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1

The term ‘transition economy’ is used to describe a country that is A adopting capital-intensive methods in place of labour-intensive methods. B moving from central planning towards the market system. C replacing a trade deficit with a trade surplus. D substituting manufacturing output for agricultural output.

11. International economic issues (A Level)  →  11.3. Economic development

11. International economic issues (A Level)  →  11.5. Relationship between countries at different levels of development

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2

In the diagram, the curve JK is a country’s production possibility curve. O L J K M good Y good X What could cause the curve to shift to LM?

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

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

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3

What is the opportunity cost to a fully employed economy of increasing capital investment?

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

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4

Skilled actors deserve to receive a high income because they bring pleasure to people who attend the theatre. What can be concluded about this statement?

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

Open

5

What is the definition of a normal good?

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

7. The price system and the microeconomy (A Level)  →  7.2. Indifference curves and budget lines

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6

A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many will the firm sell if it charges a price of $5?

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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7

The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of product Y?

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

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8

The table gives the short-run supply schedules of three firms X, Y and Z, which comprise an industry. price quantity supplied ($) firm X firm Y firm Z – – – Which is a point on the short-run supply schedule of the industry?

7. The price system and the microeconomy (A Level)  →  7.6. Different market structures

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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9

The market for tractors is supplied by two firms, X and Y, each initially having 50 % of the market. A 10 % increase in the price of tractors leads to an increase in output from firm X of 10 % and from firm Y of 20 %. What is the price elasticity of supply of tractors in this market?

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

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

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10

The diagram shows the equilibrium price (OP) and quantity (OQ) in the market for maize. S D P1 P P2 O Q1 Q quantity price The government wants to achieve a target price of OP1. What will be the outcome if the government enters the market and increases the demand by Q-Q1?

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

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

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

Open

11

The diagram shows the effect of the imposition of a tax equal to FG on a commodity. O F G D S1 S2 v w u x y price quantity Which area represents the reduction in consumer surplus?

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

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12

The diagram shows the average world price of coffee in US cents per pound weight between 1997 and 2005. US cents / lb year The price of coffee, 1997 to 2005 Which event is consistent with the price behaviour shown...

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

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

Open

13

What is not a function of the price mechanism?

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

7. The price system and the microeconomy (A Level)  →  7.8. Differing objectives and policies of firms

Open

14

In Europe it was decided that farm subsidies would be paid to farmers who protect the environment as well as producing food. What would this mean for farmers who receive the subsidy?

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

UK supermarkets can buy some vegetables at a lower price from Kenyan farmers than from UK farmers. When the environmental damage caused by transporting the vegetables is taken into account, the social costs of UK supermarkets buying Kenyan vegetables is higher than the social costs of buying UK grown ones. What can be concluded from this information about the buying by UK supermarkets?

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

Open

16

What can be calculated as part of a government cost-benefit analysis that would not be calculated by a firm seeking only to maximise profits?

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

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

Open

17

The government has to choose the best one of four possible sites to locate a port. The benefits and costs of each site are shown...

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

Open

18

The diagram shows the market for apples. A government maintains a minimum price P2 by buying apples. O P2 P1 Q1 Q Q2 D D S S V W Z quantity price X Y Which area shows the amount of money the government has to spend to maintain the price P2?

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

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

Open

19

Thailand produces rubber at a lower opportunity cost than China. It does, however, import some rubber from China. What could explain Thailand importing rubber from China?

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

Open

20

Which argument supports trade protection?

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

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

Open

21

The diagram shows that the imposition of a tariff raises price from $10 to $14. D S domestic supply domestic demand quantity price $ What is the value of tax revenue raised?

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

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

Open

22

The diagram shows the UK trade balance with China and Japan in 2003 and 2004. £ billion imports from Japan imports from China exports to Japan exports to China How did the trade balance of the UK change between the start of 2003 and the end of 2004?

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

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

Open

23

The table gives unemployment rates (%) for four countries in 1993 and 2002. UK Japan France Italy 10.5 2.5 11.4 10.1 5.0 5.4 8.8 8.5 What can be deduced from the table?

9. The macroeconomy (A Level)  →  9.3. Employment/unemployment

4. The Macroeconomy (AS Level)  →  4.5. Unemployment

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

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24

In which year did the real value of money rise?

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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25

The table shows the price indices and weights for the three commodity groups that make up the calculation of a country’s consumer price index. commodity group index weight X Y Z By how much has the cost of living increased since the base year?

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

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)  →  2.5. Consumer and producer surplus

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26

Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and lower boundary. The diagram shows the rate of inflation between 1994 and 2003 and the target rate between 1999 and 2003. 99 2000 % Inflation and inflation targets in Brazil, 1994 to 2003 government target and range rate of inflation What can be concluded from the diagram?

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

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

Open

27

The UK experienced a growing deficit in its trade in goods during 2003 to 2007 but it also had a stable exchange rate. What could have explained why the trade deficit failed to cause the exchange rate to change?

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

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

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

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28

Assuming that the supply of exports and imports are perfectly elastic, at which combination of elasticities of demand for imports and exports would a 10 % fall in the value of a currency lead to a worsening of the trade account of a country’s balance of payments?

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

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

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

Open

29

The price of a good traded internationally increases. Who would be disadvantaged the most?

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

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

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30

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

Open