Economics 9708 · AS & A Level
Law of diminishing returns
95 practice questions on Law of diminishing returns, with worked solutions and instant marking.
Under a privatisation policy, a government removes regulation from bus services and transfers its publicly owned bus services to the private sector. Which outcome is least likely to happen after these changes?
Feb/March 2016
What could assist in achieving allocative efficiency?
Feb/March 2017
Which argument has frequently been used to support the privatisation of state enterprises?
Feb/March 2020
What kinds of activity would be classified as direct government provision of goods and services?
Feb/March 2020
A government is trying to achieve allocative efficiency in a nationalised industry. What action will the government take?
Feb/March 2021
‘Governments, unlike the private sector, can put in place some of the conditions needed for the efficient allocation of resources. It is, therefore, best if there is as much government involvement in the economy as possible.’ Discuss whether you agree with this opinion.
May/June 2006
Explain the meaning of productive and allocative efficiency.
May/June 2007
Discuss whether this pricing approach can be justified by theory.
May/June 2008
Explain the effect on national income when spending on infrastructure increases.
May/June 2009
What is one benefit, rather than a drawback, of cost-benefit analysis when deciding whether a government should invest in a project?
May/June 2011
The government must select the most suitable one from four potential locations for a port. The benefits and costs for each location are presented in the table in $m. Which location would be selected?
May/June 2012
In Europe, it was agreed that farm subsidies would be given to farmers who safeguard the environment as well as produce food. What would this mean for farmers who receive the subsidy?
May/June 2012
A government decides to privatise a state monopoly. What measures should the government take to make sure this leads to greater efficiency?
May/June 2012
A government plans to privatise a state monopoly. What action should the government take to help ensure that this leads to improved efficiency?
May/June 2012
Explain the distinction between productive and allocative efficiency and discuss the suggestion that such efficiencies can be achieved only through government intervention.
May/June 2012
The article opens by saying that Malaysia is a market-orientated economy. Identify evidence in the article that (i) supports this view; and (ii) goes against this view.
May/June 2012
Achieving economic efficiency in the use of resources is essential. This can only be achieved if the private sector is expanded. Government intervention in the economy should, therefore, be kept to a minimum. To what extent do you support this view?
May/June 2012
Explain how productive efficiency differs from allocative efficiency, and discuss the claim that such efficiencies can be achieved only through government intervention.
May/June 2012
What trade-off do governments confront when they begin privatising a state monopoly?
May/June 2015
International conferences have taken place to examine the effects of global warming and to persuade governments to agree to improve efficiency in the use of resources by limiting the quantity of harmful gases produced by their country. Explain what is meant by an efficient use of resources and discuss whether efficiency can only be achieved if governments are involved.
May/June 2015
A government chooses to privatise a nationalised company by passing ownership straight to its managers and workers. What is the most likely reason for making this decision?
May/June 2016
What is one key difference between how cost-benefit analysis is used for public-sector investment projects and how it is used for private-sector investment projects?
May/June 2016
What is likely to happen when the government privatises public sector monopolies?
May/June 2017
The government sells off the telecommunications industry. What is least likely to increase?
May/June 2018
Which government policy aims to correct ‘market failure’?
May/June 2018
Which government policy does not seek to correct inefficiency in the allocation of resources?
May/June 2018
A dictionary gives efficiency as ‘the power to produce the result intended’. Explain what is meant by reaching economic efficiency and why this achievement is regarded as important.
May/June 2018
A government aims to shift its economy from central planning towards a market economy. Which policy would fit this objective?
May/June 2019
Which statement is not a reason used to support the process of privatisation?
May/June 2019
Explain, with the help of a diagram, the disadvantages for consumers when a maximum price is introduced in a market for an essential food item.
May/June 2019
Distinguish between regressive and progressive taxes and explain whether an income tax or a specific indirect tax would be used to make post-tax incomes more equal.
May/June 2019
If externalities are absent, at what output level would a nationalised firm produce in order to maximise social welfare?
May/June 2019
What conclusion can be drawn from the diagram? (Diagram: privatisation transactions and revenue for the EU 1981–2012, with revenues from PO and PS and the number of transactions shown.)
May/June 2020
What is the most likely result when the government privatises public sector organisations?
May/June 2020
Explain, using examples, how private goods differ from public goods and why public goods are not supplied by private enterprise.
May/June 2020
Discuss whether competitive markets in the private sector are the most effective means of achieving an efficient allocation of resources.
May/June 2020
Discuss whether competitive markets in the private sector are the most effective way to achieve an efficient allocation of resources.
May/June 2020
In some countries, the government has granted a licence to only a small number of private firms to supply public utilities such as water and electricity. What should governments do to encourage these profit-seeking private firms not to charge consumers too much?
May/June 2021
What is meant by ‘efficiency’ when considering the use of resources?
May/June 2021
Give one example of how ‘nudge’ theory can be used to encourage healthy eating.
May/June 2022
One cause of market failure is the presence of public goods. Which policy option would be suitable for dealing with this market failure?
May/June 2023
One cause of market failure is the presence of public goods. Which policy option is suitable for dealing with this market failure?
May/June 2023
To raise allocative efficiency, economists often recommend that governments withdraw the subsidies already given to private providers of education. Using a diagram, evaluate this advice.
May/June 2023
To raise allocative efficiency, economists often advise governments to withdraw subsidies already given to private providers of education. Using a diagram, Evaluate this advice.
May/June 2023
The table gives the yearly percentage change in output per worker employed for four nationalised industries both before and after privatisation (railways: -4 -> 2; electricity: 7 -> 9; shipbuilding: 4 -> -1; telecommunications: 6 -> 6). What conclusion can be drawn about the impact of privatisation?
May/June 2024
Singapore has among the world’s highest population densities. It reduces car use by imposing a high tax on second cars. Which further policy would also help to ease road congestion in the short run?
May/June 2024
A flood-control dam is an example of a good supplied directly by a government. Which statement about the direct provision of a flood-control dam is not correct?
May/June 2025
The marginal social benefit gained from consuming a drink is lower than the marginal private benefit. Which policy would be most suitable for improving resource allocation in this market?
May/June 2025
Explain what efficient resource allocation means in a free market.
Oct/Nov 2005
The table gives the anticipated costs and benefits of four government projects. The government can fund just one project. Which project ought the government select?
Oct/Nov 2010
Explain the difficulties involved in carrying out a cost-benefit analysis.
Oct/Nov 2010
Economic analysis states that the aims of the government include economic growth and economic efficiency. Explain in what ways achieving economic growth might clash with other macroeconomic aims of the government.
Oct/Nov 2010
A cost-benefit analysis for a planned underground railway gave the statistics shown below. What conclusions can be drawn from these statistics?
Oct/Nov 2011
What objective would economists agree any health care system should have?
Oct/Nov 2011
The elimination of market imperfections causes an increase in efficiency in the allocation of resources. Discuss whether you agree with this view.
Oct/Nov 2011
Explain what is meant by government macroeconomic policies and government microeconomic policies. Use two examples of policy from each category to illustrate your answer.
Oct/Nov 2011
The government is thinking about constructing flood defences beside a river. It has worked out the costs and benefits like this. Using cost-benefit analysis, which decision and explanation about the flood defences is correct?
Oct/Nov 2013
Explain, using a diagram, how the social cost of consuming some goods can be higher than the private cost of consuming them.
Oct/Nov 2013
Explain what is meant by efficiency in using and exploiting resources.
Oct/Nov 2013
A government puts in place tax incentives that encourage effort and enterprise. They also move income away from people who gain a higher marginal utility from money towards people who gain a lower marginal utility from money. What impact will these tax incentives have on efficiency and equity?
Oct/Nov 2014
A country operates a negative income tax system. In the diagram, the curve NT represents the country’s original tax schedule. If a change in the tax rate shifts the schedule to NT1, what is likely to happen to efficiency and to equity?
Oct/Nov 2014
Do you agree with this argument?
Oct/Nov 2014
Which government microeconomic policy is not usually designed to correct allocative inefficiency in an economy?
Oct/Nov 2015
What aim would economists agree that any health care system should have?
Oct/Nov 2015
Explain the meaning of economic efficiency.
Oct/Nov 2015
Which reason has frequently been given to support the privatisation of state enterprises?
Oct/Nov 2016
Privatisation may be carried out through selling shares to the general public (public offers, PO) or through a direct sale to a private company (private sales, PS). The diagram illustrates privatisation transactions and revenue for the European Union from 1981 to 2012. What can be concluded from the diagram?
Oct/Nov 2016
When governments choose microeconomic policy, they take account of both efficiency and equity. Which statement about the decisions that follow is correct?
Oct/Nov 2016
It has been claimed that the aim of resource allocation should be to create the greatest happiness for the largest number of people. Discuss whether economics has anything to say about the best way to maximise welfare from the use of resources.
Oct/Nov 2016
Comment on this view.
Oct/Nov 2016
Between 1990 and 2000, every country named below moved closer to a market economy by means of privatisation programmes. What conclusion can be drawn about the pace of privatisation?
Oct/Nov 2017
The graph illustrates the overall economic welfare gained by citizens from government spending on health and education services. If the government has $60 billion from its budget to divide between health and education services, which distribution will produce the greatest level of welfare for its citizens?
Oct/Nov 2017
Which is the most probable motive for the privatisation of state-owned industries?
Oct/Nov 2017
Discuss whether privatisation and a rise in competition would obstruct or improve the achievement of economic efficiency.
Oct/Nov 2017
Explain what is meant by economic efficiency. Analyse how economic efficiency in that country changed because of this movement.
Oct/Nov 2017
Discuss whether economic efficiency can always be achieved in a market economy.
Oct/Nov 2018
Explain, with the help of a diagram, the effect of a subsidy and its incidence in a market for essential transport.
Oct/Nov 2019
In March 2017, the Indian government announced a new five year programme of investment in the country’s nationalised railway system. Explain, with the aid of an aggregate demand and aggregate supply diagram, how this investment is likely to influence India’s output, prices and employment.
Oct/Nov 2019
What do economists agree ought to be the objective of any healthcare system?
Oct/Nov 2019
Explain the meaning of and whether there is a link
Oct/Nov 2019
A government plans to privatise a state-owned company. What action should the government take to help make sure that this leads to greater efficiency?
Oct/Nov 2020
For what reasons could a government choose to privatise the railway industry in a country?
Oct/Nov 2020
What is the primary purpose of cost-benefit analysis?
Oct/Nov 2020
What is the key characteristic of nudge theory?
Oct/Nov 2020
Explain what is meant by 'Pareto optimality' and whether it is correct to say that an optimal allocation of resources would result if a good's price equalled its marginal cost.
Oct/Nov 2020
What is one example of privatisation?
Oct/Nov 2021
A government deregulates several industries with the objective of increasing allocative and productive efficiency. Which change would make it less likely that the government achieves this aim?
Oct/Nov 2021
Governments adopt various policies to encourage energy to be used more efficiently. Which policy is least likely to bring about this outcome?
Oct/Nov 2021
Which example best demonstrates the process of privatisation?
Oct/Nov 2022
Explain what is meant by cost benefit analysis and assess how a government could use it when deciding whether a new hospital should be built.
Oct/Nov 2022
Which policy is not aimed at correcting a market failure?
Oct/Nov 2023
Under which circumstances is the accuracy of cost-benefit analysis in decision making most likely to be reduced?
Oct/Nov 2023
Explain what equity means and how the ban on motorcycle taxis and tricycles affects equity for commuters in Lagos.
Oct/Nov 2023
Evaluate, using appropriate diagram(s), how far two policies designed to cut negative externalities may also raise allocative efficiency.
Oct/Nov 2024
Privatisation is often demanded by the International Monetary Fund (IMF) and the World Bank before they agree to provide support to countries needing loans, grants, debt relief and debt cancellation programmes. Evaluate the view that privatisation will always improve the allocation of resources in a country.
Oct/Nov 2024