Economics P12 june 2012 ANSWERS...!!!

[jrahmed]

1)reduce expenditure-expenditure dampening policy
2)taxation payments-I dont see why a firm wont take into account consumer surplus..
3)Income and financial,interests is under income
4) ? whats the question?

shudnt 2 be consumer surplus.....cuz the producer has to pay tax!! n they wont ever care about consumer surplus....they wud care abt producer surplus!

 

[anythin576]

1)reduce expenditure-expenditure dampening policy
2)taxation payments-I dont see why a firm wont take into account consumer surplus..
3)Income and financial,interests is under income
4) ? whats the question?

1) is correct
2)it was consumer surplus because a firm would only take into account its profit and not public welfare but the government does try to improve living standard by increasing consumer surplus
3) is also correct
4) i didn't get the question either
What about the production possibilty shifting inwards??? Shouldn't it be decrease in innovation since innovation is the same thing as technology and improvements in technology promote economic growth so obviously a decrease in innovation must shift the curve inwards. And guys for the question on fixed exchange rates and how the government could improve BOP was the option " increase in national income" or "decrease in national income" coz i think i didn't read it carefully

 

[Mattman]

1) is correct
2)it was consumer surplus because a firm would only take into account its profit and not public welfare but the government does try to improve living standard by increasing consumer surplus
3) is also correct
4) i didn't get the question either
What about the production possibilty shifting inwards??? Shouldn't it be decrease in innovation since innovation is the same thing as technology and improvements in technology promote economic growth so obviously a decrease in innovation must shift the curve inwards. And guys for the question on fixed exchange rates and how the government could improve BOP was the option " increase in national income" or "decrease in national income" coz i think i didn't read it carefully

firms care about consumer surplus imo http://smallbusiness.chron.com/importance-surplus-44967.html

i awnsered C for the PPC question cos a decrease in innovation doesnt mean your productivity suddenly decreases.. it just means you are just not improving your production process or w/e

C could mean a depletion in energy, hence price rise and shrink in curve

 

[issac0215]

this year econ paper is much more difficult as we need to go through very deep in all questions.

 

[m3hdi *n3No*]

1) is correct
2)it was consumer surplus because a firm would only take into account its profit and not public welfare but the government does try to improve living standard by increasing consumer surplus
3) is also correct
4) i didn't get the question either
What about the production possibilty shifting inwards??? Shouldn't it be decrease in innovation since innovation is the same thing as technology and improvements in technology promote economic growth so obviously a decrease in innovation must shift the curve inwards. And guys for the question on fixed exchange rates and how the government could improve BOP was the option " increase in national income" or "decrease in national income" coz i think i didn't read it carefully

they consider a consumer surplus for setting price but govt sees it as msb that is total benifit deriving above the equilibrium price so answere was consumersurplus

 

[Mattman]

yea i hope the threshold is low

 

[Mattman]

they consider a consumer surplus for setting price but govt sees it as msb that is total benifit deriving above the equilibrium price so answere was consumersurplus

which is why its not CS. The question is what the govt considers when want to invest in something but not a firm

 

[junaidaftab]

1)reduce expenditure-expenditure dampening policy
2)taxation payments-I dont see why a firm wont take into account consumer surplus..
3)Income and financial,interests is under income
4) ? whats the question?

1) I wasn't referring to the last question. I was referring to the question in which a country had a fixed exchange rate, and we were to tell how can it improve its BOP.
Options:
- Increase interest rates
- Decrease interest rates
- Decrease in foreign income
- Increase in national income.

2) The question which said that the economy has expanded, and its unemployment has reduced, but inflation's relatively low.
Options include:
- Global competitiveness...couldn't transfer the burden to consumers
- etc.

 

[Mattman]

1) I wasn't referring to the last question. I was referring to the question in which a country had a fixed exchange rate, and we were to tell how can it improve its BOP.
Options:
- Increase interest rates
- Decrease interest rates
- Decrease in foreign income
- Increase in national income.

2) The question which said that the economy has expanded, and its unemployment has reduced, but inflation's relatively low.
Options include:
- Global competitiveness...couldn't transfer the burden to consumers
- etc.

decrease interest rates in other countries

 

[junaidaftab]

decrease interest rates in other countries

Explanation, please? The country in question had employed a fixed exchange rate system, implying that any change in the demand and/or supply of the country's currency would be offset by either an inflow or outflow of foreign cash reserves in the international money exchange market, a step taken by the central bank of the county.

 

[issac0215]

Explanation, please? The country in question had employed a fixed exchange rate system, implying that any change in the demand and/or supply of the country's currency would be offset by either an inflow or outflow of foreign cash reserves in the international money exchange market, a step taken by the central bank of the county.

the question is about what is the result from the improvement of BOP.
I think when their BOP improves , their currency will be appreciated.
Since the country is having a fixed exchange rate system , it will try to depreciate its currency by decreasing their interest rate.
The interest rate is low , so the investor will take out all the money and causes a rise in supply of the currency.
And the exchange rate will go back to normal.

Does it make sense?

 

[JuggyD]

what was the answer to what is the factor which a private firm will not consider in a cost benefit analysis but a government project will?
was it consumer surplus, tax payments or interests charged?>

The answer was consumer surplus since the government tries to include all costs and benefits when making decisions. Consumer surplus is something firms do not consider.

 

[JuggyD]

and yeah there was this question in our variant about unemployment rates in France japan Italy and i dno china maybe :S
and it asked what do u deduce from this information
i chose that France had the EMPLOYED rate in both the years
do u remember something about it?
another option was UK created most jobs :S

The question asked which of the responses was true. The answer was France having LOW EMPLOYMENT rates since it had the HIGHEST UNEMPLOYMENT rates for both years.

 

[JuggyD]

same here i also answered C, since an increase in the price of energy could be due to lack of supply which meant that there was a fall in the amount of resources

I answered C but apparently that doesn't lead to a shift inwards for a PPC. Instead, the answer was innovation since it is similar to technology. What confused others as well as me is that we thought innovation was to do with efficiency. However, innovation is concerned with how much you can produce with a given resource base and any improvement in innovation would allow to produce more and hence, a shift in the PPC. Therefore a DECREASE in innovation will lead to an inward shift in the PPC.

 

[Mattman]

Explanation, please? The country in question had employed a fixed exchange rate system, implying that any change in the demand and/or supply of the country's currency would be offset by either an inflow or outflow of foreign cash reserves in the international money exchange market, a step taken by the central bank of the county.

What was the awnsers to the question again? i remembered one of it was that interest rates of other countries decrease, so more ppl will save in the country, improving BoP as more money comes in.

^Innovation is the creation of better production processes/capital etc. I think decrease in innovation means less creation of such things. Which means the PPC wont expand or contract, but stay the same as we still retain the current production technology, so there is no reason for it to shrink.

 

[ibadsiddiqi]

thanks for your comments but I am pity sure it was 500 tonnes to make the total revenue equal to 10!
N secndly the hyperinflation question was almost a replica of nov 2004 qs.25 but there was a slight diffrnce for which I opted for Hyperinflation rather than D.If you remember in nov 2004 qs the base year(RPI 100) was 1971 and in our paper the base year given was 1990 so a period of 30 years cannot be classified as hyper inflation but in a span of 10 years RPI doubling is just hyperinflation...
so I think this base year made a difference

No the answer was D. Hyperinflation is when the inflation rate is at least 100 percent..Anyways there was always inflation! so D cudnt possibly be wrong!..

 

[ibadsiddiqi]

I answered C but apparently that doesn't lead to a shift inwards for a PPC. Instead, the answer was innovation since it is similar to technology. What confused others as well as me is that we thought innovation was to do with efficiency. However, innovation is concerned with how much you can produce with a given resource base and any improvement in innovation would allow to produce more and hence, a shift in the PPC. Therefore a DECREASE in innovation will lead to an inward shift in the PPC.

I chose A as well but many people are saying it was C because even if innovation decreases to zero, it means that technological advancement is not taking place. But the technology is already there so it cannot possibly cause it to shift inwards.

 

[JuggyD]

which is why its not CS. The question is what the govt considers when want to invest in something but not a firm

So you are saying governments don't take into account consumer surplus when doing a CBA?

 

[Mattman]

Govts definitely do, but firms ALSO take it into consideration http://smallbusiness.chron.com/importance-surplus-44967.html

so it cant be the awnser.

 

[ibadsiddiqi]

So you are saying governments don't take into account consumer surplus when doing a CBA?

Some are saying they do some say they don't. Arguments provided by both sides are equally good. Personally i feel its D, tax payments.