Economics- Chapter 1

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1. What explains why the social cost of developing tourism on a remote island is greater than the private cost?

  • the extra costs of providing the tourists with food
  • he travel costs paid by tourists who visit the island
  • the harm to the environment caused by the tourists
  • the costs of building extra hotels on the island
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2. A consumer allocates his expenditure over time. What would cause an increase in the opportunity cost of current consumption to the consumer?

  • an increase in interest rates
  • a decrease in his current income
  • a decrease in interest rates
  • an increase in his current income

3. In which situation are there definitely positive externalities?

  • Social benefits exceed private costs.
  • Private benefits exceed private costs.
  • Social benefits exceed private benefits.
  • Private benefits exceed social benefits.

4. What would prevent a firm gaining the maximum benefit from the division of labour?

  • low productivity
  • a high interest rate
  • high production costs
  • a small market

5. What would encourage the growth of the international division of labour?

  • the widespread introduction of tariffs
  • instability in international exchange rates
  • an improvement in transport systems
  • restrictions on the movement of resources
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