1. What can be deduced about an economy where no-one can be made better off without making someone else worse off?
A Firms succeed in maximising profits.
B Production causes no external costs or benefits.
C The distribution of income and wealth is perfectly equal.
D The resources of the economy are allocated efficiently.

2. What is equivalent to social benefits?
A the amount that the government spends on social security benefits
B the benefit gained by society from total government spending
C the benefit to third parties from household consumption of a good
D the private and external benefits from household consumption of a good

3. The diagram shows the average cost (AC), marginal cost (MC), average revenue (AR) and
marginal revenue (MR) curves for a monopoly.
At which point will allocative efficiency be achieved?

4. How can the concept of marginal utility explain the shape of the downward sloping demand curve?
A Consumer tastes and preferences only change when their spending power increases.
B Extra utility gained from consuming successive units of a good will fall continuously.
C Satisfaction of consuming one more unit of a good is greater than the loss of money spent.
D Total utility gained from buying more and more units of a good will continue to increase
indefinitely.

5. XY is the budget line of an individual consumer.

Which changes could leave the position of XY unchanged?

	Consumer’s income	Price of good M	Price of good N
A	Decrease	Decrease	Increase
B	Decrease	Increase	Increase
C	Increase	Increase	Decrease
D	Increase	Increase	Increase