---

---

1

‘From the age of twelve I made a living by buying towels, needles, shampoo and soap and re-selling them as a street vendor. Now, I run three hotels in Hanoi’ - Duong Than Binh. Which factors of production are likely to be involved in the above events?

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

Open

2

What is the correct order of these economic concepts?

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

Open

3

A farmer can produce both beef and lamb. The opportunity cost of a kilo of beef is three kilos of lamb. The price of a kilo of beef is twice that of lamb. What should he do if his aim is to maximise his revenue?

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)  →  7.5. Types of cost, revenue and profit, short-run and long-run production

Open

4

What advantage do banknotes (paper money) have over coins (metallic money)?

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

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

Open

5

The diagram shows an individual’s demand curve. price quantity O D D X Y What does XY measure?

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

7. The price system and the microeconomy (A Level)  →  7.1. Utility

Open

6

The diagram represents the market for diamonds. price quantity O D D S2 S1 S2 S1 Q1 Q2 P2 P1 What could have caused price to change from P1 to P2?

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

7

How is the market supply of a product in a competitive market obtained?

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)  →  7.6. Different market structures

Open

8

The diagram shows the demand for a product for which there are only three buyers, Freeman, Hardy and Willis. quantity D D price ($) The table shows the demand from two of the three buyers. price ($) Freeman’s demand Hardy’s demand Which statement about the demand for the product from Willis 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)  →  2.2. Price elasticity, income elasticity and cross elasticity of demand

Open

9

The diagram shows the demand and supply curves for tractors. The present equilibrium point is at X. What could be the new equilibrium if the government were to tax the country’s tractor manufacturers?

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

10

The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. WP2 WP1 O W Y X Z quantity D S price The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and exports?

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)  →  2.5. Consumer and producer surplus

Open

11

The diagram shows the market for sugar which is in equilibrium at a price of OP. P O P1 L M N quantity price S D R U T S Q A government then fixes a maximum price of OP1. What will happen as a result?

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

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

Open

12

A consumer needed a new camera and a new armchair. She was prepared to spend $500 on one item. She discovered that the camera cost $450 and the armchair $500. She bought the camera. What was her opportunity cost and her consumer surplus?

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

Open

13

In which set of circumstances will prices play no part in determining how resources are allocated between alternative uses but may still have a role as a rationing 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

The table shows the expected costs and benefits from four government projects. The government can afford only one project. Which project should the government choose?

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

Open

15

What will be the result, from society’s view, if the market price for a product does not reflect the positive externalities in its production?

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

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

Open

16

A good is produced which consumers are unable to avoid consuming. What type of good is this?

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

17

A government introduces a subsidy to reduce the price of heating oil, maximum rents for apartments and a national minimum wage rate. Who is meant to benefit from each of these?

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

Open

18

In the diagram, D is the demand curve for a commodity. S1 and S2 are the supply curves before and after an intervention by the government. S1 P1 Q1 Q2 P2 S2 D price quantity O What action has the government taken?

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

19

The table shows the ability of two countries, P and Q, to produce two goods, Y and Z. production of good Y per person production of good Z per person country P country Q Which statement is correct?

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

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

Open

20

What is the least likely outcome for participating countries of a move towards freer trade?

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

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

Open

21

A country joins a trade organisation, where the only requirements are that members must have identical tariff rates towards non-members and no trade barriers to fellow members. With which possible change in status for the country is this condition consistent?

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

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

Open

22

In Australia in 2005 a shipload of exported iron ore paid for 2200 imported flatscreen TVs. In 2010 the same size shipload paid for 22 000 imported flatscreen TVs. Which combination of price changes is certain to cause this change in the terms of trade of Australia?

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

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

23

A country has a population of 500 million. 15 million people are unemployed and the country has an unemployment rate of 6 %. What is the size of the labour force?

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

Open

24

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

25

What would increase both demand-pull and cost-push inflation?

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

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

Open

26

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

27

The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest trade deficit?

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

Open

28

Country X trades with only two countries, the USA and Japan. 90 % of the country’s trade is with the USA and 10 % is with Japan. The original value of the trade-weighted exchange rate index is 100. The value of country X’s currency against the US$ rises by 10%. The value of country X’s currency against the Japanese yen rises by 50 %. What will be the value of country X’s new trade-weighted exchange rate index?

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

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

Open

29

What is most likely to cause a rise in a country’s exchange rate?

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

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

Open

30

An economy has a high level of unemployment and a large balance of payments deficit on the current account. What would be a suitable policy for the government to adopt?

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

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

Open