ECONOMICS
MARKET FAILURES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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reduced number of bus journeys
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increased petrol (gas) sales
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increased employment in the car industry
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reduced external costs of car use
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Detailed explanation-1: -A growing population increases total demand (1) this will encourage firms to increase their output (1) may attract MNCs to set up in the country (1). A higher population may make better use of resources (1) allow firms to take advantage of economies of scale (1).
Detailed explanation-2: -This may reduce demand for imports; improve the trade in goods position; and so improve the current account position. This may protect infant industries; these may grow and take advantage of economies of scale; become internationally competitive; so create output and employment.
Detailed explanation-3: -Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between the per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost.
Detailed explanation-4: -Economies of scale are a key advantage for a business that is able to grow. Most firms find that, as their production output increases, they can achieve lower costs per unit. Economies of scale are the cost advantages that a business can exploit by expanding their scale of production.