Exam Style Questions

MPQ
1- C
2- C
3- C
4- C
5- D
6- B
7- A
8- B
9- B
10- C

DRQ
1-
a) A commercial bank merging with another bank
b) 120000- 30000= 90000:30000= 3 Times more
c) Land and borrow money with interest rates
d) One possible reason why the average wage did not increase might be
because during those years, the supply for us corporate lawyers increased
at almost the same size as the demand increased so this makes the price
stay almost the same. This means that supply and demand shifted to the
right on the demand and supply diagram.
e) They might have preferred to give bonuses because increasing wages
would make them need to pay every month and they might not be having
extra work every month so they would be paying extra when they did not
have extra work. Another reason might be because not every corporate
lawyer has extra work, so they only give bonuses to people who only have
extra work so that only they receive bonuses and not everyone.
f) People with more qualifications tend to receive more money per hour
because the more qualifications you have the better you are and the
higher is the demand for you so if the demand is higher for people with
more qualifications the wages are higher too. If you have less
qualifications the less your wage will be because firms will prefer people
with more qualifications because of the skill gap.
g) When firms make workers specialise, they tend to be more efficient
because when they start doing that certain task, they start learning and
when they learn more, they manage to find more efficient ways to do
their tasks and since they have been doing only that task, they can do it
quicker. This benefits the firm because it produces more and more
efficient.
h) Having higher wages for corporate lawyers in USA may and may not
make corporate lawyers from India move to USA. They might move to USA
because the wages are much higher, and they would earn more, but they
also might not because 30000$ in India might be the same as 120000$ in
USA because in India prices for products might be much less than in USA.
They also might change to USA because it is a much better country then
India so changing from India to USA would make them happier. They
might not move because they are geographically immobile meaning that
they can´t leave their country because of family or another issue.

2-
a) The cost of the delivery vehicles.
b) 1.95
c) Since they are buying other delivery firms and having a greater market
share, their average cost is decreasing. This is economies of scale when
the average cost decreases but the production increases.
d) When a firm uses labour intensive production, the firm is more
responsive to changes in consumer demand. It is also easier to
communicate with labour than with capital.
e) Until 2002 Chinas savings were lower than after 2002. Their spending’s
were lower but their income was lower too. After 2002 their income
started increasing much more and their spending too but the income
increased at a higher percentage than the spending, so after 2002 they
started saving more money according to the graph.
f) China´s saving ratio started increasing. Their Income increased and their
spending increased too but the income increased at a higher rate than the
spending increased. This means that the saving ratio increased.
g) An increase in income might increase the savings ratio because some
people may have already bough all their needs with that income that they
received and if they received more, they would only buy more luxury
goods and some people prefer to save instead of buying luxury goods.
Sometimes if the income increases people may decrease the saving ratio
because what they have been saving is enough for them and they would
use that extra money for their needs or more luxury goods. An increase in
income will not always increase or decrease the spending’s ratio. It all
depends on the persons situation.
h) Small delivery firms may find it hard to compete against large delivery
firms because large firms already have most of the market share and since
they have most of the market share, at first the small firms will find it hard
to make profit in that market. Small firms then will have high costs at first
and not every firm can handle high costs. Most of the time when the large
firms have most of the market share and they are a monopoly, they buy
the small firms that may threaten their business, so it is very difficult to a
small firm compete against a large firm.
FPQ
1-
a) Industrial action is when a trade union fights for workers’ rights.
b) The poor will be spending less because they start receiving less money
and the rich will spend the same, but they will save less money.
c) Some people may continue working in the same job because the
required qualifications for that job might be low and they might not have
many qualifications so if they quit, they will not have other options.
Another reason might be because there is many unemployed labours so if
they quit they might not find another job since the supply for labour is
high.
d) Sometimes teachers may earn more than farm workers but sometimes
it might be reversed. This depends on the state of the economy. When
there is a surplus for teachers and a shortage for farmers, teachers will
earn less than farmers because there is high demand for farmers and a
low demand for teachers since there is a surplus. Sometimes it depends
on the demand for the product they produce. If the demand for the
teacher’s product is higher than the demand for farmers products,
teachers may earn more than farmers.

2-
a) Average fixed cost is the cost paid per unit that does not change. It is
always the same.
b) When Kraft and Heinz merged, this was a horizontal merge because
both firms are in the same sector. A vertical merge is when firms from
different sectors merge.
c) Demand for capital goods may increase because of the advantages it
has over labour. Capital goods do not need rest. They can work whenever
the firm needs them to. They do not have wages meaning that they may
have a high short-term cost buy a low long run cost. They are less likely to
make an error producing a more complicated product.