Economics SA2 Paper 2 Review | Baamboozle - Baamboozle

Discuss whether or not removing a firm’s monopoly power will benefit consumers.

A monopoly firm can take advantage of economies of scale reducing average costs of production, the removal of monopoly power may increase prices for consumers.

Discuss whether or not removing a firm’s monopoly power will benefit consumers.

More choice for consumers improved competition will causes prices to fall which will increase consumers’ real disposable income.

Analyse, using a production possibility curve (PPC) diagram, the effect of reallocating resources from kerosene to LPG.

Reallocating resources will involve a movement along the PPC, this will involve an opportunity cost.

Explain how market failure might occur in the oil industry.

There is over-consumption/over-production of oil because the external costs are ignored by the market mechanism such as pollution / global warming

Identify two features of a capital-intensive production process.

Process which relies heavily on capital goods e.g. machines, does not use much labour, relies less on other factors of production e.g. land.

Discuss whether an increase in bank lending will benefit an economy.

It may encourage households to get into debt borrowing more than they can repay. It may encourage inefficient firms to expand, rising costs , increasing prices.

Discuss whether an increase in bank lending will benefit an economy.

It may enable households to borrow more, increasing their spending, to increase their living standards, be able to buy housing or other basic necessities.

Analyse why private sector banks may earn higher profits than public sector banks.

May have different goals, private sector banks may aim for profit maximisation while public sector banks may seek to provide a service/keep employment high.

Explain two reasons why agricultural workers may be paid less than manufacturing workers.

may be in higher supply as work may require fewer qualifications/less skill, may have less bargaining power as they may not belong to a trade union

Define ‘a standard for deferred payments’.

A function of money that enables people to borrow, pay back at a later date and to lend.

Discuss whether a decrease in wage rates and an increase in working hours will always reduce the supply of workers to a firm.

Workers may stay in the job if working conditions are good, there are long holidays, good promotion chances, good pensions and good fringe benefits.

Discuss whether a decrease in wage rates and an increase in working hours will always reduce the supply of workers to a firm.

Wage rates are a key influence on the supply of workers, a decrease in wages would reduce the financial return from working, workers may decide to switch jobs.

Analyse how consumers may suffer as a result of a fall in the profits firms earn.

Some firms may decide to stop production, this may reduce competition, raise price, lower quality and reduce choice.

Explain why some firms may have survival as a short-term goal.

Some firms may be making a loss/be in financial difficulties they may hope to continue to produce until demand increases in the future and so revenue rises

Define wage rates.

The amount of money paid to a worker per unit of time in exchange for their labour

Discuss whether or not a central bank should raise the rate of interest.

yes, to reduce borrowing if people and firms are building up unsustainable debt. No, it may reduce the economic growth rate as it may discourage investment.

Analyse the influences on the mobility of workers.

Occupational mobility is influenced by education and training, Geographical mobility is influenced by the price/availability of housing and family ties

Explain two advantages banknotes have as a form of money.

Generally acceptable, Portable, Divisible, Recognisable, Limited in supply, Homogeneous

State two functions of money

medium of exchange, measure of value (unit of account) and standard of deferred payments.

Explain two ways in which a monopoly differs from perfect competition

many firms in perfect competition but only one in monopoly, perfect information in perfect competition but not monopoly.

Explain two disadvantages of and challenges facing small firms.

small firms have limited start-up capital, small firms have the largest risk of business failure

Identify two examples of tertiary sector firms.

retail shop, schools, advertising agencies, hairdressers

Explain two advantages of small firms

Few legal formalities exist, know their customers on a more personal level, Smaller firms are easier to manage and control.

Identify three types of private sector firms

sole trader, partnership,private limited company, public limited company.