Long Essays May 1990 May 2015

Transcription

1 Microeconomics Long Essays May 1990 May What alternative solutions might an economist suggest to the problem of traffic congestion? What are the advantages and disadvantages of each of these solutions? [M 90, 6] 2. Under what conditions can a firm sell the same product at different prices? [N 90, 5] 3. European governments have a policy of supporting farm incomes with artificially higher prices for certain foodstuffs. What are the economic effects of this on Europe and the rest of the world? [M 91, 4] 4. Pollution is sometimes said to be an example of market failure. What is meant by this? How might governments encourage markets to work towards helping solve environmental problems? [M 93, 3] 5. In what circumstances might a government use price controls to influence a market? [N 93, 3] 6. Is the existence of monopoly in an industry likely to improve or worsen resource allocation? [N 93, 4] 7. Why are many industries, such as car manufacturing, becoming more oligopolistic? How are the price and output decisions of firms affected by this trend? [M 94, 3] 8. Economic theory makes certain assumptions about market conditions, in order to study how firms decide on prices and output. Are these assumptions realistic, and do firms always behave in the real world as Economics textbooks predict? [M 95, 5] 9 Briefly explain what economists mean by the word market. What kind of problems are markets good at solving, and what are they bad at solving? [N 95, 3] 10. Why does there appear to be a movement towards oligopoly in certain markets? How does this movement affect the way in which producers make decisions, and how does it affect the welfare of consumers? [N 95, 5] 11. Evaluate the roles of markets and planning in an economy today? How are these roles likely to change? [M 96, 6]

2 12. What are the assumptions behind the model of a perfectly competitive industry in long-run equilibrium? Why do economists make assumptions of this sort? Are such assumptions realistic? [N 96, 3] 13. a. Why are profits important in a market economy? b. What problems might a country experience if it tries to use the profit motive to produce everything? [M 97, 3] 14. a. What are economies of scale, and why have they become so important in modern economics? (12) b. In view of this importance, why do so many small enterprises operate successfully in the world today? (13) [M 97, 5] 15. a. Explain what externalities are and how they may arise. (15 marks) b. Discuss whether governments should always involve themselves in markets with substantial externalities. [Spec, 3] 16. a. What are the main features of an oligopolistic market? (15 marks) b. Do oligopolies work in favor of, or against the interest of consumers? ) [Spec, 4] 17. a. What do economists mean by externalities or spillover effects? b. How does an understanding of externalities (spillover effects) assists economists in analyzing environmental problems? [M 98, 4] 18. a. What are natural monopolies and why are they considered a danger if left unregulated? b. Is nationalization of natural monopolies the best method of improving their economic efficiency? [N 98, 3] 19. a. Distinguish between private costs and benefits and social costs and benefits. (8) b. Explain how an increase in the number of cars n the roads of a country might lead to a misallocation of resources. (8) (c) Evaluate the ways in which a government might remedy this misallocation. (9) [M 99, 3] 20. a. Carefully explain what is it that price, income and cross elasticities of demand are meant to measure. b. Discuss the practical importance of the concept of price elasticity of demand for (i) business organizations (ii) the government [M 99, 4]

3 21. a. Why do environmental issues cause problems to economists? b. Discuss solutions an economist might suggest to the problem of overfishing? [N 99, 3] 22. a. State the law of demand and distinguish between movements along the demand curve and shifts of the demand curve. b. Explain, with the help of diagrams, the effect of an increase in the price of petrol is likely to have on (i) The market for cars. (ii) The market for coal. [M 00, 3] 23. Monopoly price is higher and output smaller than is socially ideal. The public is a victim. (J.K. Galbraith, 1974) a. Explain the economic reasoning behind the statement that monopoly price is higher and output smaller than is socially ideal. b. To what extent do you agree that the public is always the victim of monopoly? [M 00, 4] 24. a. Explain why environmental problems are considered to be examples of market failure? b. To what extent can government intervention correct this failure? [N 00, 3] 25. a. Under what conditions is price discrimination possible and profitable? (12) b. Who gains and who loses from price discrimination? Illustrate your answer with examples. (13) [N 00, 4] 26. a. Using suitable diagrams, explain why there is likely to be an absence of long run economic profits in perfect competition. (10 marks) b. To what extent might consumers benefit from increased competition between firms? [M 01, 3] 27. a. How does a monopoly maintain supernormal (or abnormal) profit in the long run? b. Discuss whether monopoly is always undesirable? [N 01, 3] 28. Discuss and evaluate the proposition that perfect competition is a more efficient market structure than monopoly. [M 02, 3] 29. a. Explain why pollution is an example of a market failure?

4 b. To what extent can the market system protect the environment? [N 02, 3] 30. a. Explain what does an economist means by efficiency? b. Discuss whether the achievement of efficiency is possible and desirable. [N 02, 4] 31. a. Explain the role that prices play in the allocation of resources in free market economies? b. Evaluate, using examples, the options available to governments to overcome the failure of markets arising from the production and consumption of demerit goods. [M03, 1] 32. a. Explain how monopoly power might arise. b. Evaluate the extent to which governments should seek to control the growth of monopoly power. [M03, 2] 33. National policies and international agreements must be implemented in order to reduce global environmental problems. a. Using the concepts of market failure, explain the statement above from an economist s point of view. b. With references to both national policies and international agreements, evaluate three solutions that could be recommended by economists. [N 03, 1] 34. Discuss the economic arguments for and against imposing substantially higher levels of taxation on the sale of alcohol. [M04, 1] 35. a. In what ways do firms operating in different market structures compete? b. Discuss the view that the more competition there is within each industry, the better. [M04, 2] 36. a. Explain the concepts of maximum and minimum price controls. b. Evaluate the idea that government intervention in the form of price ceilings and price floors is well intentioned, but often leads to undesirable side effects. [N 04, 1]

5 37a. a. Explain how a monopolist may be able to earn supernormal (abnormal) profits in the long run b. Production by a monopolist will always be against the interests of consumers. Discuss. [Spec] 37. a. Explain how profit is determined in perfect competition b. Whatever the type of market structure, profit maximization will always be the only goal of firms. Discuss. [May 2005] 38. a. Explain the differences between monopolistic competition and oligopoly as market structures b. Discuss the differences between a collusive and a non-collusive oligopoly [Nov 2005] 39. a. Carefully distinguish between merit goods, demerit goods and public goods b. Evaluate the view that governments should always intervene in markets for such goods as cigarettes and alcohol [May 2006] 40. a. Explain the necessary conditions for price discrimination to take place b. Discuss the advantages and disadvantages of price discrimination for consumers and producers [Nov 06] 41. a. Explain how barriers to entry may affect market structure b. Evaluate the view that monopoly is an undesirable type of market structure [May 07] 42. a. Explain the difference between short run equilibrium and long run equilibrium in monopolistic competition b. Perfect competition is a more desirable market form than monopolistic competition. Discuss. [Nov 07]

6 43. a. Explain how a firm operating in an oligopolistic market might attempt to increase its market share b. Evaluate the view that producers, and not consumers, are the main beneficiaries of oligopolistic market structures [May 08] 44. a. Explain the determinants of price elasticity of demand. b. A deterioration in a country s terms of trade will always be disadvantageous for the current account balance. Evaluate this statement using the concept of price elasticity of demand. [Nov 08] 45. a. Explain the concepts of allocative and productive (technical) efficiency. b. Monopolies are inefficient and therefore always act against the public interest. Discuss this statement. [Nov 08] 46. a. In the theory of the firm, a distinction is made between short run cost curves and long run cost curves. Using appropriate cost curve diagrams, explain this distinction. b. Evaluate the view that greater economic efficiency will always be achieved in perfect competition as compared to monopoly. [May 09, 1] 47. a. Explain why a firm may practice price discrimination and the necessary conditions for it to take place b. Although a firm may pursue a range of goals, economists usually assume that profit maximization is the main goal. Discuss this statement. Nov a. Explain the importance of price elasticity of demand and cross price elasticity of demand for business decision making b. Studies have shown that the demand for tobacco tends to be highly price inelastic. Evaluate the view that governments can best reduce smoking by substantially increasing taxes on cigarettes. May 10, 1

7 50. a. Explain why negative externalities of production are an example of market failure b. Evaluate three policies that governments might implement to reduce negative externalities associated with the environment Nov 10, 1 50a. a. Using an appropriate diagram, explain how a monopolist might be able to make supernormal (abnormal) profits in the short run, and why these profits might continue to be earned in the long run b. Evaluate the view that monopolistic competition is a more economically desirable market form than monopoly May 11 TZ1 50b. a. Using at least one diagram, explain why a firm in perfect competition might only be able to make supernormal (abnormal) profits in the short run and not in the long run b. Evaluate the view that perfect competition is a more desirable market form that oligopoly May 11 TZ2 51. a. Using an appropriate diagram, explain how a monopolist might be able to make supernormal profits in the short run, and why these profits might continue to be earned in the long run. b. Evaluate the view that monopolistic competition is a more economically desirable market form than monopoly. TZ1 May 12 51a. a. Explain the economic factors which may encourage the formation of a monopoly b. Evaluate the view that natural monopoly is a more desirable market structure than perfect competition May 12 TZ1 52. a. Using at least one diagram, explain why a firm in perfect competition might only be able to make supernormal(abnormal) profits in the short-run and not in the long-run. b. Evaluate the view that perfect competition is a more desirable market form than oligopoly. TZ2 May 12

8 52a. a. Explain why, in markets dominated by a few firms, prices may remain relatively stable b. An industry with a larger number of firms will experience lower prices and greater efficiency than an industry with a smaller number of firms. Evaluate this view. TZ2 May 12 52b. a. Explain why firms in monopolistic competition can make economic (abnormal) profits only in the short run b. Compare and contrast the market structures on monopoly and monopolistic competition Specimen for c. a. Explain the possible negative externalities that might arise from the increased use of cars b. Discuss economic policy options that a government might use to reduce negative externalities that might arise from the increased use of cars Specimen for a. Explain why a monopoly can earn supernormal (abnormal) profits in the long-run. b. Evaluate the reasons why a government might allow a competitor into an industry that was previously a monopoly. TZ1 May a. Explain how welfare loss might result from monopoly power b. Discuss the effectiveness of government policies (legislation and regulation) to reduce monopoly power May 13 TZ1 55. a. Using a price ceiling diagram, analyze the impact a maximum price may have on the market for food b. Discuss the policies a government might use to make food more affordable to low income groups Nov 13

9 56. a. Explain why governments impose indirect taxes b. Discuss two possible government responses to threats to sustainability Nov a. Using diagrams, explain how a change in one of the determinants of demand might increase the price of rice and how a change in one of the determinants of supply might decrease the price of rice. b. Discuss the consequences of providing a subsidy on the production of rice for producers, consumers and the government May 14 TZ1 58. a. Using diagrams, explain why a perfectly competitive firm can make economic (abnormal) profits only in the short run b. Discuss the consequences of a perfectly competitive industry becoming a monopoly May 14 TZ1 59. a. Analyze the private and external benefits associated with the consumption of university education b. Evaluate the policies a government might use to increase the consumption of university education May 14 TZ2 60. a. Using a diagram, explain why firms in monopolistic competition are neither allocatively nor productively efficient. b. Examine the view that the market for food is more beneficial to consumers if dominated by a monopoly retailer (supermarket) rather than a by a large number of small shops operating under monopolistic competition May 14 TZ2 61. a. Using diagram(s), explain the signaling and incentive functions of price b. Evaluate the view that the market failure cause by the consumption of demerit goods is best dealt with through the use of taxation. Nov 14

10 62. a. Explain why firms might wish to collude b. Discuss the view that governments should always try to prevent a monopoly from occurring in a market Nov a. Explain how changes in price work to reallocate resources in a market b. Discuss the view that the overuse of common access resources is best addressed by government. TZ1 May a. Explain why prices tend to remain stable in oligopolistic markets b. Oligopolists often possess too much monopoly power. Evaluate whether governments should intervene in oligopolistic markets. TZ1 May a. Explain two possible government responses to the abuse of monopoly power b. Evaluate the view that monopolies, despite their inefficiencies, may often be considered desirable TZ2 May Nov 15

11 Macroeconomics 1. Discuss whether government macroeconomic demand management policies raise the real output of an economy in the long-run? [M 89, 4] 2. Most nations tax personal income. What are the arguments for and against personal income taxes? At what rates would you recommend setting income taxes? How would considerations of equity and efficiency influence your decision? [M 90, 5] 3. Unemployment can either be structural or cyclical. Explain how would government intervention differ in each case? [N 90, 4] 4. Under what conditions are high interest rates likely to benefit or damage a country's economy? [M 91, 5] 5. A reduction in unemployment is desirable, but it is certain to lead to other problems, such as inflation or balance of payments difficulties. Discuss. [M 91, 6] 6. Discuss the view that unemployment is a more serious economic problem that inflation. [M 92, 5] 7. Distinguish between supply side policies and demand management policies. Explain why many governments focus on the supply side? [M 93, 4] 8. Discuss whether there is a relationship between money supply and inflation. [N 93, 5] 9. Explain why might knowledge of the value of the multiplier be useful to government policy makers? Should governments make more use of this and other Keynesian ideas, or should they adopt non-keynesian policies? [N 95, 6] 10. Explain why investment is important to a country? Explain why the rates of investment differ in countries and what is the role of the government in encouraging investment? [M 96, 3] 11. Explain the social costs of unemployment? In view of these costs, explain why some countries give higher priority to tackling other problems such as inflation and balance of payments difficulties? [M 96, 4]

12 12. A government introduces supply side policies in order to have a flexible work force. Discuss the effectiveness of such policies. [N 96, 4] 13. a. What is monetarism? b. Explain how would a monetarist s view of economic problems (such as inflation and unemployment) and policies differ from that of a Keynesian? [M 97, 4] 14. Evaluate the costs and benefits for a country if its government adopts privatization as a major policy. [M 98, 3] 15. a. Is full employment possible? (8) b. Is full employment desirable (8) (c) Do international trading blocs such as NAFTA or the EU increase or reduce unemployment? (9) [M 98, 5] 16. To what extent is it wise for governments to follow a policy of always balancing their national budgets? [N 98, 4] 17. a. Briefly explain the various objectives of macroeconomic policy. b. Critically examine the view that the control of inflation should always be the most important objective of governments. [M 99, 5] 18. Is there a long-term trade-off between inflation and unemployment? [N 99, 4] 19. a. Explain how governments can use fiscal policy to redistribute income. b. Evaluate the advantages and disadvantages of policies aimed at reducing income inequalities [M 01, 5] 20. What is wanted is not inflation (a rise in the general price level) or deflation (a fall in the general price level) but price stability. Discuss. [N 01, 4]

13 21. a. What are the consequences of unemployment in an economy? b. Examine the policies that may be used to reduce unemployment. [M 02, 4] 22. a. What are the main macroeconomic objectives of government? b. Assume the government chooses to pursue one of these objectives. Evaluate the possible consequences for the other objectives. [N 02, 5] 23. Evaluate the view that the achievement of price stability should be the major objective of government economic policy. [M03, 3] 24. a. With the help of diagrams distinguish between demand-pull and cost-push inflation. b. Explain which policies would be appropriate to deal with these two types of inflation [N03, 3] 25. Unemployment remains persistently high in a majority of countries throughout the world a. Explain the economic problems that high unemployment may cause for a country. b. Discuss the reasons why governments find the goal of full employment difficult to achieve. [M04, 3] 26. Evaluate the effectiveness of demand-side and supply-side policies in the short and long run. Nov a. Explain the possible causes of inflation? b. Evaluate possible policies that might be used to lower the natural rate of unemployment [Spec] 28. a. Using suitable examples, explain the difference between the multiplier effect and the crowding-out effect. ( and explain the significance of automatic stabilizers)

14 b. Evaluate the proposition that the most effective way to reduce unemployment is through the use of demand-side policies. [May 05] 29. a. Explain the relationship between the Lorenz curve and the Gini coefficient b. Evaluate the effectiveness of the various methods that government may use to redistribute income [Nov05] 30. a. Explain the difference between demand-side and supply-side policies b. Higher economic growth can only be achieved through the implementation of supply-side policies. Discuss. [May06] 31. a. Explain how interest rates can be used to bring about an increase in economic activity b. Discuss the strengths and weaknesses of demand-side policies [Nov 06] 32. a. Explain possible causes of inflation (10 points) b. Evaluate the possible effects of a persistently high inflation rate on a country s current account balance and its exchange rate (15 points) [Nov 06] 33. a. Explain why a government might find it difficult to maintain a low rate of inflation as the economy approaches full employment b. Evaluate the proposition that the priority in economic management should be the maintenance of low unemployment [May 07] 34. a. Using one or more diagrams, explain the difference between the equilibrium level of national income and the full employment level of national income b. Evaluate the policies a government may use to increase the full employment level of national income [Nov 07] 35. a. The effect of an increase in aggregate demand on output and the price level depends on the shape of the aggregate supply curve. Explain this statement.

15 b. Evaluate the likely effects of a falling rate of inflation (or, separately, of deflation) on the performance of an economy [May 08] 36. a. Explain the difference between progressive taxation and regressive taxation. b. Evaluate the possible effects of a decrease in direct taxation on a country s inflation rate, unemployment rate and balance of payments. [Nov 08] 37. a. Explain the possible causes of a rise in the rate of inflation in an economy. b. Evaluate the possible impact on economic performance that may result from a government decision to bring inflation under control. [May 09] 38. a. Explain how the rate of inflation might be measured and the factors which might make accurate measurement difficult b. Evaluate the extent to which an individual government can influence the rate of inflation in its country [Nov 09] 39. a. Explain why a country may wish to reduce its rate of inflation b. Evaluate the likely impact on the economy of relying on higher interest rates to reduce the rate of inflation May 10, 2 TZ1 40. a. Explain why a country may wish to reduce its unemployment rate b. Evaluate the likely impacts on the economy of relying on demandside policies to reduce the unemployment rate May 10, 2, TZ2 41. a. Explain how supply-side improvements to an economy may be achieved through the use of taxes and government spending b. Evaluate the use of supply-side policies to reduce unemployment Nov 10

16 41a. During the global financial crisis of , there was a fall in consumer spending in many countries. a. Explain the factors which might be responsible for causing consumer spending to fall b. Evaluate the possible consequences of falling consumer spending for a country s macroeconomic performance May 11 TZ1 41b. a. Explain two policies a government might use to redistribute income b. Measures to promote greater income equality should be a key feature of government economic policy. Evaluate this statement. May 11 TZ2 42. During the global financial crisis of , there was a fall in consumer spending in many countries. a. Explain the factors which might be responsible for causing consumer spending to fall b. Evaluate the possible consequences of falling consumer spending for a country s macroeconomic performance May 2012 TZ1 42a. a. Explain why governments may view deflation as a threat b. Evaluate the view that a low and stable rate of inflation is beneficial for an economy May 12 TZ1 43. a. Explain why governments may pursue the macroeconomic goals of low inflation and low unemployment b. Evaluate the extent to which the use of expansionary demand-side policies may lead to conflicts between the various goals of macroeconomic policy May 12 TZ2 44. a. Explain how a government could bring about a more equal distribution of income b. Evaluate the effectiveness of government policies designed to reduce inequalities in income Nov 12

17 44a. a. Explain what might happen to the level of inflation if a government decides to move from a budget surplus to a budget deficit b. To what extent is an increase in interest rates the most effective cure for inflation? Specimen for May 13 44b. a. Analyze the methods by which GDP may be measured b. Using real GDP data, is a very useful means of comparing economic activity between countries. Discuss this statement. Specimen for May a. Explain why the market system may not result in an equitable distribution of income b. Evaluate government policies to promote equity in terms of their effects on efficiency in the allocation of resources May a. Using a diagram, explain how expansionary monetary policy might be used to close a deflationary (recessionary) gap b. Discuss why, in contrast to the monetarist / new classical model, an economy can remain stuck in a deflationary gap according to the Keynesian model May 13 TZ2 47. a. Explain how labor market reforms may be used to promote economic growth b. Market-oriented supply-side policies will always be more effective in promoting economic growth than demand-side policies. To what extent do you agree with this statement? May 13 TZ2 49. a. Explain how changes in the size of the circular flow depend on the relative size of injections and leakages b. Evaluate the use of national income statistics for making comparisons of the standard of living over time Nov a. Explain why measuring the rate of inflation using a consumer price index (CPI) may not be accurate b. Evaluate two government policies to reduce inflation Nov 13

18 51. a. Using two AD/As diagrams, explain cost=push and demand-pull inflation b. The rate of inflation can be most effectively reduced through the use of monetary policy. To what extent do you agree with this statement? May 14 TZ1 52. a. Explain two factors which might cause economic growth b. Evaluate the view that the benefits of economic growth will always outweigh the costs. May 14 TZ1 53. a. Distinguish between structural and demand-deficient (cyclical) unemployment b. Discuss the view that the problem of unemployment can be reduced through the use of supply-side policies Nov a. Using an appropriate diagram, explain how a recession might lead to more poverty b. Evaluate the view that attempts to achieve greater equity in the distribution of income will reduce economic efficiency Nov a. Explain what is meant by natural rate of unemployment b. Discuss the view that there is no trade-off between inflation and unemployment TZ1 May a. Explain how business spending on research and development and government expenditure on infrastructure might shift the ong-run aggregate supply curve b. Evaluate the effectiveness of interventionist supply-side policies to achieve economic growth TZ1 May a. Using the concept of the Keynesian multiplier, explain the possible impact of a rise in government spending on economic growth

19 b. To what extent might unemployment represent an economic and social problem? TZ2 May Nov 15