Economics 9708 · AS & A Level
Long-run costs and economies of scale
100 practice questions on Long-run costs and economies of scale, with worked solutions and instant marking.
A labour supply curve that slopes backward is one in which, after a particular point, the supply of labour
Feb/March 2016
Labour is the sole variable factor for a profit-maximising firm that is a price taker in the labour market. What is the basis from which the firm’s demand curve for labour is derived?
Feb/March 2016
Discuss how wage rates are determined in a perfect market.
Feb/March 2016
In the UK in 2015, the average wage stood at £26 500 per year. At the same time, some footballers were receiving more than £150 000 each week. Which part of the theory of wage determination is most likely to account for this difference in wages?
Feb/March 2017
Which government policy would be the most effective for lowering frictional unemployment?
Feb/March 2017
What factors would stimulate industrial growth in an area with high unemployment?
Feb/March 2017
A politician stated that the absence of trades unions would automatically bring about an improvement in all labour markets. To what extent does economic analysis support this claim?
Feb/March 2017
Which advantage is most likely to arise from an increase in the minimum price of labour (wage rate)?
Feb/March 2018
What factor would strengthen a trade union, enabling it to raise wages without lowering the employment of its members in a particular industry?
Feb/March 2018
Explain, with a diagram, how this situation could be shown within the marginal revenue productivity theory used to determine wages and employment.
Feb/March 2018
A country operates a negative income tax. In the diagram, curve NT represents the country’s original tax schedule. A change in the tax rate shifts the schedule to NT1. What effect will this have on work incentives and the after-tax distribution of income?
Feb/March 2019
In which labour market diagram is workers’ economic rent highest?
Feb/March 2019
The government sets a minimum wage higher than the equilibrium market wage rate. According to marginal revenue product (MRP) theory, what impact will this have on low-paid workers?
Feb/March 2019
In country X, the government wants to safeguard jobs. Which policy is most likely to be successful?
Feb/March 2019
In economic theory, what importance does a worker’s marginal product and average product have for a firm operating in a perfectly competitive labour market?
Feb/March 2019
What does the term ‘real wages’ mean?
Feb/March 2020
The graph illustrates the percentage increase in average earnings in the UK economy. What is the most likely reason for the pattern that appears in the graph?
Feb/March 2020
The diagram illustrates how introducing a national minimum wage (MW) affects the labour market. What do the distances XY and YZ indicate?
Feb/March 2020
Using economic analysis, how can the level of wage rates in a perfectly competitive labour market be explained?
Feb/March 2020
What factor would be most likely to make the demand for labour in an industry inelastic?
Feb/March 2021
Distinguish between transfer earnings and economic rent. Using diagrams, explore the connections between transfer earnings, economic rent, the elasticity of supply of labour and an individual worker’s wage rate.
Feb/March 2021
Earnings in industry X are much higher than in industry Y. What might account for this difference?
Feb/March 2022
A profit maximizing firm in a perfectly competitive labour market may choose to employ more workers, but it will not decide to raise the wage rates of its workers. Discuss the extent to which you agree with this statement.
Feb/March 2022
Within an economy, both wages and prices are increasing, but wages are increasing more quickly. Which characteristics are likely to be present in this economy?
Feb/March 2023
The diagram illustrates an industry’s demand for labour and supply of labour. At first, the labour market is at equilibrium. The government sets a minimum wage of OW0. What effect will this have on employment in the industry?
Feb/March 2023
The diagram illustrates the labour supply curve for two distinct markets, X and Y. What accounts for the variation in the slopes of the labour supply curves?
Feb/March 2023
Workers from low-income countries frequently move to high-income countries and obtain employment. In what way would this labour movement be expected to influence economic growth and the pressure for wage increases in the high-income country?
Feb/March 2023
A policy intended to lessen the extent of income inequality will also lower the level of employment in a country. Which policy is most likely to do this?
Feb/March 2024
Which factor would cause the marginal revenue product curve for workers making electric vehicles to move rightward?
Feb/March 2024
The diagram illustrates a perfectly competitive firm’s average product of labour (APL) and marginal product of labour (MPL) curves. At a wage of W, how many workers will the firm hire?
Feb/March 2024
The addition of a trade union into a perfectly competitive labour market will always result in higher wage rates and a higher level of unemployment. Using a diagram, evaluate this statement.
Feb/March 2024
In country S, frictional unemployment has fallen, whereas in country T, structural unemployment has risen. What are possible reasons for these changes?
Feb/March 2025
A government wants to lower real wage rates. Which policy should it adopt to do this?
Feb/March 2025
How is marginal revenue product determined?
Feb/March 2025
What would be most likely to increase the occupational mobility of labour?
Feb/March 2025
With the help of a diagram, evaluate the effects of introducing an effective minimum wage on employment and wage levels in a monopsony labour market.
Feb/March 2025
Explain the economic theory of wage determination in perfect competition.
May/June 2005
Explain whether a relationship exists between the marginal revenue product of labour and the wage rate in a particular occupation.
May/June 2006
Explain how analysing wage determination in perfect competition results in an equilibrium.
May/June 2007
Explain what determines the size of a country’s labour force.
May/June 2008
Is the presence of a trade union likely to be the chief factor influencing the supply of labour?
May/June 2008
Discuss what might cause inequalities in wage rates in an economy.
May/June 2009
Which statement concerning trade unions is normative?
May/June 2010
Which statement concerning trade unions is normative?
May/June 2010
What factors could make the demand curve for labour shift to the left?
May/June 2010
In the diagram, S1 shows one worker’s labour supply curve. What might lead the curve to move from S1 to S2?
May/June 2010
A firm’s employees become members of a trade union that bargains for a rise in the workers’ wage rate. The higher wage rate leads to a rise in the number employed by the firm. What could account for this?
May/June 2010
What factors might cause the labour demand curve to shift left?
May/June 2010
In the diagram, S1 shows one worker’s supply of labour curve. What might make the curve move from S1 to S2?
May/June 2010
Employees of a firm become members of a trade union, and the union secures a higher wage rate for them. As a result, the firm employs more workers. What could account for this?
May/June 2010
A government obliges all of its young citizens to perform community service for 6 months. The pay received by those doing the community service is lower than what they would otherwise have earned. What effect will this have on measured GDP and on national welfare?
May/June 2010
What effect will a rise in marginal tax rates have?
May/June 2010
Which factors could make the labour demand curve move to the left?
May/June 2010
In the diagram, S1 shows an individual worker’s labour supply curve. What might make the curve move from S1 to S2?
May/June 2010
The employees of a firm belong to a trade union that negotiates for an increase in the workers’ wage rate. As a result, the rise in the wage rate leads to a larger number of workers being employed by the firm. What might account for this?
May/June 2010
Discuss how far this claim is true.
May/June 2010
Analyse whether an increase in the wage rate always causes an increase in the number of hours worked by an individual.
May/June 2010
Analyse whether a rise in the wage rate always results in a rise in the number of hours worked by an individual.
May/June 2010
The table presents the key features of employment in two occupations. What can be definitely deduced from the table?
May/June 2011
The diagram illustrates the supply of, and demand for, labour in an industry. At first, the industry’s labour market is in equilibrium. What effect will the introduction of a minimum wage OW have on the level of employment in the industry?
May/June 2011
The table gives the key features of employment in two jobs. What can definitely be deduced from the table?
May/June 2011
The diagram illustrates labour supply and demand in an industry. At the start, the industry’s labour market is in equilibrium. What impact will the introduction of a minimum wage OW have on employment levels in the industry?
May/June 2011
The table presents the main features of employment in two occupations. What can be deduced with certainty from the table?
May/June 2011
The diagram illustrates the supply of labour and the demand for labour in an industry. At first, the industry’s labour market is in equilibrium. What effect will the introduction of a minimum wage OW have on the level of employment in the industry?
May/June 2011
Do you agree that labour wages are set by the market in the same way as any other price?
May/June 2011
Labour markets under imperfect competition may exploit workers by paying them wage rates below those in perfect competition. Discuss this opinion.
May/June 2011
In labour markets under imperfect competition, workers may be exploited through the wage rates they get compared with those in perfect competition. Discuss this opinion.
May/June 2011
The main objective of a government is to cut the natural rate of unemployment (NAIRU). Which policy would be most likely to help achieve this objective?
May/June 2012
The diagram illustrates a perfectly competitive firm’s average product of labour (APL) and marginal product of labour (MPL) curves. The market price of the firm’s product is $1. How many workers will the firm hire at a wage of OW?
May/June 2012
An increase occurs in the supply of female labour. What is the likely impact on wages for men and women?
May/June 2012
From the diagram, the perfectly competitive firm’s average product of labour (APL) and marginal product of labour (MPL) curves are shown. The market price of the firm’s product is $1. At a wage of OW, how many workers will the firm hire?
May/June 2012
A worker reacts to an increase in his hourly wage rate by cutting the number of hours he works each week. What might account for this?
May/June 2012
The supply of female labour rises. What is the likely impact on the wages of men and women?
May/June 2012
Discuss whether the higher wage rates seen in some occupations arise only because some trade unions have greater bargaining power than others.
May/June 2012
In some non-essential occupations, such as entertainment, wage rates are extremely high, whereas in essential occupations, such as public sector hospital nurses, wage rates are much lower. This is unfair. Analyse how economic theory may account for these differences in wage rates and judge whether you agree with this view.
May/June 2012
Discuss whether the higher wage rates paid in some occupations arise only because some trade unions have stronger bargaining power than others.
May/June 2012
When equal pay legislation is introduced in a country, the wages of female workers rise. What is the most likely consequence of this increase?
May/June 2013
Which labour-market data trend would be most likely to show a rise in cyclical unemployment? (changes in compulsory redundancies / voluntary resignations)
May/June 2013
Which policy is intended specifically to lower the amount of structural unemployment?
May/June 2013
A company operates in perfect competition in both product and factor markets, with labour as the only variable factor input. In the diagram, line JK represents the link between the marginal physical product of labour and the man-hours hired. If the hourly wage is $3.20, the firm hires 4000 man-hours per day. What is the price of the product?
May/June 2013
The introduction of equal pay legislation in a country raises the wages of female workers. What is the most likely result of this rise?
May/June 2013
One country operates a negative income tax. In the diagram, curve NT represents the country’s original tax schedule. When the tax rate changes, the schedule moves to NT1. What effect is most likely on incentives and on equity?
May/June 2013
Explain how a firm in a perfectly competitive labour market determines the quantity of labour employed and the wage rate.
May/June 2013
In 2011, after a recession, the governments of some countries lowered the wages they paid to public sector workers. Trade unions organised mass demonstrations in protest. Discuss how the economic theory of wage determination in perfect competition can be adapted to explain such a situation.
May/June 2013
Explain how a firm in a perfectly competitive labour market determines the quantity of labour employed and the wage rate.
May/June 2013
The diagram illustrates the demand curve for labour. What might make the demand curve move to the right?
May/June 2014
A firm now has 100 workers, each paid a daily wage of $500. It estimates that the marginal cost per day of employing one more worker would be $702. By how much would the daily wage per worker need to rise in order to persuade an extra worker to join?
May/June 2014
A trade union aims to raise the wages paid by a firm to its workers, while also preventing any job losses. Which factor would reduce the union’s bargaining position?
May/June 2014
In the diagram, S1 represents an individual worker’s labour supply curve. What might make the curve move from S1 to S2?
May/June 2014
The table presents the marginal revenue product of labour schedule for a profit-maximising firm operating under conditions of perfect competition. If the wage is $135, what is the largest number of workers the firm will hire?
May/June 2014
In 2004, union officials and businessmen in Argentina agreed to raise the minimum wage from 350 to 450 pesos. Under what conditions would this increase lead to higher employment?
May/June 2014
The diagram illustrates one worker’s labour supply curve. The hourly wage is W and the worker must work a normal 40-hour week. Which area represents the lowest weekly amount he would agree to receive?
May/June 2014
The diagram shows the labour demand curve. What might make the demand curve shift to the right?
May/June 2014
A firm is now employing 100 workers at a daily wage of $500 for each worker. It works out that the marginal cost per day of taking on one more worker would be $702. By how much would the daily wage per worker need to rise in order to persuade an extra worker to join?
May/June 2014
A trade union aims to raise the pay a firm gives its workers while also preventing any redundancies. Which factor would reduce the union’s bargaining strength?
May/June 2014
Some top executives and some sports people receive very high salaries. It is claimed that this cannot be avoided because workers are paid the market rate for the job. Use economic analysis to support this view.
May/June 2014
Explain how a profit-maximising firm chooses how much labour to employ.
May/June 2014
The diagram illustrates a perfectly competitive firm’s average product of labour (APL) and marginal product of labour (MPL) curves. The market price of the firm’s product is $1. Which section of the curves shows the firm’s demand for labour curve?
May/June 2015
The table summarises the key features of employment in two different occupations. Occupation X: average annual wage $80 000; number of weeks annual leave 10 weeks; average length of working week 44 hours; job security low; length of training course 2 years. Occupation Y: average annual wage $100 000; number of weeks annual leave 5 weeks; average length of working week 48 hours; job security high; length of training course 1 year. What conclusion can be drawn with certainty from the table?
May/June 2015
A trade union aims to raise the wages that a firm pays its workers while also keeping jobs secure. What would improve the union’s bargaining position?
May/June 2015