Muhammad Abubakar Bashir

Sec 1. The Basic Economic Ideas

Structured

Q1. Explain with the help of a production possibility curve diagram(s)

how a decision to re-allocate resources in an economy to produce more
capital goods and fewer consumer goods would affect consumers in
both the short run and the long run. [8]

Q2. Use production possibility curve (PPC) diagrams to explain the effect
on an economy's output of
(i)increased use of its existing labour, and
(ii)an increased availability of natural resources. [8]

Q3. Explain, with the aid of a production possibility curve (PPC) diagram,
why scarcity makes choice inevitable for firms and how each choice has
an opportunity cost. [8]

Q4. Show how a production possibility curve can be used to explain

scarcity, choice and opportunity cost. [8]

Q5. Explain how governments face increasing opportunity cost in their

decision-making. Use a production possibility curve diagram to support
your answer. [8]

Q6. Explain how a production possibility curve with increasing

opportunity costs illustrates the consequences of a government's choice
to produce more military goods. Use a diagram to support your answer.
[8]

Q7. Show the difference between a movement along, and a shift in, a
production possibility curve. Explain what might cause each to occur.
Use diagrams to support your answer. [8]

Q8. Explain with the help of a diagram why production possibility curves
are usually drawn with increasing opportunity costs, and show how they
can be used to illustrate scarcity. [8]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q9. Discuss whether an outward shift in a country's production

possibility curve will always raise the welfare of the citizens of that
country. [12]

Q10. With the help of a diagram, explain how a production possibility

curve can illustrate the concepts of opportunity cost and economic
growth. [8]

Q11. Explain, with the help of a production possibility diagram, how the
opportunity cost of producing different combinations of goods can be
measured. [8]

Q12. Discuss whether an economy's production possibility curve is more

likely to move inward or outward over time. [12]

Q13. Explain how the loss of confidence in money will affect an

economy's production possibility curve. [8]

Q14. Show how production possibility curves may be used to explain any
two economic ideas. [8]

Q15. Discuss whether the combination of improved technology and

globalization will result in solving the basic economic problem. [12]

Q16. Explain how microeconomic and macroeconomic issues may be

represented using production possibility curves. [8]

Q17. An economy can produce agricultural and industrial goods. Explain

the possible effects on its production possibility curve if there is an
increase in the productivity of its agricultural workers. [8]

Q18. Discuss whether government policies to influence the free market

price for a good can ever improve the allocation of resources in that
market. [12]

Q19. Discuss the view that the only goods a government should produce
are public goods. [12]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q20. The government raises taxes to provide a toll road bridge and
streetlights in a country. Explain how an economist would classify each
of these provisions. [8]

Q21. Discuss whether indirect taxes and subsidies could be used to

improve the consumption of merit and demerit goods if the demand for
both of these goods is price inelastic. [12]

Q22. Explain the features of a public good. Consider whether a

motorway (highway) provides an example of a public good. [8]

Q23. Discuss two methods of increasing the provision of merit goods in a

mixed economy. Consider which is more likely to be effective. [12]

Q24. Explain the difference between public goods and private goods.
Consider why profit can be made through the supply of one type of
good, but not the other. [8]

Q25. Discuss why merit goods may be under-consumed in a mixed

economy. Consider whether maximum prices or education campaigns
would be more effective in ensuring that these goods are supplied in
appropriate quantities. [12]

Q26. Explain, using examples, why the prices charged for merit goods
and demerit goods in a free market do not reflect the value to
consumers. [8]

Q27. Discuss the effectiveness of subsidies and indirect taxes in ensuring

that the correct prices for merit and demerit goods are charged in the
market. [12]

Q28. Most governments provide both defense and education services.

(a) Explain why defense and education services would not be
provided in sufficient quantities if the government did not provide them.
[8]

Q29. Discuss how taxation and subsidies could improve the provision of
defense and education services in an economy and consider the likely
success of such policies. [12]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q30. 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]

Q31. Discuss why merit goods are under supplied in a free market
economy and consider the effectiveness of one policy to deal with this
problem. [12]

Q32. Explain why the free market is ineffective in arriving at the correct
price for merit goods and demerit goods. [8]

Q33. Discuss the policies a government might adopt to ensure the

correct price for merit and demerit goods is charged in the market. [12]

Q34. Discuss why some governments decide that it is undesirable to

leave the provision of private goods, such as train travel, to the private
sector. [12]

Q35. Discuss whether health care can and should be provided by the
free market. [12]

Q36. Discuss the accuracy of the definition of public and merit goods as
'goods that must be provided by the government’. [12]

Q37. With the help of a diagram, explain why some goods are produced
in quantities greater than is socially desirable. [8]

Q38. Discuss whether national defense or a public park is the better

example of a public good. [12]

Q39. Explain why a lighthouse is often given as an example of a public

good while a light bulb is not. [8]

Q40. Economists also classify goods in others ways. Discuss the extent to
which an economist would classify a packet of cigarettes and a
vaccination against influenza as similar types of good. [12]

Q41. Explain the market failure which arises from the characteristics of
public goods. [8]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q42. Explain how the factor of production enterprise contributes to

aggregate supply in a modern economy and how it differs from the other
factors of production in terms of the reward for its services. [8]

Q43. Explain the role of the factor enterprise in allocating resources in a

market economy when there is an increase in the demand for a good.
Use a diagram to support your answer. [8]

Q44. Explain how a country's production possibility curve depends upon

its factors of production. [8]

Q45. (a)Explain the three economic questions that all economies face
because of the basic economic problem. [8]

(b) Discuss whether the price mechanism is an effective way to solve

the basic economic problem. [12]

Q46. (a) Explain the characteristics required by money if it is to carry out

its functions effectively. [8]

Q47. (a) Explain, with examples and diagrams, the effects of a decrease
in incomes on the markets for normal and inferior goods. [8]

(c) Economists also classify goods in other ways. Discuss the extent to
which an economist would classify a packet of cigarettes and a
vaccination against influenza as similar types of good. [12]

Q48. (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]

Q49. (a) Explain how a country's production possibility curve depends

upon its factors of production. [8]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q50. (a) With the help of a diagram, explain why some goods are
produced in quantities greater than is socially desirable. [8]

(b) Discuss whether national defense or a public park is the better

example of a public good. [12]

Q51. (a) Explain how microeconomic and macroeconomic issues may be

represented using production possibility curves. [8]

(b) Discuss whether money or the division of labour is likely to have

contributed more to economic progress. [12]

Q52. (b) Discuss the importance of price in the effective operation of a

mixed economy. [12]

Q53. (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]

Q54. (a) Explain why the successful operation of the division of labour
depends upon the use of money. [8]

Q55. (a) Show how production possibility curves maybe used to explain
any two economic ideas. [8]

(b) Discuss whether the combination of improved technology and

globalization will result in solving the basic economic problem. [12]

Q56. (a) Explain why all types of economic system benefit from the
existence and use of money. [8]

(b) Discuss whether an economy's production possibility curve is more

likely to move in-ward or outward over time. [12]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q57. (a) Explain, with the help of a production possibility diagram, how
the opportunity cost of producing different combinations of goods can
be measured. [8]

(b) Discuss the ease with which a planned economy may be changed into
a market economy. [12]

Q58. In a free market price rations scarce goods.

(a) Explain this statement and, with the help of a diagram, show how
price rations scarce goods when there is an increase in the costs of
production. [8]

Q59. (a) Use diagrams to explain the difference be-tween 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]

Q60. (a) With the use of a diagram, explain how prices allocate scarce
resources in a market economy. [8]

(c) Discuss whether prices are less important in allocating scarce

resources in a mixed economy compared with a market economy. [12]

Q61. (a) Explain how economists measure the way in which demand for
a good change when income changes and, with the help of a diagram,
show why some goods are classified as 'inferior goods’. [8]

(b) Discuss how useful governments might find the concepts of price and
income elasticity of demand when setting economic policy. [12]

Q62. (a) Using examples, explain the difference be-tween 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 under supplied in a free market

economy and consider the effectiveness of one policy to deal with this
problem. [12]

Muhammad Abubakar Bashir Contact: 0321-4962607

 Muhammad Abubakar Bashir

Q63. (a) A study estimates that dark chocolate has a price elasticity of
demand of (-)0.8 and that white chocolate has a price elasticity of
demand of (-)1.4. Explain how chocolate producers could change price
to increase total revenue for each type of chocolate. [8]

(b) Explain the factors that might cause a fall in demand for chocolate
and discuss the extent to which chocolate producers have the power to
stop this fall in demand happening. [12]

Q64. (a) Explain the role of the factor enterprise in allocating resources
in a market economy when there is an increase in the demand for a
good. Use a diagram to support your answer. [8]

Q65. (a) Show the difference between a movement along, and a shift in,
a production possibility curve.
Explain what might cause each to occur. Use diagrams to support your
answer. [8]

(b) Discuss the way in which resources are allocated in planned

economies and free market economies. Consider which type of
economic system is likely to have the more beneficial outcome. [12]

Q66. (a) Explain the different ways in which resources are allocated in a
market economy and in a mixed economy. [8]

Q67. (a) Explain the features of a public good. Consider whether a

motorway (highway)provides an example of a public good. [8]

Muhammad Abubakar Bashir Contact: 0321-4962607