MTUT 1 2024-25

Name of the Student: ____________________ Roll No: ____ Grade: Marks: 40

Subject: Economics Date: Time: 60 minutes. Invigilator Sign

Marks Obtained Examiner Sign

Section A – Multiple Choice Question

Question 1:
What is a disadvantage of a market economy?

A. Consumer choice is ignored.

B. Consumers may lack information.
C. Government subsidies encourage efficiency.
D. There is no incentive to work.

Question 2:
To reduce traffic congestion, a government decides to build a new road. There is a toll charge
on the new road.
What is the main purpose of this government intervention?

A. to address the problem of market failure

B. to discourage people from using public transport
C. to ensure the supply of transport through the free market
D. to obtain revenue from the levy of a toll

Question 3:
A government decides to move towards a market economy by selling state-owned
enterprises.
What is a possible motive for this?

A. to create greater income equality

B. to extend government control of the economy
C. to increase efficiency of production
D. to take account of external costs

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Question 4:
What is a possible consequence of market failure?

A. Consumers have complete information about goods.

B. Disequilibrium continues in the market.
C. Merit goods are under-supplied.
D. Some goods are no longer demanded.

Question 5:
Why does a government provide public goods?

A. Public goods are always used by everyone.

B. Public goods are not profitable for private firms.
C. Public goods can only be provided by monopolies.
D. Public goods create large external costs.

Question 6:
Which combination of government actions is most likely to raise the living standards of lower
income groups in an economy?

Question 7:
What may be a cost to its home country when a multinational company (MNC) expands
abroad?

A. Increased competition from the MNC may force firms in the host country to close.
B. Many jobs created by the MNC may be low-skilled.
C. The MNC’s profits from the host country may be sent to its home country.
D. The MNC may cause job losses in its home country by moving production abroad.

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Question 8:
What is an advantage of a market economy in the allocation of resources?

A. It ensures that all consumers are willing to pay the same price.
B. It fixes prices based on costs of production.
C. It guarantees suppliers will make a profit.
D. It indicates the relative demand for goods and services.

Question 9:
Which characteristics of a product will cause market failure?

A Information about the product is known equally by consumers and producers.

B The consumption of the product has no external benefits.
C The product is non-rival and non-excludable.
D The production of the product has no external costs.

Question 9:
Which characteristics of a product will cause market failure?

A Information about the product is known equally by consumers and producers.

B The consumption of the product has no external benefits.
C The product is non-rival and non-excludable.
D The production of the product has no external costs.

Question 10:
How would a state-owned oil refining firm be classified?

A. as a multi-national company (MNC) in the private sector

B. as a private sector firm in the tertiary sector
C. as a public sector firm in the primary sector
D. as a public sector firm in the secondary sector

Question 11:
Which method of trade protection would enable domestic firms to lower their prices and
undercut the price of imported goods?

A. a subsidy
B. a tariff
C. an embargo
D. an import quota

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Question 12:
How might a multinational company (MNC) directly benefit a host country?

A. It creates local employment.

B. It depletes local natural resources.
C. It imports raw materials.
D. It receives tax concessions

Question 13:
The governments of low-income countries often allow foreign multinational companies
(MNCs) to
mine minerals in their country.
Which conflict between benefit and cost might this cause the low-income countries?

Question 14:
What is an outcome of a competitive market?

A. high prices and low quality

B. low prices and large choice
C. high profits and low quality
D. low profits and little choice

Question 15:
What might encourage a consumer to spend less and save more?

A. the expectation that prices will fall

B. the expectation that prices will rise
C. the expectation that unemployment will fall
D. the expectation that real GDP will rise

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Question 16:
What is an example of market failure?

A. a growth of competition
B. a spread of pollution
C. a surplus of production in the short term
D. an existence of scarcity

Question 17:
A firm’s aim is to become a monopoly supplier. Which policy is it most likely to use to
eliminate competition?

A. adopt price reductions and advertising

B. avoid diseconomies of scale
C. maximise output and profit
D. reduce financial barriers to entry

Question 18:
What is the government most likely to produce in a mixed economy?

A all of the services and none of the goods

B amounts of goods and services equal to those of the private sector
C no goods and services
D some of the goods and services

Question 19:
A government allowed a building company to construct new houses which destroyed an area
designated as an area of natural beauty. Which concepts can be applied to this statement?

A budget surplus; public sector

B external cost; opportunity cost
C government subsidy; mixed economy
D private enterprise; budget deficit

Question 20:
What is most likely to decrease when employment increases?

A economic growth
B government welfare payments
C the price level

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D the standard of living

Section B: Four-part questions

In 2015, the global equilibrium price of milk fell. As a result, the number of farms producing
milk declined. Farms tried to cut costs by becoming larger and employing fewer but more
specialised workers. The reduction in the number of farms has led to less competition
because some large farms have gained monopoly powers in local areas. A number of farm
workers switched to other jobs, but some who remained accepted a cut in pay.

(a) Define ‘equilibrium price’. [2]

(b) Explain two reasons why a worker may continue in a job despite a cut in pay. [4]
(c) Analyse how employing specialised workers may reduce a firm’s average costs of
production. [6]
(d) Discuss whether consumers would benefit if a firm became a monopoly. [8]

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