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Economics Query.Can someone explain in detail?
- Thread starter sourgho16
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IN order
May 04 Paper 3 Q 13
least cost combination is when MP/MC per unit of factor is equal for all inputs(resources). Also by law of diminishing returns, as quantity of input increases marginal product decreases. So here, land is 1/4, labour 2/6 and capital is 9/3. So you must increase consumption of capital to reduce its marginal product and reduce land consumption to increase marginal product. Hence (less, no change, more ) ANS A
Nov 04 Paper 3 Q 8,16
Q8
let the space apart from z and x(the trapezium ) be Y. Total amount paid is Y + Z or W x 40.
Minimum amount willing to accept which is called transfer earning is the area under the supply curve until equilibrium which is y + x
Hence the difference is Y+Z - (Y+x) = z-x hence answer is D
Q16
Divergences in private and social costs means that there is market failure, the external costs are being ignored as firms are only paying the private costs. Hence it is not in the interests of society and consequently allocative efficiency is not being achieved
May 04 Paper 3 Q 13
least cost combination is when MP/MC per unit of factor is equal for all inputs(resources). Also by law of diminishing returns, as quantity of input increases marginal product decreases. So here, land is 1/4, labour 2/6 and capital is 9/3. So you must increase consumption of capital to reduce its marginal product and reduce land consumption to increase marginal product. Hence (less, no change, more ) ANS A
Nov 04 Paper 3 Q 8,16
Q8
let the space apart from z and x(the trapezium ) be Y. Total amount paid is Y + Z or W x 40.
Minimum amount willing to accept which is called transfer earning is the area under the supply curve until equilibrium which is y + x
Hence the difference is Y+Z - (Y+x) = z-x hence answer is D
Q16
Divergences in private and social costs means that there is market failure, the external costs are being ignored as firms are only paying the private costs. Hence it is not in the interests of society and consequently allocative efficiency is not being achieved
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Nov 05 Paper 3 Q 15
Not sure but imo i think this is because when industries are privatised they can produce according to the price mechanism and production is based on ability to pay. Furthermore, all the other options (marketing, financial management, quality and stock control are much more important for a profit maximising imperfect firm
Not sure but imo i think this is because when industries are privatised they can produce according to the price mechanism and production is based on ability to pay. Furthermore, all the other options (marketing, financial management, quality and stock control are much more important for a profit maximising imperfect firm
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Nov 06 paper 3 Q 4,15
Q4
No of workers / average product / Total product / Marginal product
1 / 20 / 20 / 20
2 / 18 / 36 / 16
3 / 16 / 48 / 12
4 / 14 / 56 / 8
firms employ resources at a level where MP>$P
FOr $10 they will employ a maximum of 3 workers as 12>10>8
for $14 they will employ a maximum of 2 workers
Hence ANS B
Q15
When price is fixed at OP. the Horizontal line from point P becomes the price. When price is fixed, the marginal revenue curve is the same as the average revenue curve which is the horizontal line, like perfect competition. so profit max is MC = MR, so when the horizontal line cuts the MC curve, it produces quantity OL. Answer C
Q4
No of workers / average product / Total product / Marginal product
1 / 20 / 20 / 20
2 / 18 / 36 / 16
3 / 16 / 48 / 12
4 / 14 / 56 / 8
firms employ resources at a level where MP>$P
FOr $10 they will employ a maximum of 3 workers as 12>10>8
for $14 they will employ a maximum of 2 workers
Hence ANS B
Q15
When price is fixed at OP. the Horizontal line from point P becomes the price. When price is fixed, the marginal revenue curve is the same as the average revenue curve which is the horizontal line, like perfect competition. so profit max is MC = MR, so when the horizontal line cuts the MC curve, it produces quantity OL. Answer C
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May 07 Paper 3 Q 6
Transfer earning is minimum amount willing to work for. This is the area under the supply curve until 40 hours. Hence ans is x+y B.
for more info on transfer earning and economic rent
http://tutor2u.net/economics/content/to ... rnings.htm
Nov 07 Paper 3 Q 3,17
Substitution effect can refer to the backward bending labour curve but it can also mean the the change in expenditure for subtitute goods to a change in price in an existing good. Hence expenditure on other goods is the variable being measured and as such, it is not held constant
ANS A
Q17
Those who continue to drive have to pay a charge but they get to enjoy a reduced amount of traffic. Hence their net welfare outcome is uncertain those who no longer travel lose as they dont drive as a result of the charge and are not better off by any means. Those who switch to public transport evade the charge and also enjoy reduced traffic but have to deal with discomfort and bus fares. Their welfare is also uncertain
ANS A
Transfer earning is minimum amount willing to work for. This is the area under the supply curve until 40 hours. Hence ans is x+y B.
for more info on transfer earning and economic rent
http://tutor2u.net/economics/content/to ... rnings.htm
Nov 07 Paper 3 Q 3,17
Substitution effect can refer to the backward bending labour curve but it can also mean the the change in expenditure for subtitute goods to a change in price in an existing good. Hence expenditure on other goods is the variable being measured and as such, it is not held constant
ANS A
Q17
Those who continue to drive have to pay a charge but they get to enjoy a reduced amount of traffic. Hence their net welfare outcome is uncertain those who no longer travel lose as they dont drive as a result of the charge and are not better off by any means. Those who switch to public transport evade the charge and also enjoy reduced traffic but have to deal with discomfort and bus fares. Their welfare is also uncertain
ANS A
