economics A Level P4

1) An economy reallocates resources and moves along its production possibility frontier.
It increases production of necessity goods and reduces production of luxury goods.
The marginal utility of the consumers of the additional necessity goods produced is greater than
the marginal utility of the consumers of the luxury goods that are no longer produced.
What is the effect on the economic efficiency of the economy?
productive
efficiency
allocative
efficiency
A increases increases
B increases unchanged
C unchanged increases
D unchanged unchanged

2) A household which spends all of its income on bananas and apples makes the following
purchases.
fruit price per
unit ($)
bananas 2.50
apples 1.00
The household derives twice as much utility from the last unit of bananas consumed as from the
last unit of apples consumed.
What should the household do to maximise utility from the consumption of these fruits?
consumption
of bananas
consumption
of apples
A decrease increase
B increase decrease
C no change decrease
D no change increase

8) The average variable costs of a firm are constant over the relevant range of output.
Assuming that fixed costs are incurred, which curve on the diagram could be the firm’s average
total cost curve over this range?
Also num 11,12,13,14
Hello really need help on these question !! Please help me ! TQ

9708/31/m/j/15

1) There is no change in average cost hence productive efficiency remains unchanged. Since marginal utility gained from necessity goods is greater than luxury goods and production of necessity goods has increased, your allocative efficiency has improved.

8) The greater the number of goods you produced, the more your average fixed cost will decrease. This is because unlike variable cost, your fixed cost, also known as sunk cost, is shared among your produced goods. Hence your fixed cost decreases when output increases. Answer is D.