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1

What distinguishes the very long run from the long run?

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

7. The price system and the microeconomy (A Level)  →  7.5. Types of cost, revenue and profit, short-run and long-run production

Open

2

What is least likely to happen if a firm decides to increase automation and division of labour in its production process?

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

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3

R1S1, R2S2, R3S3 and R4S4 are production possibility curves (PPC) for four different countries 1, 2, 3 and 4. R4 R3 R2 R1 S1 S2 S3 S4 good R good S O Which statement about the opportunity cost of good R in terms of good S is not correct?

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

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4

Many governments are concerned that the high sugar content in fizzy drinks might lead to health problems such as obesity. These governments are also concerned about the lack of public awareness of the dangers. What can be concluded from this?

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

5

There is a fall in the world price of tea traded on wholesale international markets. How will this most likely affect the supply curve of a major tea retailer?

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

6

It was estimated in 2015 that milk had an income elasticity of demand of –0.6. What can be concluded about milk from this information?

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

Open

7

The diagram shows four supply curves. price quantity O Which statement about the price elasticities of the curves is correct?

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

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

Open

8

The data shows both short-term and long-term changes in the quantities of a product that are supplied to a market in response to an increase in its price from $20 to $25 per unit. quantity supplied at a price of $20 per unit 400 per week quantity supplied after short-term adjustments when price rises to $25 per unit 440 per week quantity supplied after long-term adjustments when price rises to $25 per unit 560 per week What are the short-term and long-term price elasticities of supply for the product?

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

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

Open

9

In the diagram, D is the demand curve for an agricultural commodity and S1 is the initial supply curve. A good harvest causes the supply curve to shift to S2. quantity (’000 tonnes) price ($) S1 S2 D By how much will the demand curve have to shift to leave farm incomes unchanged?

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

10

A market is in an unstable disequilibrium when it does not return to its equilibrium point from a disequilibrium position. The diagram shows a market with two equilibrium points. At which price is the market in an unstable disequilibrium?

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

11

In which situation will it be necessary to use an alternative to the price mechanism to allocate a good between consumers?

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)  →  7.8. Differing objectives and policies of firms

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

Open

12

The table shows the price Rashid is willing to pay for successive bottles of water. bottles of water 1st 2nd 3rd 4th price willing to pay $0.90 $0.80 $0.65 $0.50 If the price is $0.50 and Rashid buys four bottles, what is the monetary value of Rashid’s consumer surplus?

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

Open

13

A market is in equilibrium at price $5. Market supply changes from being inelastic at each price to become elastic at each price. The market equilibrium price does not change. What is the effect on consumer surplus and producer surplus?

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

Open

14

A government has introduced an effective maximum price on rice. Which combination of changes must cause an existing shortage of rice to increase the most?

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

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

Open

15

The diagram shows the market for a product before and after the introduction of a subsidy. supply before subsidy supply after subsidy demand quantity price S R Q P O Y X W U T T1 T2 V Which area represents the total amount paid in subsidies?

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

16

The graph shows the total economic welfare derived by citizens from a government’s expenditure on health and education services. expenditure ($ billions) health education total economic welfare If the government has $60 billion of its budget to allocate between health and education services, which allocation will give its citizens the highest level of welfare?

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

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

Open

17

The table shows the demand and supply schedules for a good before and after the imposition of a tax. price ($) quantity demanded quantity supplied before tax quantity supplied after tax What was the tax and the price change?

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

Which action by a government would not be regarded as a form of privatisation?

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

19

The diagram shows changes in aggregate demand and aggregate supply that have resulted in a move from equilibrium point X to equilibrium point Y. price level real output O SRAS2 SRAS1 AD1 AD2 X Y Which combination of events could have caused this change?

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

20

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

21

What is the average weighted price change illustrated by the table below?

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

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

Open

22

The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 imports from EU exports to EU imports from Russia exports to Russia key Greek trade $bn What happened to Greek trade balances over this period?

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

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

Open

23

The graphs show the changes in the exchange rates of the £ sterling against the US$ and against the euro. The exchange rate of sterling against the euro is shown...

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

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

Open

24

What has happened when a country’s terms of trade are said to have moved in a favourable direction?

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

Open

25

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

26

The diagram shows that the imposition of a tariff raises a product’s world price from $10 to $14. D S domestic supply domestic demand quantity price $ What was the change in domestic producers’ income as a result of the tariff?

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

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

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

Open

27

What is a disadvantage when a quota replaces a tariff to reduce imports?

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

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

Open

28

All other things being equal, what will be the likely effects on the US budget deficit and the supply of US government bonds if the US government increases its expenditure?

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

Open

29

A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The effect of this policy in the following two years is shown...

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

30

Suppose a country has a rate of inflation well below its target rate, high unemployment and a large balance of payments deficit. What would an economic advisor to the government be most likely to recommend?

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

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

Open