Answer all the following questions.

1. Explain the significance of sub-prime mortgages and Mortgage Backed Securities in the context of the financial collapse of 2007/2008.

2. Why is opportunity cost a more comprehensive and important concept than accounting cost in the context of the whole economy? Give an example of a decision involving both (other than those given in lecture notes or seminar questions).

3. Giving examples, describe the strategic use to which a business may put a knowledge of both the price elasticity and the income elasticity of demand for its product.

4. Define, using diagrams, the term minimum efficient scale and explain how it may be related to market structure.

5. Which factors are likely to determine price elasticity of demand for Higher Education?

6. Giving real world examples in each case, define the following in your own words - (a) Public goods (b) Merit goods (c) Externalities.

7. Giving examples, explain why some goods may exhibit negative income elasticity in the short run but positive income elasticity in the long run.

8. Explain why it may be in the best interest of a firm to voluntarily pay its lowest paid/lowest skilled workers above the statutory minimum wage rate.