Why are insurance companies unwilling to provide insurance against losses arising from war or ‘civil insurrection’? Name some other events where it would be impossible to obtain insurance.
> Outline the main determinants of business performance. In each case, explain whether it is a micro- or macroeconomic issue.
> In which of the following industries is collusion likely to occur: bricks, beer, margarine, cement, crisps, washing powder, blank DVDs or BluRay, carpets? Explain why.
> Will competition between oligopolists always reduce total industry profits?
> For what reasons would you expect a monopoly to charge (a) a higher price, and (b) a lower price than if the industry were operating under perfect competition?
> As an illustration of the difficulty in identifying monopolies, try to decide which of the following are monopolies: a train operating company; your local evening newspaper; the village hairdresser; the Royal Mail; Microsoft Office suite of programs; Int
> How will a business’s pricing strategy differ at each stage of its product’s life cycle? First assume that the business has a monopoly position at the launch stage; then assume that it faces a high degree of competition right from the outset.
> A frequent complaint of junior and some senior managers is that they are frequently faced with new targets from above, and that this makes their life difficult. If their complaint is true, does this conflict with the hypothesis that managers will try to
> Think of four different products or services and estimate roughly how many firms there are in the market. You will need to decide whether ‘the market’ is a local one, a national one or an international one. In what ways do the firms compete in each of th
> What determines the size of normal profit? Will it vary with the general state of the economy?
> Normal profits are regarded as a cost (and are included in the cost curves). Explain why.
> Why are many firms likely to experience economies of scale up to a certain size and then diseconomies of scale after some point beyond that?
> What is the Standard Industrial Classification (SIC)? In what ways might such a classification system be useful? Can you think of any limitations or problems such a system might have over time?
> What economies of scale is a large department store likely to experience?
> Does the marginal value of a variable (such as cost, revenue or profit) determine the average value of the variable, or does the average value of the variable determine the marginal value? Explain your answer.
> Why does the marginal cost curve pass through the bottom of the average cost curve and the average variable cost curve?
> The following are some costs incurred by a shoe manufacturer. Decide whether each one is a fixed cost or a variable cost or has some element of both. (a) The cost of leather; (b) The fee paid to an advertising agency; (c) Wear and tear on machinery; (d)
> Up to roughly how long is the short run in the following cases? (a) A karaoke firm; (b) Electricity power generation; (c) A small grocery retailing business; (d) ‘Superstore Hypermarkets plc’. In each case, specify your assumptions.
> Illustrate on a diagram similar to Figure 4.6 what would happen in the long-run if price were initially below PL.
> Would it ever be worthwhile for a firm to try to continue in production if it could not cover its long-run average (total) costs?
> A firm will continue producing in the short run even if it is making a loss, providing it can cover its variable costs. Explain why. Just how long will it be willing to continue making such a loss?
> Are all explicit costs variable costs? Are all variable costs explicit costs?
> How might we account for the growth in non-price competition within the modern developed economy?
> Assume you are a UK car manufacturer and are seeking to devise a business strategy for the twenty-first century. Conduct a STEEPLE analysis of the UK car industry and evaluate the various strategies that the business might pursue.
> You are about to launch a new range of cosmetics, but you are still to decide upon the content and structure of your advertising campaign. Consider how market surveys and market experiments might be used to help you assess consumer perceptions of the pro
> You are working for a recording company which is thinking of signing up some new bands. What market observations, market surveys and market experiments could you conduct to help you decide which bands to sign?
> What are the relative strengths and weaknesses of using (a) market observations, (b) market surveys and (c) market experiments as a means of gathering evidence on consumer demand?
> What has happened to premiums for home insurance for those houses in areas that are at risk of flooding? Which factors have caused this change? Is there a role for the government to intervene in this market?
> How can marginal utility be used to explain the price elasticity of demand for a particular brand of a product?
> How can advertising help a nation recover from an economic downturn?
> There are many methods of advertising, from newspapers to television to the Internet. What trends can you identify for the amount of spending on the various methods of advertising as a percentage of total advertising expenditure?
> Imagine that ‘Sunshine’ sunflower margarine, a well-known brand, is advertised with the slogan, ‘It helps you live longer’ (the implication being that butter and margarines high in saturates shorten your life). What do you think would happen to the deman
> Think of some advertisements that deliberately seek to make demand less price elastic. How do they do this?
> Consider how the selection of the product/market strategy (market penetration, market development, product development and diversification) will influence the business’s marketing mix. Choose a particular product and identify which elements in the market
> Explain why the business objectives of owners and managers are likely to diverge. How might owners attempt to ensure that managers act in their interests and not in the managers’ own interests?
> How would marginal utility and market demand be affected by a rise in the price of (a) a substitute good (b) a complementary good?
> Rank the following in ascending order of elasticity: jeans, black Levi jeans, black jeans, black Levi 501 jeans, trousers, outer garments, clothes.
> Why does price elasticity of demand have a negative value, whereas price elasticity of supply has a positive value?
> Outline the main factors that might influence the size of the profit mark-up set by a business
> If a cinema could sell all its seats to adults in the evenings at the end of the week, but only a few on Mondays and Tuesdays, what price discrimination policy would you recommend to the cinema in order for it to maximise its weekly revenue?
> The price of tablet computers and digital cameras fell significantly in the years after they were first introduced and at the same time demand for them increased substantially. Use cost and revenue diagrams to illustrate these events. Explain the reasoni
> What will happen to the equilibrium price and quantity of butter in each of the following cases? You should state whether demand or supply or both have shifted and in which direction: (a) a rise in the price of margarine; (b) a rise in the demand for y
> Since advertising increases a firm’s costs, will prices necessarily be lower with sales revenue maximisation than with profit maximisation?
> Explain which of these two pairs are likely to have the highest cross-price elasticity of demand: two brands of coffee, or coffee and tea?
> Will a general item of expenditure like food or clothing have a price elastic or inelastic demand? Explain.
> Imagine that you are working for an airline attempting to forecast demand for seats over the next two or three years. What, do you think, could be used as leading indicators?
> It is often argued that if the market fails to develop infant industries, then this is an argument for government intervention, but not necessarily in the form of restricting imports. In what other ways could infant industries be given government support
> To what extent are the arguments for countries specializing and then trading with each other the same as those for individuals specializing in doing the jobs to which they are relatively well suited?
> Assume that the multiplier has a value of 3. Now assume that the government decides to increase aggregate demand in an attempt to reduce unemployment. It raises government expenditure by £100 million with no increase in taxes. Firms, anticipating a rise
> How might the structure of a multinational differ depending on whether its objective of being multinational is to reduce costs or to grow?
> Referring to Table 2.1, assume that there are 200 consumers in the market. Of these, 100 have schedules like Tracey’s and 100 have schedules like Darren’s. What would be the total market demand schedule for potatoes now?
> The price of cod is much higher today than it was 30 years ago. Using demand and supply diagrams, explain why this should be so.
> By what means would a depressed country in an economic union with a single currency be able to recover? Would the market provide a satisfactory solution or would (union) government intervention be necessary, and if so. what form would the intervention ta
> Did the exchange rate difficulties experienced by countries under the ERM strengthen or weaken the arguments for progressing to a single European currency?
> What are the causes of exchange-rate volatility? Have these problems become greater or lesser in the past 15 years? Explain why.
> What adverse effects on the domestic economy may follow from (a) a depreciation of the exchange rate and (b) an appreciation of the exchange rate?
> Why may capital inflows damage the international competitiveness of a country's businesses?
> Consider the argument that in the modern world of large-scale short-term international financial movements, the ability of individual countries to affect their exchange rate is very limited.
> What is the relationship between the balance of payments and the rate of exchange?
> Assume that there is a free-floating exchange rate. Will the following cause the exchange rate to appreciate or depreciate? In each case you should consider whether there is a shift in the demand or supply curves of sterling (or both) and which way the c
> Who are the winners and losers from globalisation?
> To what extent can international negotiations over economic policy be seen as a game of strategy? Are there any parallels between the behaviour of countries and the behaviour of oligopolies?
> This question is concerned with the supply of oil for central heating. In each case consider whether there is a movement along the supply curve (and in which direction) or a shift in it (and whether left or right): (a) new oil fields start up in product
> What are the economic (as opposed to political) difficulties in achieving an international harmonisation of economic policies so as to avoid damaging currency fluctuations?
> Assume that just some of the members of a common market like the EU adopt full economic and monetary union, including a common currency. What are the advantages and disadvantages to those members joining the full EMU and to those not joining?
> The following are the items in the UK’s 2014 balance of payments: £ billions Exports of goods …………………………………………………………… 293.7 Imports of goods …………………………………………………………. 416.9 Exports of services ………………………………………………………. 219.7 Imports of services.……………….…………………
> If countries are so keen to reduce the barriers to trade, why do many countries frequently attempt to erect barriers?
> Go through each of the arguments for restricting trade and provide a counter-argument for not restricting trade.
> What is fallacious about the following two arguments? Is there any truth in either? (a) ‘Imports should be reduced because money is going abroad which would be better spent at home.’ (b) ‘We should protect our industries from being undercut by import
> Does the consumer in the importing country gain or lose from dumping? (Consider both the short run and the long run.)
> The following are four items that are traded internationally: wheat; computers; textiles; insurance. In which one of the four is each of the following most likely to have a comparative advantage: India; the UK; Canada; Japan? Give reasons for your answer
> Why doesn’t the USA specialise as much as General Motors or Texaco? Why doesn’t the UK specialise as much as Unilever? Is the answer to these questions similar to the answer to the questions, ‘Why doesn’t the USA specialise as much as Luxembourg?’ and ‘W
> How did the financial crisis of 2008/9 and the subsequent economic downturn affect the costs and benefits of the latest EU enlargement?
> Refer to the list of determinants of supply (see pages 000). For what reasons might (a) the supply of potatoes fall; (b) the supply of leather rise?
> Look through the costs and benefits that we identified from the single European market. Do the same costs and benefits arise from a substantially enlarged EU?
> Why is it difficult to estimate the magnitude of the benefits of completing the internal market of the EU?
> If rich countries stand to gain substantially from freer trade, why have they been so reluctant to reduce the levels of protection for agriculture?
> Imagine that two countries, Richland and Poorland, can produce just two goods, computers and coal. Assume that for a given amount of land and capital, the output of these two products requires the following constant amounts of labour: Assume that each
> Under what circumstances would adherence to an inflation target lead to (a) more stable interest rates, (b) less stable interest rates than pursuing discretionary demand management policy?
> What is meant by a Taylor rule? In what way is it a better rule for central banks to follow than one of adhering to a simple inflation target?
> To what extent did the Bank of England’s Monetary Policy Committee and other central banks face a dilemma in 2008, when faced with rising inflation and the onset of recession?
> How does the Bank of England attempt to achieve the target rate of inflation of 2 per cent? What determines its likelihood of success in meeting the target?
> When the Bank of England announces that it is putting down interest rates, how will it achieve this, given that interest rates are determined by demand and supply?
> Why is it difficult to use fiscal policy to ‘fine tune’ the economy?
> Why are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run?
> Imagine you were called in by the government to advise on whether it should attempt to prevent cyclical fluctuations by the use of fiscal policy. What advice would you give and how would you justify the advice?
> Adam Smith, the founder of modern economics, remarked in The Wealth of Nations (1776) concerning the balancing of budgets, ‘What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.’ What problems might there
> In what ways can interventionist industrial policy work with the market, rather than against it? What are the arguments for and against such policy?
> Imagine that you are asked to advise the government on ways of increasing investment in the economy. What advice would you give and why?
> What types of tax cuts are likely to create the greatest (a) incentives, (b) disincentives to effort?
> Define demand-side and supply-side policies. Are there any ways in which such policies are incompatible?
> ‘The existence of a budget deficit or a budget surplus tells us very little about the stance of fiscal policy.’ Explain and discuss.
> Imagine that the banking system receives additional deposits of £100 million and that all the individual banks wish to retain their current liquidity ratio of 20 per cent. (a) How much will banks choose to lend out initially? (b) What will happen to bank
> For what possible reasons may one country experience a persistently faster rate of economic growth than another?
> Why does a booming economy not carry on booming indefinitely. Why does an economy in recession pull out of that recession?
> Would a firm want demand for its brand to be more or less elastic? How might a firm achieve this?
> What factors could explain why some countries have a higher multiplier than others?
> In terms of the UK circular flow of income, are the following net injections, net withdrawals or neither? If there is uncertainty, explain your assumptions. (a) Firms are forced to take a cut in profits in order to give a pay rise. (b) Firms spend money
> The table shows index numbers for real GDP (national output) for various countries (2010  100). Using the formula G = (GDPt – GDPt–1)/GDPt–1  100 (where G is the
> Imagine that you had to determine whether a particular period of inflation was demand pull, or cost push, or a combination of the two. What information would you require in order to conduct your analysis?
> Under what circumstances will a reduction in unemployment by accompanied by (a) an increase in inflation; (b) a decrease in inflation? Explain your answer.
