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1

Why can division of labour benefit an economy?

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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2

The production possibility curve for an economy producing capital goods 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

How is labour allocated in a market economy and in a planned economy?

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

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

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4

A person who has bought a DVD player using a credit card does not have to settle the account until 56 days after making the purchase. What function of money is illustrated by this delay in settlement?

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

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

Open

5

When will the demand curve for motorcycles shift to the left?

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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6

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 halve?

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

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

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7

A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax. Which type of elasticity would it be best for the good to have to achieve this aim?

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

Open

8

The diagram shows the relationship between the price and the total expenditure on a good. total expenditure price O Which statement is correct?

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

Open

9

The table gives an individual’s demand for four goods at two income levels. Over this range of income, for which good does the individual have an income elasticity of demand = 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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10

The diagram shows the market for coffee. The initial equilibrium position is X. The price of tea, a substitute, falls and an indirect tax is imposed on coffee. What will be the new equilibrium position?

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

11

The diagram shows the demand curve, DD1, and the supply curve, SS1, for eye operations. O number of operations price S S1 D D1 P The operations are provided free to the consumer. 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

12

The diagram represents a market for a good, in which the equilibrium price is OU. price quantity O W X V U Y Z supply maximum price demand A maximum price of OV is imposed by the government. What effect does this have on consumer surplus?

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

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

Open

13

Which government policy might limit the rationing function of the price mechanism?

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

Open

14

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

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

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

Open

15

Which statement is correct?

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

Open

16

A government carries out a cost-benefit analysis on the building of a new airport. It calculates that the cost of constructing and running the airport will be less than the revenue the airport will generate. It also estimates that benefits to third parties will be greater than the cost to third parties. Which reason might the government give for not building this airport?

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

Open

17

What is a defining characteristic of a public good?

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

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18

A government introduces a maximum price for house rentals (maxPh) and a minimum price for cleaning services (minPc). Both markets have identical demand and supply curves. Which diagram shows that the maximum price will be effective and the minimum price will be ineffective in the respective markets?

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

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

Open

20

What is an assumption behind the basic theory of comparative advantage?

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

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

Open

21

Which statement about the impact of a quota and a tariff 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

22

Between 2005 and 2010, a country’s import prices rose by 25 % and its terms of trade rose to 120 (2005 = 100). Which change has there been in the country’s export prices?

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

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

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23

A firm initially employs 50 workers, each working 40 hours a week, and produces a total output of 18 000 units. It then employs an additional 10 workers, again each working 40 hours, and total output rises to 19 200 units. What effect does this rise in employment have on labour productivity?

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

Open

24

The table shows some of the elements of aggregate demand in selected countries in US$ in 2009. country aggregate demand (US$ bn) consumer expenditure + investment + government spending (US$ bn) exports (US$ bn) Argentina Brazil Kenya South Africa What can be concluded from this information?

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

9. The macroeconomy (A Level)  →  9.1. The circular flow of income

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

Open

25

The graph shows a country’s average annual inflation rate over a five year period. year average annual inflation rate (%) What can be concluded about the general price level during the five years?

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

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26

A country has a balance of payments disequilibrium with a long-run deficit on its current account. Which outcome of the disequilibrium will cause inflationary pressure?

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

27

If interest rates are reduced, what is most likely to decrease?

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

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

9. The macroeconomy (A Level)  →  9.1. The circular flow of income

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28

The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade agreement. The values are given both in Singapore dollars (S$) and New Zealand dollars (NZ$). S$ m NZ$ m percentage change from 2000 Singapore exports to New Zealand +20 % Singapore imports from New Zealand –17 % What can be concluded from the table?

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

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

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29

At present, one unit of a country’s currency exchanges for US$1.2. The country aims to set its exchange rate at US$1.4. Which combination of government actions in the foreign exchange market must achieve this aim?

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

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

Open

30

The government wishes to encourage a rise in the external exchange rate of a currency in order to dampen inflationary expectations. What should it do?

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)  →  11.1. Policies to correct disequilibrium in the balance of payments

Open