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1

An American family is choosing between four holiday destinations in Europe, each at the same price. The table shows the family’s order of preference for these holiday destinations. holiday destination order of preference Barcelona 1st London = 3rd Paris 2nd Venice = 3rd If the family goes to Barcelona, what is the opportunity cost of this choice?

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

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2

The diagram shows two production possibility curves for an economy. O services goods L N M K Which combination of movements correctly illustrates these changes in production?

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

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

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3

What distinguishes the very long run from the long run?

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

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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4

Which statement is a positive statement?

8. Government microeconomic intervention (A Level)  →  8.2. Equity and redistribution of income and wealth

3. Government microeconomic intervention (AS Level)  →  3.3. Addressing income and wealth inequality

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5

What could not cause a shift in an individual’s demand curve for good Z?

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

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

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6

The diagram shows the market for sugar which is initially in equilibrium at a price of OP. P O P1 P2 L M N quantity price S D R U T S A government then fixes a maximum price of OP1. What will happen as a result?

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

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

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7

The table shows a competitive market in equilibrium in two periods. period market price quantity traded 10 000 12 000 What could explain the change from period 1 to period 2?

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

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8

Which example of consumer behaviour would create consumer surplus?

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

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9

A manufacturer reduces the price of its goods after developing a more efficient manufacturing process. It makes leather belts that compete against belts made of artificial material. What are the likely outcomes of the change in the manufacturing process?

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

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

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10

What is the likely price elasticity of supply of highly perishable goods and goods that have low stocks?

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

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

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11

The diagrams show the initial demand curve D1 and supply curve S1 for steel in the European Union (EU). In 2018 European steel firms experienced rising energy prices. Which diagram shows the likely impact of this?

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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12

The market for wheat is in equilibrium at price P with supply at 40 million tonnes. Due to a drought in the growing season, supply falls to 20 million tonnes. P2 P P1 O D S quantity of wheat (million tonnes) price of wheat per tonne Which immediate action should be taken to maintain the equilibrium price of P?

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

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

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13

What is used to calculate the price elasticity of demand?

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

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14

After a series of poor harvests, a government imposes an effective maximum price on cereals. What would be a consequence of this policy?

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

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

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

Open

15

What would be a transfer payment?

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

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

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16

The government redistributes income by raising the top rate of income tax and using the money raised to finance additional benefits to students and the unemployed. Under which conditions will total spending in the economy increase the most?

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

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17

A government wishes to increase the supply of houses. It pays a subsidy to brick manufacturers to increase supplies of bricks to S2. The diagram shows the supply of and demand for bricks. quantity of bricks D1 S1 S2 P1 P2 P3 O price of bricks Which size of subsidy per unit is required to increase supply to S2?

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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18

Why is national defence provided by the government?

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

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19

Which statement about a rise in the general price level in a country is correct?

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

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

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20

A country’s terms of trade changed from 100 to 95. What is most likely to have caused this change?

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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21

A country replaces a floating exchange rate system with a managed floating exchange rate system. Which statement is correct?

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

11. International economic issues (A Level)  →  11.2. Exchange rates

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22

What will be the immediate effect of a devaluation of an economy’s foreign exchange rate?

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

11. International economic issues (A Level)  →  11.2. Exchange rates

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23

A country has a deficit on the current account of its balance of payments. What might help the country to reduce its deficit?

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

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

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24

The diagram shows the effect of removing a tariff on imports of good X into country Y. price of X (US$) DX domestic SX domestic SX world SX world + tariff quantity of X What is the volume, in million units, of the extra international trade created by removing the tariff?

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

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25

Which item should be recorded in the financial account of a country’s balance of payments?

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

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26

The table shows a country’s consumer prices index (CPfor March and April 2018. CPI March 2018 151.3 April 2018 148.6 Which statement correctly describes what happened between these two months?

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

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

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

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27

The diagram shows the rate of inflation over time in four countries. Which country has a rising real value of money over time?

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

10. Government macroeconomic intervention (A Level)  →  10.2. Links between macroeconomic problems and their interrelatedness

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28

The table shows the consumer prices index (CPfor an economy expressed as an index number. year CPI Which action is the government most likely to take to achieve price stability?

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

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29

Other things being equal, what is most likely to be reduced by falling labour productivity?

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

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

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

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30

A government spends money building more schools. How might this be classified?

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

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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