Economics – Chapter 8 Practice Questions

Question 1 (p. 195)  1 a) Using a suitable diagram, explain the difference between short-run equilibrium and long-run equilibrium in perfect competition.  In the short-run, perfectively competitive firm will produce at the level of output at which the marginal revenue (MR) = marginal cost (MC), which is the profit-maximization rule. However, following this rule does … Continue reading →

Economics – Chapter 7 Practice Questions

Question 1 (p. 175) 1 a) Explain the relationship in the short run between the marginal costs of a firm and its average total costs. For firms, there are marginal costs (MC) – the cost of an additional unit of output needed to produce the output, and average costs (AC) – the total cost divided by the number … Continue reading →

Economics – Chapter 6 Practice Questions

Question 2 (p. 147) 2 a) What are positive externalities and how do they arise? Illustrate your answer with examples. Positive externalities can be of production and consumption. When a production of a good creates benefits for third parties, there is a positive externality of production, also known as a positive spillover effect. An example of … Continue reading →

Economics Photograph: The Co-op Supermarket

Take a photograph of an economic transaction. Describe and analyze the photograph using economic concepts.  The Co-op supermarket is a popular supermarket in Japan. The one in the photographs is one of the Co-op chains in Nishinomiya city, located close to the JR train station. Entrance: fresh fruit The very first items the customer sees … Continue reading →

Economics – Chapter 5 Practice Questions

HL Exercises (p. 121) 35. 36. 44. What is the effect of price controls on allocative efficiency? Allocative efficiency is achieved when society produces enough of a good so that marginal benefit equals marginal cost, ie. when supply meets demand. Price controls which include price ceilings and price floors eliminates allocative efficiency in a competitive market. … Continue reading →

Economics – Chapter 4 Practice Questions

Question 1 (p. 97) 1a) With the use of examples, explain why some products have a low price elasticity while others have a high elasticity. Price elasticity of demand (PED) tells how much the quantity demanded of a good will decrease when the price of that good increases – it is a measure of the responsiveness … Continue reading →

“Japan Senior Spending Lifts” Extended Response

Senior Spending to Give Japan a Lift (The Wall Street Journal) 1. Explain which non-price determinant of demand is affecting the market. The non-price determinant of demand that is affecting the Japanese market is the consumers’ tastes and preferences. As Japan’s population rapidly ages, the market produces goods and services that suit the “senior generation” tastes and … Continue reading →