AQA As Level Economics Econ 1 January 2009

In a monopoly, there is no competition, allowing the monopolistic firm to have control over the market and set higher prices. This is because there are no other firms to offer alternative products at lower prices. As a result, consumers have limited options and are forced to pay the higher prices set by the monopoly. This leads to a misallocation of resources as the monopolistic firm may not be producing the optimal quantity of goods or services that would benefit society as a whole.

A positive statement is a statement that can be tested against the facts, meaning it can be empirically verified or falsified. This means that it can be proven to be true or false based on evidence and observations. Positive statements are based on objective data and do not involve subjective opinions or values.

At current levels of output, when the marginal social benefit of a good is greater than its marginal private benefit, it suggests that the consumption of the good generates positive externalities. This means that the benefits of consuming the good extend beyond the individual consumer and positively impact others in society. Therefore, there are likely to be positive externalities in consumption.

The correct answer is limited resources have alternative uses. This is because the basic economic problem arises from the scarcity of resources relative to unlimited wants and needs. Resources such as land, labor, and capital are limited, but they can be used in different ways to produce different goods and services. Therefore, choices must be made about how to allocate these limited resources among competing alternative uses, which is the essence of the basic economic problem.

The division of labor makes it cost-effective to provide workers with specialist equipment. This is because when workers specialize in specific tasks, they become more skilled and efficient in performing those tasks. As a result, they can produce more output in less time. By providing them with specialist equipment that is specifically designed for their tasks, they can further enhance their productivity. This equipment is tailored to their needs and allows them to perform their tasks more effectively, ultimately leading to increased labor productivity.

Negative externalities occur when the production or consumption of a good imposes costs on third parties who are not involved in the transaction. In this case, the existence of negative externalities in the market for the good indicates that the production of the product is causing harm to others. Over-production of the product means that more of it is being produced than what is socially optimal, leading to an excessive amount of negative externalities. Therefore, the misallocation of resources is most likely a result of over-production of the product.

not-available-via-ai

The cross elasticity of demand measures the responsiveness of the quantity demanded of one product to a change in the price of another product. Complementary products are those that are used together, such as bread and butter. When the price of one complementary product increases, the demand for the other complementary product decreases. Therefore, the cross elasticity of demand between two complementary products is negative, indicating an inverse relationship between the two products.

not-available-via-ai

Subsidies granted to producers would shift the supply curve for a good to the left. When subsidies are given to producers, it reduces their production costs, making it more profitable for them to supply the good. As a result, they are willing and able to supply more of the good at each price level, causing the supply curve to shift to the right. Therefore, a decrease in subsidies granted to producers would have the opposite effect, reducing their willingness and ability to supply the good, and shifting the supply curve to the left.

The correct answer is "Only V, W, X and Y." This means that the answer includes V, W, X, and Y, but does not include Z.

not-available-via-ai

In a buffer-stock scheme, an organization might buy in the open market to maintain a minimum price in the market for a product. This means that the organization purchases the product from the open market in order to prevent the price from falling below a certain level. By doing so, they create a buffer stock that can be used to stabilize the market and ensure that the price remains at a desired minimum level. This helps to protect the interests of producers and maintain a stable market for the product.

The expected percentage rise in demand can be calculated using the formula:

% Rise in Demand = % Reduction in Price * Price Elasticity of Demand

In this case, the % Reduction in Price is 35% and the Price Elasticity of Demand is -2.0.

So, % Rise in Demand = 35% * -2.0 = -70%

However, since the question asks for the expected percentage rise in demand, the negative sign is ignored.

Therefore, the expected percentage rise in demand is 70.0%.

not-available-via-ai

The imposition of a maximum price for a merit good is an appropriate form of government intervention for the problem identified. A merit good is a good that is considered to be beneficial for society, but may be under-consumed by individuals. By imposing a maximum price, the government can ensure that the merit good is affordable and accessible to all, thereby increasing its consumption and maximizing the social benefits it provides. This intervention helps to correct market failures and promote the overall welfare of society.

not-available-via-ai

not-available-via-ai

A missing market refers to a situation where there is no market mechanism to allocate resources efficiently. The production of a negative externality is associated with a missing market because the cost of the negative externality is not accounted for in the market price. This leads to an inefficient allocation of resources as the negative effects of the externality are not taken into consideration by producers and consumers. Therefore, the production of a negative externality is a characteristic of a missing market.

not-available-via-ai

This answer is correct because it refers to the concept of trade-offs in economics. When an economy can only produce more of one good by producing less of another, it demonstrates that resources are limited and choices must be made. This concept is known as the production possibility frontier, where a country must allocate its resources efficiently to maximize its production of goods and services. Therefore, this answer indicates that the economy is productively efficient.

When demand is perfectly inelastic, it means that the quantity demanded does not change regardless of the price. If a firm's labor costs rise, it will need to increase the price of its product in order to maintain profitability. Since the demand is inelastic, consumers will continue to purchase the product even at the higher price, leading to an increase in equilibrium price.

not-available-via-ai

The correct answer is that electricity suppliers are paying higher average prices for their electricity because some of the electricity is generated from 'green sources'. This can be inferred from the statement that "Green energy generators are paid more for their electricity because there is a scarcity of supply of electricity generated from renewable resources." This indicates that the higher prices are a result of the limited availability of renewable energy sources.

The correct answer suggests that the price mechanism helps allocate resources efficiently because as the stock of non-renewable resources nears depletion, their prices tend to rise. This increase in price signals scarcity and encourages consumers and producers to use these resources more efficiently or find alternative resources. As a result, the price mechanism helps in the allocation of resources by incentivizing conservation and the search for substitutes, ensuring their optimal use.