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1

Some people are shipwrecked on a tropical island and allocate their time between gathering coconuts and fishing. Each individual is equally productive in collecting coconuts or catching fish. Which diagram represents the production possibility curve of this community?

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

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2

Which is a normative statement?

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

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

Open

3

In which situation would an economist assume ceteris paribus?

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

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

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4

In the 20th century the nature of a typical car assembly plant changed. Company mergers meant there were fewer firms, they operated on larger sites and they had more automated machinery and robots. How is this change most likely to have affected the relative employment of factors of production in the industry?

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

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

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5

The following might influence the demand for a good. Which would not cause a shift in the demand curve for the good?

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

6

A fall in the price of cars causes the demand for petrol to rise by 20 %. The cross-elasticity of demand between cars and petrol is –2. Which change in car prices has brought this about?

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

Open

7

What is correct about market supply?

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 of a firm’s product rises by 12 %. After one week the firm is only able to produce the same quantity but after one month it can increase the quantity by 6 %. How would price elasticity of supply be described after one week and after one month?

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

The government imposes a sales tax to reduce consumption of good X. With which combination of price elasticity of demand and price elasticity of supply will this have the greatest effect?

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

10

Jam and honey are substitutes and honey and beeswax are in joint supply. Other things being equal, what will be the result of an increase in the price of jam?

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)  →  2.3. Price elasticity of supply

Open

11

The number of passenger journeys per week by train on a certain route is shown...

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

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12

The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh represents domestic supply and Sm represents imports. price quantity O R D Sm Sh T V What will be the level of consumption and the associated volume of imports?

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

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

Open

13

In a free market in disequilibrium, which combination of price and quantity will lead to a fall in price and a contraction in output to reach equilibrium?

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

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

Open

14

A government decided to approve a private airport-building scheme because it was socially beneficial. In making its decision it calculated private costs at $700 m, private benefits at $800 m and external costs at $200 m. What does this suggest must have been true about the external benefits of the scheme?

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

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15

In cost-benefit analysis the term net social benefit refers to A private benefit plus social benefit. B social benefit minus private benefit. C social benefit minus private cost. D social benefit minus social cost.

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

Open

16

Advances in technology are turning a number of goods which are usually thought of as public goods (for example, television broadcasting and road use) into private goods. Why might this be so?

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

17

What is true of merit goods?

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

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

Open

18

Brazil and Colombia attempt to control the supply of coffee in the world market to help stabilise their incomes. What condition is essential for this to stabilise their incomes effectively?

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

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

Open

19

Country X has a comparative advantage in producing wheat and country Y in producing cars. However, the countries choose not to specialise and trade. What is a valid reason for this behaviour?

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

Open

20

What would be an economic benefit to a country of imposing a tariff on imported goods?

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

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

Open

21

When must the terms of trade of a country change?

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

Open

22

The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods imports of goods exports of services imports of services net transfers + 5 What is the value of the current account balance?

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

Open

23

The table gives the % rates of youth unemployment and total unemployment in France and the UK in 2001 and 2005. France UK youth unemployment (%) total unemployment (%) youth unemployment (%) total unemployment (%) 19.2 8.7 5.2 22.1 10.1 12.5 4.8 What can be concluded from the table?

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

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

Open

24

When is labour productivity in a firm most likely to increase?

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

Open

25

A country experienced an annual inflation rate of 4 % for three successive years. Which statement is correct for the three-year period?

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

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

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

Open

26

What would be likely to decrease inflation in an economy?

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

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

Open

27

A UK resident buys shares in a Spanish company. What will be the immediate and subsequent effects on the UK’s balance of payments?

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

28

In a country the Marshall-Lerner condition for an improvement in the trade balance is satisfied in the long run, but quantities of imports and exports are slow to respond to price changes. The government devalues its currency to reduce its trade deficit. Which curve indicates the probable behaviour of the trade balance?

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

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

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

Open

29

There is a rise in the exchange rate of the US$. Which would cause the greatest increase in the US current account deficit?

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

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

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

Open

30

The diagram shows the market for £ sterling which is in equilibrium. 2.5 2.0 D S price of £ in US$ quantity of £s What must the UK government do to achieve an exchange rate of £1 = US$2.50?

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

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