. 2.‘Governments, unlike the private sector, can create some of the necessary conditions for the efficient

allocation of resources. It is, therefore, best if there is as much government involvement in the economy as

possible.’ Discuss whether you agree with this opinion. [25]

W2006

13.2 (a) Explain what is meant by the term ‘economic efficiency’. [10]

(b) Does the price mechanism allocate scarce resources efficiently? [15]

S2008

14. 2 The government in Namibia stated that electricity prices should cover cost and should also be based on the

principle of allocative efficiency. Discuss whether this approach to pricing can be supported in theory. [25]

W2008

15. 2 Economic analysis of resource allocation assumes consumers are rational. Where advertising exists, this

analysis is of little value. Do you agree with this argument? [25]

16. 3 (a) Explain the market failure which arises from the characteristics of public goods. [8]


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(b) Discuss whether the use of cost-benefit analysis helps to improve economic decision making. [12]

S2009

17. 7 A World Bank report in 2007 commented on the continuing need for major spending worldwide on

infrastructure on everything from roads and railways to water and electricity generation.

a. Explain the effect on national income when there is an increase in spending on infrastructure. [10]

b. Discuss whether an efficient allocation of resources can be obtained only if large-scale investment is

undertaken by the public sector rather than the private sector. [15]

18. 3 (a) Explain, with the aid of a diagram, how consumer surplus will be affected by the introduction of an

indirect tax. [8]

(b) Discuss the advantages and disadvantages of using indirect taxes to deal with the negative externalities

associated with some products. [12]

W2009

19. 3 (a) Explain why a lighthouse is often given as an example of a public good while a light bulb is not. [8]

(b) Discuss whether it is likely that the private costs and the social costs of production would be identical. [12]

W2010

20. 2 In 2009 there were huge fires in Australia which destroyed much property and countryside.The government

promised to allocate a large amount of money and resources to help with the restoration of the area.

a. With the help of diagrams explain what is meant by efficiency in the use of resources. [12]

b. Discuss the economic implications of the government’s approach to the situation. [13]

S2011

21. 2 The use of cars causes market failure. To achieve an efficient use of resources it would be better if

governments intervened to affect both the production and the use of cars. Explain the meaning of the terms

‘market failure’ and ‘the efficient use of resources’ and analyse whether economic theory can be used to

support this argument. [25]

22. 2 (a) Explain the role that a government should fulfil in a mixed economy. [8]

(b) Discuss the accuracy of the definition of public and merit goods as ‘goods that must be provided by the

government’. [12]

W2011

23. 2 (a) Explain the link between a consumer’s expenditure and the equi-marginal principle of utility.[12]

(b) Analyse what is meant by economic efficiency and assess whether efficiency is always achieved in a

market. [13]

S2012

24. 7 It is important to achieve economic efficiency in the use of resources. This can only be done if the private

sector is increased in size. Government intervention in the economy should, therefore, be minimised. To what

extent do you support this argument? [25]

S2013

25. 7 The market system is not able to allocate resources efficiently. Discuss this opinion. [25]

W2013

26. 3 (a) Use diagrams to explain the difference between merit goods and demerit goods. [8]

(b) Discuss whether it would be better if smoking were banned completely or whether it should be subject to

an indirect tax. [12]

S2014

27. 3 ‘The profitability of firms is a measure of their efficiency. The higher the profit, the greater the efficiency.

High profits should, therefore, be encouraged.’ Do you support this argument? [25]

S2015

28. 3 (a) Using examples, explain the difference between merit goods and public goods and show why it is

possible for profit to be made in the supply of one of these types of good but not the other. [8]

(b) Discuss why merit goods are undersupplied in a free market economy and consider the effectiveness of

one policy to deal with this problem. [12]

S2016

29. 2 ‘Government economic policy is based on the idea that people cannot be trusted to choose what is good for them but instead sometimes choose things that are harmful to themselves or detrimental to the environment (or both). Therefore a free market cannot allocate resources efficiently.’ Do you support this argument? [25] W2016

30. 2 It has been said that the aim in the allocation of resources should be to achieve the greatest happiness for the greatest number of people. Discuss whether economics has anything to say about the best way to maximise welfare from the use of resources. [25] M2017

S2017


3

W2017

2. The price system and the micro economy - Law of diminishing marginal utility • Indifference curves

• Budget lines • Types of cost, revenue and profit, short-run and long-run production • Different market structures

• Growth and survival of firms • Differing objectives of a firm w2002

1. 2 ‘In a free competitive market, a shortage causes price to rise, a surplus causes price to fall. In some markets

this does not happen because a minimum price is fixed by producers.’

(a) With the aid of diagrams and examples, explain why prices rise when there are shortages and fall when there

are surpluses. [10]

(b) Discuss the factors that a group of companies might consider when deciding to fix a minimum price in a

market. [15]

2. 7 (a) Explain with the aid of examples how price discrimination can operate. [12]

(b) Discuss whether price discrimination can ever be of benefit to consumers. [13]

S2003

3. 4 There are often reports in the press that company profits have not risen as much as in previous years. As a

result the company receives adverse criticism.

a. Explain what a company might do if it wished to try to increase its profits. [13]

b. Discuss what alternative objectives a company might have apart from profit maximisation. [12]

W2003

4. 4 Sony, the Japanese company, is involved in insurance and on-line banking as well as computers, electronics,

and computer games.

a. Explain why a company might wish to produce a diverse range of products rather than specialise. [10]

b. Sony is a large company that can influence the price of its products. Discuss whether imperfect market

structures which allow such companies are beneficial. [15]

s2004

5. 2 (a) Explain what is meant by the income and substitution effects of a price change and discuss why these

might be different for different types of goods. [12]

(b) Discuss whether marginal utility theory is a realistic piece of economic analysis in explaining consumer

demand. [13]

6. 3 Discuss the similarities and differences between a firm’s behaviour in perfect competition and oligopoly.

[25]

w2011

7. 2 (a) Explain the link between a consumer’s expenditure and the equi-marginal principle of utility.[12]

S2005

8. 5 Gillette, the world’s largest razor maker, announced in August 2003 that its annual profits had risen by 15%.

In the same period, its sales increased by 11% as there was increased demand for its Sensor3 and

Mach3Turbo razors and a reduction in the price of Duracell batteries, which Gillette produces. However,

Gillette faces strong competition from Energizer Holdings, which sells batteries and Schick razors. Energizer

introduced a new four-blade razor in September 2002 and increased its advertising and product promotion.

Gillette lost US market share and announced it planned to increase expenditure on marketing. Explain how

firms are said to behave in oligopolistic markets and discuss how far this is supported by the above statement.

[25]

9. 6 Discuss the assertion that the market system is not able to allocate resources efficiently. [25]

10. 7 (a) Explain two methods of calculating gross domestic product used in national income statistics.[10]

(b) How useful are national income statistics for indicating changes in living standards? [15]

W2005

11. 4 (a) With the help of diagrams distinguish between normal profit and abnormal profit. [10]

(b) Discuss whether firms always want to maximise profits and are able to do so in the way suggested by economic

theory. [15]

s2006

12. 3 The gain in happiness when someone gets an extra dollar is much smaller when the person is rich than if

they are poor. So money transferred from rich to poor raises total happiness and governments should seek to

make such transfers.

(a) Explain what is meant by the Law of Diminishing Marginal Utility and consider whether the statement above is a

correct application of it. [12]

(b)Discuss what policies a government might use in order to decrease poverty in its country. [13]

13. 4 Large organisations face no competition. There is, therefore, no choice. Small competitive businesses are a

better means of providing for consumers’ needs. Do you agree with this argument? [25]

14. 7 (a) Explain whether there is a link between the marginal revenue product of labour and the wage rate in an

occupation. [10]


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(b) The price of a firm’s product is above the average total cost. Discuss whether the firm should stop production if

its price falls. [15]

w2006

15. 3 My higher income will make me happier in the short run. In the long run I will become accustomed to it and

my happiness will return to the previous level. There is no point, therefore, in earning higher income.

(a) Explain the Law of Diminishing Marginal Utility and discuss whether it supports the idea that higher incomes

increase happiness. [12]

(b) Discuss how governments might achieve a more equal distribution of income. [13]

16. 4 In 2004 the Chinese government approved a deal with BAT (formerly British American Tobacco) to enable

them to become the first foreign manufacturer of cigarettes in China for at least 50 years. BAT said that it

would invest $1.5 million in China and that it would take about two years before the factories were running

efficiently. It is estimated that China has 300 million smokers and is the world’s most important cigarette

market.

(a) Cigarette manufacture takes place in an imperfect market. Distinguish between the imperfect markets of

monopolistic competition and oligopoly. [13]

(b) Discuss how BAT’s investment might be likely to affect its profits in the short and long run. [12]

S2008

17. 4 Large firms necessarily become monopolistic. Monopolies adopt practices that are undesirable. Therefore,

large firms should be regulated by governments. Discuss whether there is any truth in this argument. [25]

W2008

18. 3 (a) Explain how a knowledge of its long-run average costs might be useful to a profit-maximising firm. [10]

(b) Discuss whether firms always want, and are able, to maximise profits as suggested by economic theory. [15]

19. 4 In India the post is delivered partly by private courier firms and partly by the government-owned India Post.

The government is keen to increase its share of the market.

(a) Explain why a government might wish to increase its control over private firms. [10]

(b) Discuss whether an increase in government control necessarily improves efficiency in an organisation. [15]

20. 5 The economic theory of wages assumes first that there is a perfect market and secondly that the market will

reach a stable equilibrium. It therefore has little relevance to a commercial world full of change and

uncertainty. Discuss whether you agree with this opinion. [25]

S2009

21. 2 In many cities worldwide, newspaper publishers compete with each other. Some types of newspapers are

sold, but publishers also produce others that are distributed free of charge. Many people and companies pay

to advertise in the free newspapers.

(a) Explain the different ways that economists classify profits and consider whether it is possible to make a profit

from a newspaper that is distributed free. [12]

(b) Discuss how a firm might compete in a market. [13]

22. 4 Airbus, a large aircraft manufacturing company, announced in 2007 that its goal was to increase its $475

million research budget by 25 % in order to try to develop a more environmentally friendly aircraft that had

lower fuel consumption.

(a) Explain why Airbus is likely to be in an imperfect rather than a perfect market structure. [10]

(b) Economics textbooks sometimes criticise firms in imperfect competition as being against the public interest.

What does this mean, and how far does the Airbus announcement prove the textbooks wrong? [15]

w2009

23. 2 In 2007 BHP Billiton, a large mining group, made a bid to take over Rio Tinto, the world’s third largest mining

group. Such a takeover would create the largest producer of copper and aluminium in the world.

(a) Explain whether increasing its scale of production will always reduce a company’s costs. [12]

(b) BHP Billiton and Rio Tinto have monopoly powers and are mining a natural resource. Discuss why the

governments of the countries in which these companies operate might become concerned about this. [13]

24. 3 By 2007, the telecommunications business had become dominated by fewer organisations. One of them,

Cable and Wireless, announced there would be 3000 job losses. Another, Tiscali, announced 800 job losses

and BT, the UK telecoms giant, announced a £450m major investment and restructuring resulting in

thousands of job cuts. Analyse whether the above is what marginal revenue product theory predicts will

happen when a labour market becomes less competitive and large investment takes place. [25]

s2010

25. 2 In 2007 the UK Competition Commission indicated that failure in the market mechanism would result in

both winners and losers.

(a) Explain why producers are usually the winners and consumers are usually the losers when the market fails. [12]

(b) Discuss what the government might do when there are losers because the market mechanism has failed. [13]


5

26. 3 In March 2009, the government of France agreed to pay 250 million Euros to the car manufacturer Renault,

which employed 63 000 workers, on condition that it would not reduce the number of French jobs or factories.

General Motors, a US car manufacturer which employed 600 000 workers, said that it needed $2 million in

government aid to avoid bankruptcy.

(a) Describe the characteristics and likely pricing policy of the market structure in which a car manufacturer is likely

to operate. [12]

(b) Discuss whether economic theory supports the idea that governments should encourage all large organisations.

[13]

27. 5 Economic theory emphasises the idea of an equilibrium position. Discuss whether the idea of an equilibrium

is a useful and practical way of explaining the behaviour of a consumer. [25]

s2010

28. 3 (a) Explain what is meant by internal economies of scale, and analyse the link between economies of scale

and a firm’s long run average cost curve. [12]

(b) Discuss whether there is a relationship between the marginal cost curve of the firm and the supply curve of the

industry to which it belongs. [13]

29. 4 Recently, employers in some countries have employed foreign workers instead of local workers. The local

workers argue that they should have priority over foreign workers and also that more products should be

produced at home rather than being imported.

(a) Explain, with the help of a marginal revenue productivity diagram, why an employer might prefer to switch to

foreign workers. [12]

(b) Discuss whether it would be beneficial for a country to give priority to its local workers. [13]

S2011

30. 3 (a) Discuss whether demand schedules and budget line diagrams are similar in the way they represent the

effect of (i) a rise in the price of a good (ii) a rise in a consumer’s income. [12]

(b) Analyse what is meant by the equi-marginal principle of consumer demand and whether it can be linked to the

derivation of a market demand curve. [13]

31. 4 (a) Discuss whether it is always advantageous for a firm to grow in size. [12]

(b) Explain the economic theory of profit maximisation for a firm and consider whether firms are likely to follow this

theory in fixing their price and output. [13]

W2011

32. 2 (a) Explain the link between a consumer’s expenditure and the equi-marginal principle of utility. [12]

(b) Analyse what is meant by economic efficiency and assess whether efficiency is always achieved in a market.

[13]

33. 3 (a) Consider whether small firms should be encouraged in an economy. [12]

(b) Economic theory states that large firms have lower average costs than small firms. Discuss whether this

statement is necessarily true. [13]

S2012

34. 2 When buying goods not everyone buys the same standard product. There are some who want a cheap

product even though it might be of poor quality, while there are those who are willing to pay more for a luxury

or an individually-made product. Customers search for value but value is not just in the price.

(adapted from New York Times in the Observer 21.02.10)

(a) Explain the theoretical link between utility, price and the demand for a product. [12]

(b) Discuss whether the economic analysis of a rational consumer estimating demand based on value (utility) is

valid not only for standard products but also for poor quality and luxury products. [13]

35. 3 (a) Explain why there may be different levels of profit within perfect competition and between perfect

competition and monopoly. [12]

(b) Discuss whether the average variable cost has any significance in a perfectly competitive market structure in

determining (i) the output produced by a firm and (ii) the profit of a firm. [13]

W2012

36. 2 A study found that demand for tickets for exhibitions at a major art gallery had unitary price elasticity.

(a) Explain how the concept of diminishing marginal utility may be used to construct a demand curve for the

product and whether that analysis still applies in the case of demand for tickets for the exhibitions. [12]

(b) Discuss whether the law of diminishing returns contradicts the concept of economies of scale. [13]

37. 3 (a) Explain what is meant by an oligopoly market and why prices might fluctuate less in an oligopoly market

than in a perfectly competitive market. [12]

(b) Discuss whether a firm in monopolistic competition is more likely to act in the public interest than a firm that is

a monopoly. [13]

w2013


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38. 2 (a) Use the theory of marginal utility to analyse how a consumer will normally buy more of a product at a

lower price than at a higher price and explain how this theory can be used to derive a market demand curve.

[12]

(b) Economic texts examine market equilibrium. Discuss whether it is the consumer or the producer who

determines the equilibrium market price and whether consumers have the same power in all types of market

structure. [13]

39. 3 (a) Analyse whether in a perfectly competitive labour market it is true that a profit maximising firm will

employ labour only up to the point where the marginal revenue product of labour is at its maximum. [12]

(b) Discuss whether the marginal revenue productivity theory of wages is useful in explaining wage determination in

an imperfect market where there is a trade union. [13]

s2014

40. 2 ‘The analysis of marginal utility as an explanation of consumer equilibrium can only be related to the

purchase of one good, cannot be used if incomes increase, and is not applicable if advertising causes a

change in tastes. It is, in practice, not a useful guide to consumer behaviour’. Assess this opinion. [25]

41. 3 ‘The profitability of firms is a measure of their efficiency. The higher the profit, the greater the efficiency.

High profits should, therefore, be encouraged.’ Do you support this argument? [25]

S2015

42. 2 (a) Describe how consumer theory suggests a rise in income will cause a consumer’s demand to change for

a normal good and for an inferior good. [12]

(b) Explain the difference between structural, cyclical and seasonal unemployment and discuss whether a general

rise in income in a country would have the same effect on each of these types of unemployment. [13]

43. 3 (a) A firm in a perfectly competitive market and a firm with a monopoly both seek to maximise their profit.

Explain, with the help of a diagram, why the levels of price and output might be different in the two markets.

[12]

(b) Discuss whether it is always true that a firm, rather than maximising its profits while remaining small, will seek

to grow in size. [13]

M2016

44. 2 ‘The best way to increase economic welfare is to encourage competition in a market system.’ Consider whether you agree with this view. [25] 45. 3 (a) ‘If a firm is experiencing diminishing returns and diseconomies of scale, it means that its output must be decreasing.’ Explain whether this statement is true. [12] (b) ‘It is certain that firms maximise profits where marginal cost equals marginal revenue, and that this is what all firms seek to do.’ Discuss this assertion. [13] S2016

46. 3 With the help of diagrams, use indifference analysis to: (a) explain what is meant in economic theory by consumer equilibrium and how it is related to a consumer’s demand curve. [12] (b) discuss how this equilibrium might be affected by a government fiscal policy that raises taxes on goods. [13]

47. 5 The traditional theory of the firm assumes a single objective for the firm, namely the maximisation of profit. (a) Explain whether a firm with this objective necessarily always makes a profit. [12] (b) Discuss how the objective in the traditional theory may be varied in different market structures. [13]

W2016

48. 3 (a) A number of consumers are deciding whether to buy a product. How far does economic theory explain the determination of the market demand curve for that product? [12] (b) Discuss whether that theory is still valid if the producer decides to advertise the product, and consider the effects of the advertising on the demand curve for the product. [13]

49. 4 Explain what is meant by the ‘equilibrium of a perfectly competitive firm’ and consider the view that equilibrium is always achieved in perfect competition but never in a monopoly market. [25] M2017

S2017

W2017


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3. Government microeconomic intervention – Policies to achieve efficient resource allocation and correct market failure • Equity and policies towards

income and wealth redistribution • Labour market forces and government intervention: – Demand and

supply of labour – Wage determination in perfect Markets – Wage determination in imperfect markets • Government failure in microeconomic intervention

S2003

1. 3 Between 1995 and 2000 there was a change in work patterns in Mauritius. Fewer people worked in

agriculture and fisheries as the country diversified away from its staple crop, sugar, and more worked in

restaurants and hotels as the tourist industry increased. However, in 2000 the government stated that the

economy still suffered from an inadequately trained workforce with a lack of skills. How far can the

economic theory of wages explain the implications of this situation for the wages of an agricultural labourer

and a hotel manager? [25]

w2003

2. 3 In some economies in 2001 there was a decline in the number of people travelling by air. Unemployment

increased as many people lost their jobs in hotels, airline companies and tourist related industries. Similar

jobs in other industries were advertised at reduced wage rates.

(a) Explain the different types of unemployment and suggest which type the above unemployment

might be. [10]

(b) Discuss how far economic analysis is of use in explaining the change in wage rates mentioned

above. [15]

s2004

3. 4 In 2002 in the UK public sector fire-fighters threatened to go on strike because they stated that their

earnings were very low compared with other workers. In the same year Robbie Williams, a singer from the

UK, signed the largest ever recording deal in the music industry, worth millions of pounds. Discuss whether

the economic theory of wages can explain how workers in a vital industry such as the fire-fighting service

can have lower pay than workers in a less vital industry such as entertainment. [25]

s20005

4. 2 Economic theory often produces a definite outcome but in reality events are much less certain.

(a) Explain the economic theory of wage determination in perfect competition. [12]

(b) Discuss whether this theory is useful in explaining how wages are determined in reality. [13]

W2005

5. 3 In some countries the power of trade unions has been restricted and the government has passed

legislation fixing the minimum level of wage rates.

(a) Explain how trade unions can be incorporated into the economic analysis of wage determination. [12]

(b) Discuss the possible effects that trade unions might have on the economy of a country. [13]

S2008

6. 3 In some countries the power of trade unions has decreased. In other countries, trade unions have

organised major strikes resulting in employees refusing to work.

(a) Is the existence of a trade union likely to be the main factor that affects the supply of labour? [10]

(b) Discuss how the theory of wage determination through market forces might need to be altered when

trade unions exist in an industry. [15]

s2009

7. 3 Discuss what might cause inequalities in wage rates in an economy. [25]

S2010

8. 4 (a) Analyse whether an increase in the wage rate always leads to an increase in the number of hours

worked by an individual. [10]

(b) A government stated that pay increases in the coming year should be kept to a minimum. Discuss

whether the main determinants of wage rates are factors such as trade unions and the government rather

than market forces. [15]

s2011

9. 2 The use of cars causes market failure. To achieve an efficient use of resources it would be better if

governments intervened to affect both the production and the use of cars. Explain the meaning of the

terms ‘market failure’ and ‘the efficient use of resources’ and analyse whether economic theory can be

used to support this argument. [25]

10. 5 In imperfect competition, labour markets can lead to worker exploitation in terms of the wage rates they

receive compared with wage rates in perfect competition. Discuss this opinion. [25]

W2011

11. 4 The market is the fairest means of wage determination. To what extent do you support this opinion? [25]


8

S2012

12. 4 Wage rates in some non-essential occupations, such as entertainment, are very high while wage rates in

essential occupations, such as public sector hospital nurses, are much lower. This is unfair. Analyse how

economic theory can explain these differences in wage rates and consider whether you agree with the

conclusion of this statement. [25]

w2012

13. 4 Some workers producing non-essential luxury goods or services are paid very highly. The wage rate is not

related to the economic value of a good or service but more to social factors or fashion. The economic

theory of wages is, therefore, of little use in explaining wage differentials. Assess this argument. [25]

W2013

14. 4 In the economic recession of 2011 many private sector firms were still able to announce that they were

successful and had made substantial profits. Large bonuses were paid to directors and shareholders

received large dividends. Discuss whether it is better for an economy if the allocation of resources is left

entirely to the private sector operating through the market system. [25]

s2014

15. 4 (a) Some top executives and some sports people are paid very high salaries. It is argued that this is

inevitable as people are paid the market rate for the job. Use economic analysis to support this opinion.

[12]

(b) It is argued that the wage determination in imperfect markets leads to exploitation. It is therefore

necessary and beneficial if the government intervenes in the determination of wage rates. Discuss whether

there is any truth in this argument. [13]

s2015

16. 4 ‘Wage determination in the factor market is just like price determination in the product market. It is

entirely dependent on the forces of supply and demand.’ Do you agree with this statement? [25]

S2016

17. 4 (a) ‘In perfect competition in the short run, wage rates in some occupations will be higher than in others.’ Explain the economic analysis underlying this. [12] (b) Do you agree that in an imperfect labour market any activity by trades unions designed to increase wage rates would inevitably lead to unemployment in that market? [13] W2016

18. 6 (a) Some occupations that do not have pleasant working conditions, such as rubbish collection, receive low pay, while those with pleasant conditions, such as senior managers, receive high pay. How far does economic analysis explain this situation? [12] (b) Discuss what influence a trades union and a government can have in determining wage rates. [13]

M2017

S2017

W2017


9

4. The macro economy - Economic growth, economic development and sustainability • National

Income statistics • Classification of countries • Employment/unemployment • The circular flow of

income • Money supply (theory) • Keynesian and Monetarist schools • The demand for money and

interest rate determination • Policies towards developing economies; policies of trade and aid w2002

1. 4 (a) Assume there is an open economy with a government sector. Explain the conditions for equilibrium in

the circular flow in such an economy. [10]

(b) Discuss how an increase in injections may affect the equilibrium level of national income. [15]

2. 6 The aim of most developing countries is to become developed. If this aim is achieved, will it always bring

benefit to the population of the developing country? [25]

S2003

3. 5 One tenth of the world’s population live in developing countries. Many of those live on less than US$2

day, and the average life expectancy is less than 50 years.

(a) Explain what other indicators might be used, apart from those above, to classify a country as

developing rather than developed. [10]

(b) Describe the policies that might be used by the government of a developing country to remedy the

situation described above, and assess how easy it would be to implement those policies. [15]

4. 6 (a) Use the multiplier process to explain the effect of an increase in investment by firms on output and

prices in an economy. [13]

(a) Discuss the ways in which a government might influence private investment in order to try to

ensure sufficient economic growth in a country. [12]

5. 7 Most governments aim for full employment and stable prices. Which of those two aims should your

government seek to achieve in the coming year and how might this choice affect the other aim? [25]

s2003

6. 5 (a) What distinguishes a developing country from a developed country? [10]

(b) Do you agree that if a developing country becomes a developed country the problems that face its

population are solved? [15]

7. 7 How reliable are national income statistics as a means of comparing living standards between countries?

[25]

W2004

8. 5 Many countries are concerned to promote economic growth.

(a) Describe the other major objectives of a government’s macro-economic policy. [12]

(b) Discuss whether an emphasis on economic growth is always beneficial. [13]

9. 6 (a) What are the characteristics of a developing economy? [12]

(b) How useful is the GDP as a measure of the standard of living in a country? [13]

S2005

10. 3 In 2002 there was a dangerous virus in China which caused many deaths. By July 2003 China had

eliminated the virus and, as a result, there was a revival in tourism and consumer spending. Retail sales

rose at the fastest pace for six months.

(a) Explain the effect of a rise in consumer spending on China’s national income. [12]

(b) Why might a government wish to promote an increase in tourism? [13]

11. 4 In August 2003 the US dollar rose in value against the euro as reports showed that Europe’s

economy failed to grow and Germany even fell into a recession.

(a) Explain what the above statement means. [12]

(b) Discuss what policies the German government might use to combat the recession. [13]

W2005

12. 6 With the approval of the Malaysian government, the Swedish company IKEA, the world’s largest retailer

of home furnishings, has invested $106 million in Malaysia in the past three years. It now plans to open

another large store in the country, employing 450 people, with expected sales of approximately $50 million

in the first year.

(a) Use multiplier analysis to explain what effect this investment might have on the Malaysian national

income. [10]

(b) Discuss whether the activities of multi-national companies are always beneficial. [15]

13. 7 ‘There are so many difficulties in measuring living standards that we can never be sure that people in

one country are better off than those in another country.’ Comment upon this statement. [25]

s2006

14. 5 Sometimes the development of a project in an urban area is encouraged by a government. At other times

the priority is to support rural areas.

(a) Explain what benefits might be obtained by encouraging investment in rural areas. [12]

(b) Discuss whether it might be better to conserve, rather than exploit, the resources of a country. [13]


10

15. 6 (a) Explain how changes in interest rates might influence investment. [10]

(b) ‘If investment increases it will cause an increase in output. If output increases it will cause an increase

in investment’. Discuss whether both these statements can be true. [15]

w2006

16. 5 (a) Explain what indicators would suggest that a country is developed rather than developing.[12]

(b) It is sometimes stated that the policies of farm subsidies and international protectionism pursued by

developed countries have caused damage to the economies of developing countries. Discuss whether the

policies of governments in developed countries necessarily harm developing countries. [13]

17. 6 (a) Explain what determines the demand for money. [10]

(b) In some countries it is said that the use of credit cards by many people has resulted in huge debts as

people spend far more than they earn. Discuss what might be the consequences of a large increase in

consumer spending. [15]

s2008

18. 5 The solution to unsatisfactory economic development and growth is to focus on economic

theory,scientific advances, new technology and market forces.

(a) Explain what is meant by economic development. [10]

(b) Discuss whether you agree with this statement. [15]

19. 6 (a) It is feared that if the government increases taxes the level of national income will fall. Explain

whether this is necessarily true. [10]

(b) Discuss whether a fall in the level of national income is a good indicator that there has also been a

decline in the standard of living in the country. [15]

w2008

20. 7 (a) Explain the factors influencing the level of investment in an economy. [10]

(b) Discuss the extent to which national income is determined by private investment. [15]

S2009

21. 5 In 2006 it was reported that a country’s unemployment rate had remained steady and that its central

bank, through its interest rate policy, had prevented an increase in inflation despite a sharp rise in oil

prices.

(a) Explain what might cause unemployment. [12]

(b) Discuss how interest rate policy might prevent a rise in inflation. [13]

W2009

22. 4 (a) Explain what is meant by the transactions, precautionary and speculative demands for money. [10]

(b) An employee moves to another job because it pays more. However, the old job was paid weekly and the

new job is paid monthly. At the same time interest rates are increased. Discuss how these changes would

affect the employee’s transactions, precautionary and speculative demands for money. [15]

23. 5 (a) Explain whether low GDP is a good indicator that a country has a low standard of living. [12]

(b) Discuss whether the main aim of a government should be to have a policy on population growth if it

wishes to increase the standard of living in its country. [13]

w2010

24. 5 National income statistics are used to calculate a country’s GDP. The table shows the GDP for five

countries for 2008.

Country GDP $m

USA 14 580 000

India 3 319 000

Singapore 244 000

Mauritius 14 060

Swaziland 5 626

Discuss how far the table might be used to determine whether one country has higher living

standards than another. [25]

25. 6 Explain what is meant by an equilibrium level of national income and discuss why this equilibrium might

change in a developing country. [25]

s2011

26. 6 (a) An increase in investment will raise national income but an increase in the desire by consumers to

save will reduce national income. Explain why this is the case. [12]

(b) To increase national income, interest rates should be lowered; indeed lowering interest rates is the only

policy available to increase national income. Discuss whether you support this opinion. [13]

W2011

27. 6 (a) For what purposes do people demand money? [12]

(b) Assess, using the concept of liquidity preference, the possible links between an increase in the

supply of money, the rate of interest and investment. [13]


11

28. 7 Some economies are said to be developing while others are developed. Explain the difference between

the two and discuss whether the problems of a developing economy would be solved if it achieves

developed status. [25]

s2012

29. 5 As part of the measurement of GDP governments calculate the level of investment expenditure.

(a) What determines the level of investment and how do changes in investment expenditure affect

GDP? [12]

(b) Assess the difficulties of using GDP as an economic indicator. [13]

30. 6 It is sometimes stated that the economic growth rates of developed countries are higher than those of

developing countries.

(a) Explain why developing countries often aim to increase economic growth. [12]

(b) Assess the likely effectiveness of the types of policy the government of a developing country might

use if it wished to increase economic growth. [13]

w2012

31. 5 It is said that the lack of investment funds for private companies from banks leads to temporary closures

of factories which then become permanent and cause long-term unemployment. This loss of output will

lead to a possible recession. Analyse each part of this argument and discuss whether you agree with it.

[25]

32. 6 (a) Explain how the age and employment structures of the population of a developing country are likely to

differ from those of a developed country. [12]

(b) You are told that a country has problems relating to overcrowding, unemployment and pollution.

Discuss whether the existence of such problems necessarily means that the country must be a developing

country. [13]


(b) Too much money causes inflation. Discuss the main macroeconomic aims of the government and

consider whether it should give priority to the limitation of inflation in achieving economic well-being. [15]

w2013

34. 7 A country has a high level of unemployment and a low level of GDP. Discuss whether this situation is a

good indication that the country is a developing country. [25]

S2014

35. 5 It was reported in 2012 that consumers should not be encouraged to save more and reduce their debts.

Increased saving would result in a Keynesian ‘paradox of thrift’ which would not help economic growth.

Instead consumers should spend money on new purchases. (Source: The Times. 2011)

(a) Explain and comment on what is meant by ‘the paradox of thrift’. [12]

(b) Discuss what is meant by economic growth and consider whether spending money on new

purchases would necessarily help economic growth. [13]

s2015

36. 5 ‘Lack of consumer spending causes recessions. Recessions do not improve a country’s standard of

living. It is always better, therefore, to encourage consumer spending for this improves a country’s

standard of living.’

(a) What is a recession and is it always caused by a lack of consumer spending? [12]

(b) Discuss what policies a government may use to try and end a recession. [13]

M2016

37. 4 (a) Discuss how wage rates are determined in a perfect market. [12] (b) If the labour market is imperfect, is the determination of wage rates still better left to that market? [13]

38. 5 (a) Consider whether the main cause of economic growth is an increase in population, and hence in labour supply. [12] (b) Do you agree that a country should try to increase its rate of economic growth? [13] S2016

39. 5 (a) Explain the causes of unemployment and consider what type of unemployment is the most serious for the country in which you live. [12] (b) Discuss whether government macroeconomic aims of full employment, economic growth and price stability are likely to conflict with each other. [13] W2016

M2017

S2017

W2017


12

5. Government macro intervention - Government macro policy aims • Inter-connectedness of

problems • Effectiveness of policy options to meet all macroeconomic objectives W2002

1. 5 A government’s macroeconomic aims are low inflation, low unemployment, balance of payments equilibrium

and economic growth. Individuals see their standard of living as more affected by a well-paid job, low crime

rates and a pleasant environment. Discuss how far the government can meet the desires of individuals by

satisfying its macroeconomic aims. [25]

2. 7 (a) Explain with the aid of examples how price discrimination can operate. [12]

(a) Discuss whether price discrimination can ever be of benefit to consumers. [13]

W2003

3. 6 (a) Distinguish between monetary policy and fiscal policy. [12]

(b) Discuss how monetary policy might be used by a government in a time of inflation. [13]

S2004

4. 7 (a) Explain what indicators suggest that an economy is developing rather than developed. [12]

(b) In Johannesburg in 2002 there was an international conference, the World Summit on Sustainable

Development, to discuss the use of the world’s resources and the best ways governments can help to promote

environmentally friendly development. Analyse how the policies adopted by a developed economy may affect

the standard of living in a developing economy. [13]

w2004

5. 3 (a) Explain what factors might determine the level of investment in an economy. [12]

(b) Analyse what effects an increase in investment might have on an economy. [13]

6. 4 In 2002 an electrical goods company in the UK that uses mass production techniques made many people

redundant. It said that there had been meetings with the trade union but that it was moving its production to

Eastern Europe and would transport the products from there.

(a) Explain the economic considerations that might have led the company to make this decision. [12]

(b) How far does this decision indicate that trade unions have very little influence over wages and

employment? [13]

7. 7 In each of the countries Ghana, Nigeria and Zimbabwe internet services are provided by only a few large

companies.

(a) Consider who might benefit when a market consists of only a few large companies. [12]

(b) Discuss why in some markets firms remain small while in others the market is dominated by large companies.

[13]

w2005

8. 5 How far do you agree that low interest rates and low inflation are the most important aims of government

policy in maximising economic welfare? [25]

w2006

9. 7 Government economic policy should be aimed at the needs of citizens – employment, health, education and

a good environment. It should not concentrate on the balance of payments or gross domestic product. Discuss

whether there is any truth in this statement. [25]

S2008



13

(b) Discuss the effect of an increase in the supply of money on interest rates and national income. [15]

w2008

11. 6 In some countries the rate of unemployment has remained low for several years.

(a) Explain what causes unemployment. [12]

(b) Discuss whether the reduction of unemployment should always be the main aim of government policy. [13]

s2009

12. 6 In 2007 a report stated ‘classrooms with teachers, clinics with nurses, clean water and working toilets are

the key to ending global poverty. Only governments are in a position to provide these services on the scale

required’. Discuss whether governments should abandon their traditional macroeconomic aims in favour of

the alternatives in the above statement. [25]

13. 7 A World Bank report in 2007 commented on the continuing need for major spending worldwide on

infrastructure on everything from roads and railways to water and electricity generation.

(a) Explain the effect on national income when there is an increase in spending on infrastructure. [10]

(b) Discuss whether an efficient allocation of resources can be obtained only if large-scale investment is

undertaken by the public sector rather than the private sector. [15]

w2009

14. 6 (a) In some countries there has been fear of economic recession in recent years. Explain the main

characteristics of an economic recession. [10]

(b) Discuss the policies that might be used to bring an economic recession to an end. [15]

15. 7 The economy of South Africa is growing faster than its potential growth rate. The Governor of the central

bank of South Africa said ‘This is why we have inflation. We need to deal with inflation as it does not lead to

job creation. Interest rates are the only tool available to control inflation’. Do you agree with the Governor’s

opinion on inflation? [25]

S2010

16. 6 (a) Explain the causes of unemployment. [12]

(b) Explain what is meant by liquidity preference and discuss how it might be affected by an increase in

unemployment. [13]

17. 7 ‘Developing countries have a low standard of living, yet many have much wealth in natural resources which

multi-national companies would like to exploit.’ Discuss which is the better way of increasing the standard of

living: to allow multi-national companies to exploit all the natural resources, or for the government to increase

expenditure on education and health. [25]

w2010

18. 7 Economic analysis states that the aims of the government include economic growth and economic

efficiency.

(a) Explain how achieving economic growth might conflict with other government macroeconomic aims. [12]

(b) Is economic efficiency better achieved by the market mechanism rather than by government

microeconomic policy? [13]

s2011

19. 7 (a) As an economy develops, the relative importance of different sectors of production changes.Explain, with

examples, why the pattern of employment might change as an economy develops. [12]

(b) Discuss whether increases in economic growth are necessarily beneficial to an economy. [13]

W2011

20. 5 (a) Explain what is meant by government macroeconomic policies and government microeconomic policies.

Illustrate your answer with two types of policy from each. [12]

(b) Consider how government economic policies might be used to help a country out of a recession.

W2013

21. 5 (a) Explain, using the concept of the multiplier, the possible link between a fall in interest rates and an

increase in national income. [12]

(b) Discuss whether the use of fiscal policy is the only effective means of stimulating economic growth. [13]

22. 6 While the overall aim may be to improve the economy, governments find that their macroeconomic policies

sometimes conflict with each other. Explain why some government economic policies may conflict with each

other and discuss which should be given priority. [25]

s2014

23. 6 (a) Explain the possible causes of unemployment and explain which is responsible for most of the

unemployment in your country. [12]

(b) ‘When a government wishes to lower unemployment its only method of reducing it is by the use of fiscal

policies’. Do you agree with this opinion? [13]

24. 7 (a) Too much labour but not enough capital. Is this the most significant difference between a developing and

a developed economy? [12]

(b) Discuss whether GDP is a reliable measure of the difference in living standards between developing and

developed economies. [13]


14

s2015

25. 6 The table shows figures for annual GDP growth rates at market prices for three developing countries,

Bangladesh, Ethiopia and Malawi, and three developed countries, Greece, UK and USA.

Bangladesh Ethiopia Greece Malawi UK USA

GDP

growth

rate (%)

2009 5.7 8.8 -3.1 9.0 -4.0 -3.5

2010 6.1 9.9 -4.9 6.5 1.8 3.0

2011 6.7 7.3 -7.1 4.3 0.8 1.7

Source: the world Bank

(a) Describe what is meant by economic growth and consider if it is always advantageous. [12]

(b) Explain what is meant by a developing country and a developed country and consider whether the table

supports the idea that GDP growth rates are a good indicator of development. [13]

26. 7 ‘The free market is not the way to achieve a sustainable, efficient use of economic resources. Even the

famous economist Adam Smith recognised that there was a need for some government involvement.’ Discuss

whether government involvement in the economy might overcome the weaknesses of the free market system.

[25]

M2016

27. 6 (a) Assess how changes in interest rates might influence investment. [12] (b) Some argue that increases in investment cause national income to increase. Others argue that the reverse is true: an increase in national income brings about investment. Discuss whether both these seemingly contradictory statements can be true. [13]

28. 7 Governments want to increase the standard of living in their country. Discuss whether the indicators used to measure the standard of living are reliable and consider what policies a government might use to try to increase the standard of living in its country. [25] S2016

29. 6 Imagine you have been asked to produce a report about the quality of life in your country. Discuss what would be important to include in your report and what economic indicators you would use in order to reach a conclusion. [25]

30. 7 (a) Explain how the age and employment structure of a population in a developing country may differ from those of a developed country. [12] (b) Consider whether a developing country is likely to experience different types of unemployment compared with a developed country. [13] W2016

31. 7 (a) Conventional estimates of national income indicated that average income per head between 2009 and 2013 was US$98 780 in Norway and US$36 900 in New Zealand. Consider whether this means that the standard of living in Norway is nearly three times as high as in New Zealand. [12] (b) Norway and New Zealand are classified as developed countries. Make a judgement on what are the important distinguishing differences between a developed country and a developing country. [13]

M2017

S2017

W2017

mss, mba, b.ed economics, business studies, bangladesh

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