1. Which statement best defines productive efficiency?
A It is not possible to increase profits by changing the level of production.
B It is not possible to make anyone better off without others becoming worse off.
C It is not possible to produce the level of output at a lower unit cost.
D It is not possible to produce outside the production possibility curve.
2. Medical researchers indicated that drinking too many sugary drinks is bad for health.
Government intervention to impose a tax on the sale of sugary drinks might help solve which
market failures?
| Negative externalities of consumption | Negative externalities of production | Over-consumption of demerit goods | |
| A | no | yes | yes |
| B | yes | yes | no |
| C | yes | no | yes |
| D | yes | no | no |
3. A government uses a cost–benefit analysis approach to infrastructure projects. It is considering building a new railway to link a city centre to its airport. It estimates the following:
| $ billion | |
| Private costs | 1.0 |
| Social costs | 1.7 |
| Private benefits | 0.5 |
| External benefits | 1.8 |
What should the government decide and why?:
| Decision | Reason | |
| A | Do not proceed | Total costs exceed external benefits |
| B | Do not proceed | Total costs exceed total benefits |
| C | Proceed | Private costs exceed private benefits |
| D | Proceed | Social benefits exceed social costs |
4. A consumer currently consumes 10 units of good X and 10 units of good Y at point Z on an
indifference curve.
The consumer’s marginal utilities from consuming both good X and good Y are positive.
Which combination of good X and good Y could be on the same indifference curve as point Z?
| Units of good X | Units of good Y | |
| A | 9 | 11 |
| B | 10 | 11 |
| C | 11 | 10 |
| D | 12 | 12 |
5. The diagram shows two indifference curves and two budget lines for goods X and Y. The
consumer’s initial equilibrium is point R.
There is a shift in the budget line from Y1X1 to Y2X2 and the new equilibrium for the consumer is point S.
What can definitely be concluded about good X?
A It is a Giffen good.
B It is an inferior good.
C It is a normal good.
D It is a public good.
Maths with David 