BA1 Fundamentals of Business Economics Question and Answers

£1,021

£1,070

£1,225.15

£1,155.12

Demand would fall as consumers would look for alternative teddy bears to buy

Demand would increase because the teddy bears would be seen as more prestigious by consumers due to their higher prices

Demand would fall as the relationship between price and demand as shown in the graph is inelastic

Demand would increase as the relationship between price and demand as shown in the graph is elastic

£20 million

£40 million

£80 million

£400 million

an economic union.

a customs union.

a free trade area.

a common market

8.87%

8.86%

8.9%

8.83%

Production processes

Rood congestion

The decision to source workers from abroad

Antisocial behaviour

The high unemployment rate in the local area

The poor infrastructure in the local area

Heineken/Punch Pubs will not be able to charge excessive prices for alcoholic beverages served at their pubs

There will be a greater variety of pubs for consumers to choose from in certain areas

Heineken will divest in a certain number of pubs where the merger would have created monopolies

The companies' divestment of pubs in certain areas could lead to the closure of the majority of pubs in said area

The CMA will use this decision as a precedent for others in the future

Purchase oil produced within the country in order to support the domestic oil industry

Invest in retraining those working in the oil industry so they can enter other domestic industries which are currently more profitable

Dump its oil exports into the trading bloc by exporting the oil at an artificially low price

Begin extracting and exporting coal as a substitute for oil

Allow the oil industry in Country X without any further investment to fail as it is a sunset industry

It is a supply-side policy which will lead to a more productive workforce in the future

It is a policy which will increase demand internationally for the higher standard of education in Britain

It will lead to a reduction in taxes

It will lead to more private sector involvement in education

Relevance

Accuracy

Reliability

Cost efficiency

the price that is determined by demand and supply.

the price that includes tax

the value that is adjusted for inflation.

the price that maximise profits.

$2, 400

$1, 400

$2, 500

$4, 000

Capital account

Financial account

Profit account

Current account

individual users do not have sufficient knowledge to appreciate their importance.

individual users do not have sufficient incentives to privately fund their provision.

individual users do not have sufficient bargaining power to secure a low price.

individual users do not have sufficient funds to purchase them

Devaluate the exchange rate in order to increase exports.

Increase the money supply in order to stimulate domestic consumption.

Appreciate the exchange rate in order to reduce imports.

Reduce the interest rate in order to stimulate investment.

Introduce tariffs on imported goods in order to favour domestic producers.

+ $l8m

+ $12.5m

+ S3m

+ $0-6m

+1.87

+0.6

-2

-0.5

1, 3 and 4

1, 2 and 4

2, 3 and 4

1, 2 and 3

An increase in exports.

A rise in imports.

More domestic companies invest abroad.

Outward financial flows.

Prices will have to increase due to increased inflationary pressures

Sales will increase as consumers have stable incomes in the short term.

The cost of financing projects through loans will increase

The cost of holding stock will reduce

The model is based on historical data, so it is of little use in making forecasts

1 percent increase in the number of fixed broadband internet subscribers will lead to 0 3 percent increase in household final consumption expenditure.

A non-linear relationship is suggested by the model between household final consumption expenditure and the number of fixed broadband internet subscribers.

The model makes accurate forecasts on household final consumption expenditure in Country and therefore it should be widely applied to most countries and regions.

Banker to the banking system

Supervision of the banking system

Banker to the government

Lender of last resort to the banking system

Maintain adequate liquidity

Generate adequate profitability

Maintain adequate security of lending

Exercise adequate risk management

the expected cash flows from the project

the scrap value of the capital at the end of the project's life

interest rates

the net present value of alternative projects

Economic welfare is maximized

Government expenditure on the provision of public goods increases

The incentive to provide private health care through the market disappears

Provision of merit goods by the state is taking place

A debenture

A commercial bill

Ordinary shares

Overdraft

Markets within the European Union where foreign currencies are bought and sold.

The market for the single European currency, the euro.

The market for bank deposits denominated in a currency other than that of the country where the bank is located.

The market for bank deposits which can be switched into any other currency at 24 hours notice.

Holder of bank accounts on behalf of the commercial banks

Lender of liquidity to the commercial banks

Provider of capital and liquidity to the government

Chief advisor to government on taxation policy

Maturity transformation

Aggregation

Risk transformation

Money transmission

Shares

Certificate deposit

Government undated stock

Long dated bonds

Lender of the last resort

Banker to the commercial banks

The conduct of fiscal policy

Regulation of the banking system

-1

-0.5

+0.5

+1

Lift quantitative restrictions on bank lending

Lower the capital adequacy requirements for banks

Buy government bonds from the banks

Ease the liquidity ratios banks need to hold

Excessive lending to the sub-prime mortgage market

Excessive lending by commercial banks against limited reserves

Economic recession and the credit crunch

Excessively complicated financial assets which disguised risks

Life insurance companies

Building societies

Finance houses

Investment exchanges

Increasing productivity of labor

Increasing returns to scale

External economies of scale

The benefits of the division of labor

Small firms do not generally raise finance on the capital market

Banks may refuse to lend to small firms because of the risk involved

Small firms are common in industries which display increasing returns to scale

Small firms are common in industries where there are niche markets

It will create a shortage of the product and incentives for producers and consumers to evade the policy

It will create a surplus of unsold produce that will need to be paid for from taxation

It will not affect market price or producer incomes at the present time

It will increase farm incomes but eventually force the government to introduce maximum quotas on production

The existence of significant economies of scale

Important production processes are subject to patents

Low price elasticity of demand for the product

Extensive product differentiation in the industry

Steel

Second-hand cars

Public transport

Motor insurance

The demand curve to the right

The supply curve to the right

The demand curve to the left

The supply curve to the left

Consumer expenditure will fall as price rises

Producers' incomes will rise as price falls

It is a product with many close substitutes

Total quantity sold will fall as price rises

A merit good

An external social cost

A diseconomy of scale

A public good

the gains from the division of labor are exhausted

all available economies of scale have been exhausted

the market for the firm's product becomes saturated

difficulties in managing a large firm lead to rising long run average costs

Reduce output

Advertise the product to increase demand

Cut fixed costs

Produce a higher output

Cheaper procurement via on line search and ordering

Reduced transport costs from internet buying

Lower entry barriers by reducing the need for expensive premises

Reduced transactions costs leading to low variable costs

an extension in demand, a contraction in supply and a market shortage

a decrease in demand, an extension in supply and a market surplus

a contraction in demand, an increase in supply and a market surplus

a contraction in demand, an extension in supply and market surplus

the demand for labor and the supply of labor are both price inelastic

the demand for labor and the supply of labor are both price elastic

the demand for labor is price inelastic and the supply of labor is price elastic

the demand for labor is price elastic and the supply of labor is price inelastic

Marginal revenue is zero

Marginal revenue equals marginal cost

Price equals marginal revenue

Total cost equals total revenue

A reduction in the money supply

Income tax cuts to promote labor market incentives

Tax cuts to expand aggregate demand

Increasing the job-seekers allowance and the period for which it can be claimed

High power, low interest

High power, high interest

Low power, high interest

Low power, low interest

Increased flows of factors of production between economies.

Higher international disparities in rates of return on capital.

Increasing interdependence between economies.

Higher levels of trade in components and semi-finished goods.

cannot use monetary policy to reduce the level of unemployment without causing a rise in interest rates.

can only use fiscal policy to reduce the rate of unemployment in the short run but not in the long run.

can only use expansionary policy to reduce the level of unemployment if it is prepared to accept a higher rate of inflation.

in the long run expansionary fiscal and monetary policy can only lead to higher inflation and higher unemployment.

Expenditure in its shops by foreign diplomats based in the country

The country's contribution to foreign aid

A foreign company signing a contract guaranteeing to invest in a new factory in the country

Repayment of an IMF loan by the country's government

Improve the country's balance of payments on current account

Improve the price competitiveness of manufacturing firms in the country

Cause the country's terms of trade to deteriorate

Increase GDP but not GNP in the country

Withdrawals exceeding injections

Aggregate demand exceeding aggregate supply

Injections exceeding withdrawals

A fiscal deficit

Reduction of marginal rates of income tax.

Tariffs to encourage domestic suppliers of goods.

Deregulation of the financial sector.

Tax relief for business expenditure on research and development.

An inflow of capital on the capital account.

Lending abroad on the capital account.

A fall in the foreign exchange reserves

A surplus on the government budget.

An expansionary fiscal policy

The central bank cutting interest rates

Retraining schemes for redundant workers

A regulation extending employment rights for newly-hired workers

Are largely bought on credit

Are largely exported

Have a high price elasticity of demand

Are sold mainly to individual consumers

The economy's output gap

Investment to make good wear and tear of the national capital stock

Investment in human capital

Gross domestic product sustained over a number of years

Meet to agree tariff increases affecting internal trade between themselves

Trade freely with each other and impose their own national restrictions on trade with the rest of the world

Trade freely with each other and accept a common external tariff for trade with the rest of the world

Replace national currencies with a common currency such as the Euro

Reductions in the marginal rates of taxation.

Increased entitlement to social security and unemployment benefits.

Increased public expenditure on education and training.

Privatization of public sector industries.