9708A. 24 January


. Some multinational oil companies extracting oil in developing countries are now required to repair the damage they do to the environment.
Which best describes the total costs incurred by the oil companies in such circumstances?
A external costs
B private costs plus external costs
C social costs plus external costs
D social costs plus private costs

2. In an economy, no one can be made better off without making someone else worse off.
What does not necessarily follow from this?
A The conditions for allocative efficiency have been met.
B The conditions for productive efficiency have been met.
C The distribution of income is socially acceptable.
D The economy is operating at a point on its production possibility curve.

3. A government decided to approve a road building scheme because it was socially beneficial. In
making its decision it calculated private costs at $800m, private benefits at $800m and external
costs at $150m.
What must have been true about the external benefits of the scheme?
A External benefits equalled private benefits.
B External benefits exceeded external costs.
C External benefits exceeded $200m.
D There were no external benefits.

4. What is it called when a consumer’s marginal utility is greater than the price paid for the good?
A a Giffen good
B an inferior good
C consumer surplus
D producer surplus

5. A consumer has $3 to spend each day on chocolate bars or toffee bars, which all cost $1 each.
The table below shows the units of additional satisfaction she gets from consuming each bar:

1st chocolate bar: 162nd chocolate bar: 133rd chocolate bar: 10
1st toffee bar: 142nd toffee bar: 123rd toffee bar: 9

What should she buy to maximise her total utility?
A 1 chocolate bar and 2 toffee bars
B 2 chocolate bars and 1 toffee bar
C 3 chocolate bars
D 3 toffee bars


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