Questions for practice – heuristic and practical questions
“The central problem of Economics is scarcity and choice.” Is this statement true? Discuss. (25)
What is opportunity cost? How does it relate to scarcity and choice? (8)
“America is very rich and as such can afford to expand its military around the world indefinitely. We can also catch all the terrorists as we have colossal resources in our hands.” Is this statement correct? (17)
What are the concepts of opportunity cost, marginal analysis and substitutes and complements? (10)
“The price of oil is too high. Thus, no one will buy oil as it is overpriced. The world will therefore resort to using alternative sources of fuel.” Is this true?
What is the primary product problem of agricultural products? (10)
How can farmers earn more income? (15)
What are the determinants of demand? (12)
What are the determinants of supply? (13)
What are the determinants of the demand for air travel? (10)
“Let’s increase our air fleet. That will give us more business, and hence more revenues and thus profits!” Is this statement accurate? (15)
What are complements, substitutes, normal and inferior goods? Give illustrations and examples. (10)
How do the types of goods, complements and so on, affect demand? (15)
What is a price ceiling, and what is a price floor? Give illustrations and examples. (10)
“Rent control is the surest way to destroy a city apart from bombing it.” Discuss. (15)
Define and explain the concepts of price elasticity, cross price elasticity, income elasticity and supply elasticity. (10)
“Cutting price raises revenue.” Is this true? Discuss. (15)
You are a monopolist. Using the concepts of elasticities, you think that cutting price will let you increase your revenue. This is a good idea, or so you think. Your company economist tells you that this is untrue and that cutting price decreases revenue. Who is right? (25)
You are a perfectly competitive firm. Using the concept of elasticities, you think that cutting price would be a great idea. However, your friend, an economist argues that this is not a good idea. Should you believe him? Do your results differ if you were an: monopolistic competitive firm owner, a monopolist, or an oligopolist? (25)
What is the difference between a shift in demand and a change in quantity demanded? Explain the factors shifting demand. (10)
An increase in demand for football shoes will lead to an increase in price. What are the factors leading to an increase in demand for football shoes? (15)
Explain the central economic problem and illustrate demand and supply. (10)
What does advertising do to demand of a particular product? Is advertising useful? (15)
Explain the various concepts of price elasticity, cross elasticity and income elasticity. (10)
You are a small business owner, running a little shop. Why is it important to know about elasticities? (15)
What are economies of scale? Differentiate between internal economies and external economies. (10)
“Natural monopolies rely on economies of scale, they are good for consumers, therefore they should not be regulated.” Discuss. (15)
Firms usually profit-maximise. What is profit maximization? (8)
“Profit maximization is the only goal of a firm.” Is this true? (17)
What is the profit maximizing level for a perfectly competitive firm? What is the profit maximizing level for a monopolistic competitive firm? (10)
Do firms only maximize profits? (15)
What is the profit maximizing level for an oligopolistic firm? What is the profit maximizing level for a monopoly? (10)
“Firms cannot maximize profits in practice; only in theory can they maximize profits. They cannot and they will not.” Is this true? Discuss.
What is the kinked demand model of oligopoly? (10)
How can advertising help Ford overcome its rivals, GM and Toyota? (15)
What is price-discrimination? What is non-price competition?
You run a tourist souvenir shop at Bali. Do you practice price discrimination or non price competition, and why?
What is first degree price discrimination? What is second degree price discrimination? What is third degree price discrimination? (9)
“Separation of two markets is the most important factor leading to price discrimination.” Is this true? Discuss. (16)
What is allocative efficiency? What is innovation and R&D? (10)
“Monopolies are not allocatively efficient, but they have innovation and research capabilities.” Is this true? Discuss. (15)
What are the various sources of market failure? (10)
“The government should produce all public goods and all merit goods.” Is this statement accurate, from an economics point of view? (15)
What are public goods? (8)
What steps should government take to overcome market failure? (17)
What are externalities? (8)
What steps should government take to overcome market failure? (17)
What are market imperfections? Give examples. (10)
What steps should government take to overcome market failure? Is regulation the best way? (15)
“Monopolies are highly inefficient from society’s point of view.” Discuss. (10)
Taking the lead from the USA, where Microsoft was put on trial for anti-trust, monopolies should always be regulated and monitored by governments. Discuss. (15)
What is demand pull inflation? Illustrate. (10)
“High demand for goods is the only factor leading to inflation in an economy.” Is this true? (15)
What is cost-push inflation? Illustrate. (10)
“Inflation is always and everywhere a monetary phenomenon.” Milton Friedman, the great economist, declared. Is this the only way to understand inflation? Discuss. (15)
What is structural unemployment? (8)
What can the Singapore government to overcome unemployment? (17)
What are frictional and seasonal unemployment? (8)
What can European governments do to overcome unemployment? (17)
Explain and illustrate the Keynesian multiplier effect. (10)
“Governments should always increase government spending to solve unemployment and raise the economy to the full employment level.” Discuss. (15)
What is inflation, and what is unemployment? (10)
“Governments are concerned with inflation and unemployment.” Discuss, suggesting ways in which governments can reach their macroeconomic goals. (15)
What is economic growth? Distinguish between actual and potential growth. (10)
“Increasing the labour supply, capital stock, and supporting entrepreneurship and oil exploration are the means of economic growth in the long run.” Discuss this statement. (15)
What is expansionary Keynesian fiscal policy? (10)
Expansionary fiscal policy is the only way to macro-manage the economy. Discuss. (15)
What is expansionary monetary policy? (10)
Monetary policy is the only way to macro-manage the macroeconomy. Is this remotely true? (15)
What are the various forms of protectionist measures? (10)
“Protectionism increases the current account, therefore it is good for the macroeconomy.” Is this true? (15)
What are tariffs, subsidies and quotas, in the context of protectionism? (10)
“Protectionism is terrible from an economist’s point of view – in fact, lack of international trade damages an economy.” Is this economist right? (15)
What is comparative advantage? (8)
“International trade is always better than protectionism.” Discuss. (17)
What are the various models that explain international trade? Is comparative advantage the most important theory? (25)
Economic globalization is extremely beneficial to consumers, producers, employers, and employees. Discuss. (25)
What is the classical loanable funds theory, and what is the Keynesian liquidity preference theory of interest rate determination? (10)
“Increasing the money supply is beneficial to the economy.” Discuss. (15)
What are the various models of interest rate determination? (10)
“Raising the interest rate solves inflation. Hence, raising the interest rate is a great policy to use at all times.” Discuss. (15)
What are the three main exchange rate mechanisms that determine exchange rates? (10)
“High interest rates encourage hot money to flow into an economy. Therefore, high interest rates are detrimental to an economy.” Discuss. (15)
The Singapore government is known to use a managed float exchange rate system. What are the various mechanisms of exchange rates? (10)
Why, in your own professional opinion, does the Singapore government use a managed float system and not a free float system? (15)
Monetary policy in Singapore is tightly linked to exchange rate policy. Why does Singapore use exchange rates to macro-manage its economy? (10)
“Keynesian fiscal policy (a demand side policy) and supply side policies all do not work in Singapore’s case. Singapore is really exceptional.” Discuss. (15)
What can the government do to reduce unemployment? (10)
What can the government do to increase economic growth? (15)
What are the main conflicts between different government policy aims and goals? (25)
Macroeconomics is all about trade-offs in government policy. Discuss. (25)
“Tax cuts and increasing spending alone are enough to provide impetus for economic growth.” Discuss. (25)
“Singapore should use Keynesian discretionary economics. Great stuff!” Discuss.
Evaluate the pros and cons of a floating exchange rate and a fixed exchange rate mechanism. Why does Singapore not use either? (25)
Global capital inflows and outflows are responsible for economic recessions. Discuss. (25)
Why study economics? (25)
What is the use of ceteris paribus in economics? (25)
JC ECONOMICS ESSAYS: Good luck and do try the practical questions!
