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1

What is the opportunity cost to a person of spending $20 on a new pair of sports shoes?

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)  →  7.4. Private costs and benefits, externalities and social costs and benefits

Open

2

Which statement is correct?

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

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

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3

What is correct at any point along an economy’s production possibility curve?

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

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4

‘The local government of Tokyo should use a policy of taxation to reduce traffic congestion in the city centre.’ What can be concluded about this statement and the type of economic policy?

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

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

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

Open

5

Which statement about market disequilibrium is correct?

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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6

In the diagram, D1 and S1 represent the demand for and supply of luxury watches. Equilibrium is initially at point X. The cost of raw materials for manufacturing watches rises. At the same time the incomes of the rich increase. Which point on the diagram is most likely to represent the new equilibrium?

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

7

The equation for the quantity demanded (QD) of a product is QD = 400 – 20P where P = price in dollars. The quantity supplied (QS) is given by QS = 100 + 40P. What can be concluded about the market when price is $5?

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

Open

8

When is the supply curve for a car manufacturing firm most likely to be price elastic?

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

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9

The diagram shows a market for wheat. quantity of wheat price of wheat P2 P1 S D Q2 Q1 Q3 What is the response of demand for and supply of wheat when the price of wheat falls from P2 to P1?

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

10

The table shows the demand schedule for avocados in a market on a particular day. The supply of avocados was fixed on that day. $ per avocado quantity demanded 2.60 2.40 2.20 2.00 1.80 Which statement is correct?

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

The diagram shows the demand and supply curves of a normal good (. Q1P1 is the initial equilibrium. O price quantity P2 S2 D2 D1 Q1 Q2 S1 P1 Other things being equal, what may cause the change in the market equilibrium to Q2P2?

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

12

The diagrams show the supply curves in four different markets. In which market is the price elasticity of supply always equal to one?

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

Open

13

The diagram represents the market for electric cookers. price quantity O S D2 D1 X Y What is most likely to explain the change in the equilibrium from point X to point Y?

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

14

The diagram shows the effect on the market for rice of a change in government policy that causes a shift in the supply curve from S to S1. K J L M D S S1 O quantity price What does the area JKLM represent?

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

15

Which statement is not an argument in support of the process of privatisation?

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

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

Open

16

Governments are trying to reduce the burden of transfer payments in economies with an ageing population. Which policy would help to achieve this aim?

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

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

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

Open

17

Doctors are concerned about the negative health effects of sugary drinks. When would a tax on sugary drinks be least effective in improving health?

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

Open

18

The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS) in an economy during a year. O Q Q1 AD1 P1 P AD AS general price level real output What explains the rise in the general price level?

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

Open

19

How is a rate of inflation that is lower than that expected likely to affect lenders and borrowers in an economy?

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

9. The macroeconomy (A Level)  →  9.4. Money and banking

Open

20

A country devalues its currency in the expectation that a deficit on the current account of the balance of payments will be reduced. What is necessary to make this happen?

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

21

The current account of the balance of payments for Nigeria changed from US$899 m in 2014 to US$ –15 763 m in 2015. Assuming that nothing else changes, what is likely to be the impact in 2015 on GDP and the exchange rate in Nigeria?

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

22

Australia’s aggregate demand decreased over the last year. What might have been the cause of this?

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

Open

23

The diagram shows the effect of introducing an import quota on the market for good X. price of X quantity of X O Sdomestic + quota Sdomestic Sworld Ddomestic pQ q1 q2 q3 q4 p What is the change in domestic supply and the size of the import quota?

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

24

Country X joins a customs union with country Y and will remove the tariff on its imports of good M from country Y. Under which conditions will trade creation in country X be the smallest?

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

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

Open

25

An Australian family purchases a holiday to New Zealand and an Australian mining company sells coal to China. Four students, A, B, C and D, are asked where these transactions appear in the current account of Australia’s balance of payments. Which student is correct?

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

Open

26

What is likely to be the least effective store of value during a period of rapid inflation?

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

9. The macroeconomy (A Level)  →  9.4. Money and banking

Open

27

An increase in what will shift the aggregate demand curve in an economy to the right?

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

Open

28

A country’s balance of payments current account is in deficit. How can this be restored to equilibrium, assuming the Marshall-Lerner condition holds?

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

29

Monetary policy does not usually work immediately. Which time lag is likely to be the least concern to a government whose priority is a rapid domestic impact?

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

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

Open

30

What is the best example of an expansionary supply-side policy?

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

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

Open