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1

Three women work in a pottery workshop, each dividing their time equally between three products. The table shows how many units of each product are made. plates bowls mugs Jane Sarah Seema total Later, division of labour is introduced and each woman makes only the product in which she has absolute advantage. What is the rise in total output?

1. Basic economic ideas and resource allocation (AS Level)  →  1.3. Factors of production

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

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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2

The diagram shows two production possibility curves (EF and GH), before and after technological progress has taken place. O G E X F M Y H consumer goods capital goods After technological progress has taken place, what is the opportunity cost in capital goods of producing OX consumer goods?

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

1. Basic economic ideas and resource allocation (AS Level)  →  1.3. Factors of production

Open

3

What must be true of a positive statement?

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

Open

4

In 2001, the Argentinian economy was in serious economic difficulties. At this time, Argentinians made everyday purchases using the country’s currency, the peso, but saved money in US dollars. Which functions were the two currencies carrying out in Argentina in this case?

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

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

Open

5

What is not held constant when aggregating individual firms’ supply curves to give the market supply curve?

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

Open

6

The table shows the demand for tickets for a concert. price of tickets $ quantity demanded The capacity of the concert hall is 6000. What price should be charged to maximise total revenue?

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

7

The table shows the demand and supply schedules for a good before and after the imposition of a tax. price ($) quantity demanded quantity supplied before tax quantity supplied after tax What was the amount of the tax?

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

8

The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between total expenditure on the product and its price?

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

Open

9

In the UK, attempts to encourage people to change from road to rail travel by the introduction of a system of road pricing were forecast to fail because ‘people like using their cars too much’. How would this forecast be explained?

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

Open

10

The table shows changes in a consumer’s expenditure on various goods when his income increases from $20 000 to $24 000. good income $20 000: amount spent on good ($) income $24 000: amount spent on good ($) W X Y Z Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of demand greater than 1.0?

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

Open

11

The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. WP2 WP1 O W Y X Z quantity D S price The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and exports?

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

Open

12

Between 2006 and 2007, the price of skimmed milk powder on the world market rose from $1000 per tonne to $2400 per tonne. Assuming that the market is a free market, what will result from the price change?

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

13

Which statement indicates that the price mechanism is allocating resources successfully?

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

8. Government microeconomic intervention (A Level)  →  8.1. Government policies to achieve efficient resource allocation and correct market failure

Open

14

A government is planning to intervene in a market to fix output at the economically desirable level by giving a subsidy. MSB MPB MSC R W Y X S T costs / benefits O output To achieve its objective, what should be the subsidy per unit?

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

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

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

Open

15

A town council estimated the costs and benefits of operating a bus service in 2006 and 2007. These are shown...

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

Open

16

When would cost-benefit analysis definitely indicate that a government project should be approved?

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

Open

17

Why does the production of public goods have to be financed by the government?

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

1. Basic economic ideas and resource allocation (AS Level)  →  1.6. Classification of goods and services

Open

18

The market price of an agricultural commodity was so low that the government fixed a minimum price for it above the market equilibrium price. However, the government did not buy any of the commodity itself. What would happen as a result?

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

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

Open

19

In the diagram, MN is the production possibility curve of a country that has a comparative advantage in the production of good Y. O quantity of good Y quantity of good X R M N What might enable the country to consume the quantities of X and Y indicated by point R?

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

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

Open

20

Japan introduces import quotas on consumer durables imported from Malaysia. These goods have a high price elasticity of demand. What effect is this likely to have on the prices paid for these goods by Japanese consumers and on the revenues received by Malaysian producers?

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

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

Open

21

Which statement about economic integration is correct?

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

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

Open

22

Since 2000 a country’s export prices have increased on average by 50 % and its import prices by 25 %. What is the current figure for the country’s terms of trade (2000 = 100)?

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

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

Open

23

What will cause an immediate rise in the size of a country’s labour force?

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

Open

24

What is the average weighted price change illustrated by the table below?

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

Open

25

The diagram shows the annual rate of inflation in a country between 2000 and 2003. rate of inflation % year Which statement is true of the period 2000 to 2003?

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

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

Open

26

A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries decide to provide more oil to the market. What is likely to happen as a result in the developed country to inflation, its balance of trade and the quantity of oil demanded?

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

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

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

Open

27

Why is it that a country’s balance of payments must always balance?

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

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

Open

28

In the diagram, D1D1 and S1S1 are the initial demand and supply curves of the pound sterling (£) on the foreign exchange market. price of £ in $US quantity of £ O D1 S1 S2 D2 S2 S1 D1 D2 What will cause the demand curve to shift to D2D2 and the supply curve to S2S2?

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

29

With an exchange rate of 5 Egyptian pounds (EGP) = 1 US dollar ($), an American product sells in Egypt for EGP 100. Assuming that the dollar price remains unchanged, what will be the price of the product in Egypt if the Egyptian pound appreciates to 4 EGP = 1 US$?

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

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

Open

30

A country has a large current account deficit. Its government decides to devalue its currency. In which circumstance would such a measure reduce 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