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ATD Level 3

Free Economics Revision questions & answers

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ATD 3

Free Principles of Economics revision questions & answers-ATD 3

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Category: ATD 3-Principles of Economics

1. (a)________measures the additional revenue a company earns by selling one additional unit of its good or service, whereas (b)________measures the consumer's benefit of consuming an additional unit of a good or service.

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Category: ATD 3-Principles of Economics

2. TRUE OR FALSE: For a price ceiling to be effective, it must be less than the free-market equilibrium price.

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Category: ATD 3-Principles of Economics

3. The _____________states that if a person has a thing which can be put to several uses, he/she will distribute it among these uses in such a way that it has the same marginal utility in all.

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Category: ATD 3-Principles of Economics

4. Economic development can be defined as __________

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Category: ATD 3-Principles of Economics

5. In a monopolistic firm, the marginal revenue (MR) curve lies below the average revenue arc) curve at all units of output because__________.

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Category: ATD 3-Principles of Economics

6. The following are differences between inflationary gap and deflationary gap. Which is not true?

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Category: ATD 3-Principles of Economics

7. TRUE OR FALSE: Only the goods produced in the home country are included in the GDP, regardless of the nationality status of the company owners

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Category: ATD 3-Principles of Economics

8. Juno has a monthly income of kshs 72,000 which he plans to spend on shoes and clothes in the ratio of 1:1. The unit price of the shoes and clothes is shs 500 and kshs 600 respectively. Juno is satisfied with various combination of the two services/goods, but prefers equal proportions of each.

Required
a. Calculate the optimal point for shoes and clothes and the X intercepts
b. Juno’s income reduced by 60%. Calculate the new optimum point and X intercept.
c. Calculate the marginal rate of substitution when the consumer spends the new income in the purchase of 15 units of each goods.

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Category: ATD 3-Principles of Economics

9. The law of diminishing marginal utility says that _______

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Category: ATD 3-Principles of Economics

10. Rightward shift in supply is caused by (a)_________in supply, whereas leftward shift in supply is caused by (b)_________in supply

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Category: ATD 3-Principles of Economics

11. Ordinal utility states that________

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Category: ATD 3-Principles of Economics

12. ________refers to the ease with which productive factors like labor, capital, land, natural resources and so on can be reallocated across sectors within the domestic economy .

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Category: ATD 3-Principles of Economics

13. TRUE OR FALSE: The marginal cost curve always intersects the average total cost curve at its lowest point because the marginal cost of making the next unit of output will always affect the average total cost.

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Category: ATD 3-Principles of Economics

14. TRUE OR FALSE: According to Laissex-faire principle, the less the government is involved in the economy, the better off business will be, and by extension, society as a whole.

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Category: ATD 3-Principles of Economics

15. The theory of the firm is a microeconomic concept that states that _________

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