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1

Why is scarcity the central feature of the economic problem?

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

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2

The production possibility curve for an economy producing capital and consumer goods is represented by the line PQ. P R O S T Q consumer goods capital goods What is the opportunity cost of producing OS of consumer goods?

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

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3

In which types of economy might a government control prices?

1. Basic economic ideas and resource allocation (AS Level)  →  1.4. Resource allocation in different economic systems

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

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

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4

Which action by an individual would not be considered an action of the factor of production labour?

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

A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direction of price change for this to be certain to happen?

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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6

The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is always +1?

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

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7

The diagram shows the demand curve for a product. O M Q D N R S L P quantity price If the rectangle OLMN is equal in area to the rectangle OPQR, which statement is correct?

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)  →  2.4. The interaction of demand and supply

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8

The price of good X rises by 10 %. As a result, the demand for a substitute good Y rises by 20 %. What is the cross-elasticity of demand for good Y with respect to good X?

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

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9

There are three firms (X, Y and Z) supplying a market. The table shows their supply at four different prices. price ($) firm X’s supply firm Y’s supply firm Z’s supply Which price change is required for market supply to double?

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

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10

What might explain a simultaneous increase in both price and quantity traded in the market for a normal 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

11

The diagram shows demand and supply curves for petrol. The present equilibrium is at X. What could be the new equilibrium if there were a large fall in the price of cars?

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

12

The diagram shows the demand and supply curves for a product. price quantity O S D W X Y Z V Which area measures the total amount consumers would be willing to pay for the equilibrium level of output?

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

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

Open

13

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

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14

A firm owns a bridge and charges all vehicle users who cross it. How might the charge be classified?

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

Which statement about externalities is correct?

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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16

The table shows, for two different quantities of good X, the total amount consumers are willing to pay and the total external benefits that are generated. quantity of good X consumers’ willingness to pay ($) total external benefits ($) What is the additional social benefit when 4 units rather than 3 units are produced?

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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17

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

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18

What is a defining characteristic of a private good?

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

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19

The diagram represents the production possibility curves of two economies X and Y. manufactured goods agricultural goods Y X1 X As a result of soil erosion in economy X, the production possibility curve shifts from X to X1. According to the law of comparative advantage, what should country Y do following this change?

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

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20

What will be the immediate effect of the removal of tariffs on imported consumer goods?

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

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

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

Open

21

Which feature is found in both a customs union and a free trade area?

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

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

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22

In which situation must the terms of trade be moving in a country’s favour?

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

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23

The table shows a country’s employment statistics. million population of working age number in employment number unemployed What are the participation rate and the unemployment rate?

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

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

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24

The figures were taken from the consumer price indices of retail prices for three countries. country X Y Z Between 2006 and 2007, what is correct?

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

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

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

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25

What is correct about the causes of inflation?

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

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

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26

The diagram shows Australia’s exports to and imports from four trade partners in $billion in 1994 and 2004. Japan United States China New Zealand exports imports Australia’s exports and imports, $bn, 1994 and 2004 With which country did Australia have a trade deficit in 1994 and a trade surplus in 2004?

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

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

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27

A country succeeds in attracting foreign direct investment. How is its effect recorded in its balance of payments in the short run and long run?

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

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

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28

Under a system of flexible exchange rates, what determines the foreign exchange value of a currency?

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

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

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29

With an exchange rate of 5 Egyptian pounds (EGP) = 1 US dollar ($), an American product sells in Egypt for EGP100. Assuming that the dollar price remains unchanged, what will be the price of the product in Egypt if the Egyptian pound appreciates to EGP4 = 1 US$?

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

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

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30

Which measure to correct a balance of payments current account deficit would be classified as an expenditure-dampening policy?

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