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1

Which statement about the problem of scarcity is correct?

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

Open

2

A firm is considering whether to buy a piece of capital equipment which will cost $2000. It estimates that the equipment will last for two years. The alternative is to lend the money to a finance company at a compound rate of interest of 5%. What is the minimum increase in revenue the firm must expect to make it worthwhile buying the equipment?

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

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

Open

3

The diagram shows the production possibility curve XX of an economy that produces both consumer goods and capital goods. O capital goods consumer goods X X M N If the economy moves from point M to point N, which diagram represents the most likely position of the production possibility curve YY in the future?

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

Open

4

Arfan and his brother Ben own and run a fishing business together. They have one boat and on the days when they fish they employ Cephas and Dipak. They sell the fish to the owner of a local shop. Which row correctly identifies the factors of production involved?

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

Open

5

The market price of a product rose from $8 to $10 and as a result the market demand fell from 20 000 to 8000 a week. Consumer X’s demand declined from 30 to 24 and consumer Y’s demand fell from 100 to 60 a week. What can be concluded from this information?

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)  →  2.5. Consumer and producer surplus

Open

6

A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax increase. Which level of price elasticity of demand 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

7

The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity and its price?

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)  →  2.5. Consumer and producer surplus

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

Open

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 the price of good X?

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 supply curve of coffee in an economy. supply O X Y price quantity The market equilibrium is initially at point X, but a change moves it to point Y. What might explain this?

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

In the diagram OS1 and OS2 are two straight-line supply curves. price O quantity S1 S2 As price increases, the elasticity of supply A decreases along both OS1 and OS2. B increases less rapidly along OS1 than along OS2. C increases more rapidly along OS1 than along OS2. D is constant along OS1 and along OS2.

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

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

Open

11

In which case will a given increase in the supply of a good cause the greatest fall in the price of 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

12

The table shows the maximum price a consumer would be willing to pay for successive cans of fruit juice. cans first second third fourth fifth price ($) The price of a can of fruit juice is $4 and, having bought three cans, the consumer decides to buy a fourth. How does buying the fourth can affect his consumer surplus?

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

Open

13

Which combination of changes would enable the price mechanism to allocate resources more efficiently in a monopoly market?

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

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

Open

14

A firm wishes to build a factory extension. Permission is required from the government because the extension may increase A comparative costs. B external costs. C opportunity costs. D private costs.

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

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

Open

15

The diagram shows the private and social costs and benefits that arise from the consumption and production of a good. 20 25 MPB MSB MSC = MPC quantity costs / benefits $ If there is no government intervention, what is the value of the marginal external benefit?

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

Open

16

What can be provided only as a public good?

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

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

Open

17

The diagram shows the demand for and supply of a foreign-made mobile phone. The initial position in the domestic market is X. price quantity X E F G O S1 D1 D S Importers increased the supply of the phone and there was an increase in demand for the phone. The government considered whether to protect domestic manufacturers with a limit on imports which would keep the supply at the initial quantity. How would the price change between the new equilibrium without a limit on imports and the equilibrium with a limit on imports?

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

18

The government imposes a maximum price of P2 on a product. O S D Q2 P2 P1 Q1 Q3 quantity price What will be the position after this action?

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

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

Open

19

What is an effect on a country of free trade?

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

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

Open

20

What is meant by dumping in international trade?

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

Open

21

As a result of a trade agreement, toys produced in Africa can be supplied to European markets. These toys are much cheaper than similar toys produced in Europe but are not of such good quality. What will happen in Europe to expenditure on toys, employment in European toy companies and imports from Africa?

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

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

Open

22

Which international transaction is correctly matched to the part of the balance of payments account in which it is recorded?

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

Open

23

The diagram shows annual average labour productivity growth for three groups of countries during two time periods. 1975-1990 1990-2005 agriculture 1975-1990 1990-2005 –1 industry key Latin America East Asia high-income countries Which activity in which country group achieved the greatest improvement in its labour productivity growth rate between 1975-1990 and 1990-2005?

11. International economic issues (A Level)  →  11.3. Economic development

4. The Macroeconomy (AS Level)  →  4.4. Economic growth

9. The macroeconomy (A Level)  →  9.2. Economic growth and sustainability

Open

24

The diagram, which shows part of the process that causes the aggregate demand curve to slope downwards to the right, is incomplete. aggregate price level rises level of consumption rate of interest real value of savings Which words correctly complete gaps 1, 2 and 3?

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

25

The graph shows the rate of inflation in a country in a 5 year period. year + – rate of inflation % What can be concluded from the graph?

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

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

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

Open

26

What might explain an increase in the volume of a country’s imports?

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

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

Open

27

What is the most likely consequence of an increase in a country’s balance of payments deficit?

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

Which economic change might contribute to both cost-push and demand-pull inflation?

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

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

Open

29

The diagram shows the market for Japanese Yen. O price of Yen in terms of other currencies quantity of Yen D S2 S1 What could have caused the change in the supply of Yen from S1 to S2?

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

30

To reduce a deficit on the current account of the balance of payments, a government imposes a limit on the foreign exchange its people and firms can purchase. Why may this increase the country’s inflation rate?

6. International economic issues (AS Level)  →  6.4. 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)  →  6.5. Policies to correct imbalances in the current account of the balance of payments

Open