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1

Which statement about economics is not correct?

1. Basic economic ideas and resource allocation (AS Level)  →  1.2. Economic methodology

7. The price system and the microeconomy (A Level)  →  7.4. Private costs and benefits, externalities and social costs and benefits

4. The Macroeconomy (AS Level)  →  4.4. Economic growth

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2

A farmer is able to grow three crops, X, Y and Z, on his land. The farmer decides to grow at most two crops in any year. The table shows six possible combinations of units of output of the three crops. output X Y Z What is the opportunity cost of 1 unit of X?

1. Basic economic ideas and resource allocation (AS Level)  →  1.1. Scarcity, choice and opportunity cost

1. Basic economic ideas and resource allocation (AS Level)  →  1.5. Production possibility curves

7. The price system and the microeconomy (A Level)  →  7.5. Types of cost, revenue and profit, short-run and long-run production

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3

The diagram shows a production possibility curve for an economy that produces capital goods and consumer goods. O capital goods consumer goods Why is the production possibility curve drawn concave to the origin?

1. Basic economic ideas and resource allocation (AS Level)  →  1.5. Production possibility curves

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4

The Bureau of Alcohol, Tobacco, Firearms and Explosives is a branch of the United States Government which regulates markets. What does its name imply is most likely to be its main responsibility?

3. Government microeconomic intervention (AS Level)  →  3.1. Reasons for government intervention in markets

3. Government microeconomic intervention (AS Level)  →  3.2. Methods and effects of government intervention in markets

Open

5

What is treated as a variable in constructing a market demand curve?

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

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6

The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is always +1?

2. The price system and the microeconomy (AS Level)  →  2.2. Price elasticity, income elasticity and cross elasticity of demand

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7

The table shows three different prices and quantities supplied per week of two products, X and Y. price of X ($) quantity supplied of X price of Y ($) quantity supplied of Y Which statement about price elasticity of supply (PES) is correct?

2. The price system and the microeconomy (AS Level)  →  2.3. Price elasticity of supply

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8

In 2016 car drivers bought more fuel because the price of oil from which it was made had fallen. Which diagram represents this change in the market for fuel?

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

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9

The market demand for a product is made up of the demand from three firms, X, Y and Z. The table shows the demand from each firm and the market supply. price $ demand from X demand from Y demand from Z market supply 3 300 6 200 8 200 10 000 What is the equilibrium price in the market?

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

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10

The diagram represents the market for diamonds. price quantity O D S1 S2 Q1 Q2 P2 P1 What could have caused price to change from P1 to P2?

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

Open

11

Good X has a substitute, good Y, and a complement, good Z. The price of good Y decreases and the price of good Z increases. Why might the equilibrium price of good X remain unchanged?

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

5. Government macroeconomic intervention (AS Level)  →  5.4. Supply-side policy

4. The Macroeconomy (AS Level)  →  4.3. Aggregate Demand and Aggregate Supply analysis

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12

At first, a television service is available at no charge. The television company then charges viewers $6 per hour to watch its programmes. The demand curve is D. price ($) number of hours viewed D What is the value of the loss in consumer surplus and what value of consumer surplus remains after the introduction of the hourly charge?

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

2. The price system and the microeconomy (AS Level)  →  2.5. Consumer and producer surplus

Open

13

The diagram shows the European airline market. F G H J K O R T M N S1 S2 D price quantity New entrants have come into the market, shifting supply from S1 to S2. Which area represents the new producer surplus?

2. The price system and the microeconomy (AS Level)  →  2.5. Consumer and producer surplus

Open

14

Which benefit is most likely to result from a rise in the minimum price of labour (wage rate)?

8. Government microeconomic intervention (A Level)  →  8.3. Labour market forces and government intervention

5. Government macroeconomic intervention (AS Level)  →  5.4. Supply-side policy

Open

15

The diagram shows the equilibrium price and quantity of good X. price quantity O D S F E The initial market equilibrium is shown...

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

Open

16

The table shows the demand and supply schedules for a product before and after the government pays a subsidy of $4 per unit to the producers. price $ quantity demanded quantity supplied before subsidy quantity supplied after subsidy Assuming that any extra sales are to new consumers, how much do the original consumers of the product save as a result of the subsidy?

2. The price system and the microeconomy (AS Level)  →  2.4. The interaction of demand and supply

2. The price system and the microeconomy (AS Level)  →  2.5. Consumer and producer surplus

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

Open

17

Which statement about transfer payments is correct?

8. Government microeconomic intervention (A Level)  →  8.3. Labour market forces and government intervention

11. International economic issues (A Level)  →  11.1. Policies to correct disequilibrium in the balance of payments

Open

18

What is the major problem associated with a government directly providing the correct amount of a public good?

3. Government microeconomic intervention (AS Level)  →  3.1. Reasons for government intervention in markets

3. Government microeconomic intervention (AS Level)  →  3.2. Methods and effects of government intervention in markets

Open

19

An aggregate demand curve slopes downwards from left to right. One reason for this is that a reduction in the average price level will lead to A a decline in the country’s international competitiveness. B an increase in interest rates. C an increase in the real value of money balances. D the expectation of further price falls.

4. The Macroeconomy (AS Level)  →  4.3. Aggregate Demand and Aggregate Supply analysis

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

Open

20

In the diagram an economy is initially in equilibrium at point X. The government increases spending on education. This coincides with an increase in wage rate inflation. Which point shows the most likely short-run equilibrium of the economy?

4. The Macroeconomy (AS Level)  →  4.3. Aggregate Demand and Aggregate Supply analysis

5. Government macroeconomic intervention (AS Level)  →  5.3. Monetary policy

Open

21

During one year the national output of a country valued in terms of money prices increased by 8% while the index of the prices of all goods and services produced in the country increased by 3%. By how much did the real national output increase?

5. Government macroeconomic intervention (AS Level)  →  5.3. Monetary policy

6. International economic issues (AS Level)  →  6.4. Exchange rates

4. The Macroeconomy (AS Level)  →  4.1. National income statistics

Open

22

The table shows the CPI rate of inflation (%) in the United States from 2006 to 2013. 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 2.0% What can be concluded from the figures about the period 2006 to 2013?

4. The Macroeconomy (AS Level)  →  4.6. Price stability

4. The Macroeconomy (AS Level)  →  4.1. National income statistics

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23

In 2014 Australia and China negotiated a trade agreement. This removed Chinese tariffs on 95% of Australian exports in exchange for greater access to the Australian economy for Chinese investors. How would the agreement be expected to affect the Australian balance of payments in the short run?

6. International economic issues (AS Level)  →  6.5. Policies to correct imbalances in the current account of the balance of payments

6. International economic issues (AS Level)  →  6.3. Current account of the balance of payments

Open

24

Turkey can produce a good but also imports some of the good from Egypt. The Turkish currency depreciates against the Egyptian currency. How is this most likely to affect production of this good in Egypt and in Turkey?

6. International economic issues (AS Level)  →  6.4. Exchange rates

2. The price system and the microeconomy (AS Level)  →  2.1. Demand and supply curves

Open

25

The table shows the terms of trade for Saudi Arabia. date terms of trade What can be concluded from the table for Saudi Arabia?

6. International economic issues (AS Level)  →  6.1. The reasons for international trade

6. International economic issues (AS Level)  →  6.4. Exchange rates

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26

What is present in a customs union but not in a free trade area?

11. International economic issues (A Level)  →  11.6. Globalisation

6. International economic issues (AS Level)  →  6.1. The reasons for international trade

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27

Which argument in favour of protectionism is not generally regarded as economically valid?

6. International economic issues (AS Level)  →  6.2. Protectionism

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28

Which action is classified as a fiscal policy measure?

5. Government macroeconomic intervention (AS Level)  →  5.2. Fiscal policy

10. Government macroeconomic intervention (A Level)  →  10.3. Effectiveness of policy options to meet all macroeconomic objectives

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29

A country has a deficit on the current account of the balance of payments. Which policy would be expected to increase the deficit?

6. International economic issues (AS Level)  →  6.5. Policies to correct imbalances in the current account of the balance of payments

6. International economic issues (AS Level)  →  6.3. Current account of the balance of payments

Open

30

Which type of policy would have the most immediate effect in dealing with a deflationary economic downturn?

5. Government macroeconomic intervention (AS Level)  →  5.2. Fiscal policy

5. Government macroeconomic intervention (AS Level)  →  5.3. Monetary policy

11. International economic issues (A Level)  →  11.1. Policies to correct disequilibrium in the balance of payments

Open