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1

Which statement about a production possibility curve is correct?

1. The basic economic problem  →  1.4. Production possibility curve (PPC) diagrams

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2

Which firm is likely to find it most difficult to expand the use of its main factor of production?

3. Microeconomic decision makers  →  3.6. Firms and production

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3

The diagram shows the choices for an individual between leisure and earnings. earnings $ hours of leisure per day X Y What is the opportunity cost to the individual of the extra earnings when moving from position X to position Y?

1. The basic economic problem  →  1.3. Opportunity cost

1. The basic economic problem  →  1.4. Production possibility curve (PPC) diagrams

3. Microeconomic decision makers  →  3.3. Workers

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4

A government taxes the production of cars. What is likely to decrease?

4. Government and the macroeconomy  →  4.3. Fiscal policy

3. Microeconomic decision makers  →  3.7. Firms’ costs, revenue and objectives

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5

Which pair of economic institutions can be found in a market economy?

3. Microeconomic decision makers  →  3.1. Money and banking

2. The allocation of resources  →  2.11. Mixed economic system

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6

Developers want to increase the size of a major retail shopping area in a city. It is thought that the proposal would create hundreds of jobs, be profitable for the shops but cause major traffic congestion. What economic concepts are directly involved in this statement?

4. Government and the macroeconomy  →  4.6. Economic growth

2. The allocation of resources  →  2.2. The role of markets in allocating resources

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7

The diagram shows demand and supply curves for a product. Initially the market is in equilibrium at point X. What would be the new equilibrium point if the costs of production fell and a rumour circulated that the product could become unsafe in extreme weather conditions?

2. The allocation of resources  →  2.6. Price changes

2. The allocation of resources  →  2.5. Price determination

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8

What does the term ‘closed shop’ mean?

3. Microeconomic decision makers  →  3.4. Trade unions

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9

What function does a central bank fulfil?

3. Microeconomic decision makers  →  3.1. Money and banking

4. Government and the macroeconomy  →  4.4. Monetary policy

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10

In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a legal minimum wage. An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2. wage ($) labour 6 S1 S1 S2 S2 D1 D1 W How many people will be employed if the minimum wage legislation is then abolished?

3. Microeconomic decision makers  →  3.3. Workers

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11

The table shows how three people spend their income. person X person Y person Z food, clothing and housing 30% 25% 50% entertainment and leisure 35% 35% 25% luxury goods 35% 40% 25% For these three people, what is the most likely order of income, from lowest income to highest income?

3. Microeconomic decision makers  →  3.2. Households

5. Economic development  →  5.1. Living standards

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12

How does a firm guarantee that it makes the maximum profit?

3. Microeconomic decision makers  →  3.7. Firms’ costs, revenue and objectives

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13

What is true when comparing a monopoly to a perfectly competitive firm?

3. Microeconomic decision makers  →  3.8. Market structure

2. The allocation of resources  →  2.10. Market failure

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14

A manufacturing firm increases the scale of its production. Its average total cost curve in the long run (LRAC) is shown...

3. Microeconomic decision makers  →  3.5. Firms

3. Microeconomic decision makers  →  3.7. Firms’ costs, revenue and objectives

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15

The table shows the units of factors of production that a firm needs to employ for two different levels of output. land labour capital output What is the firm experiencing?

3. Microeconomic decision makers  →  3.5. Firms

1. The basic economic problem  →  1.2. The factors of production

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16

A government wishes to stimulate economic recovery. Which action will assist this?

4. Government and the macroeconomy  →  4.3. Fiscal policy

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17

When a government aims to encourage economic growth it may adopt supply-side policies. Which policy is a supply-side policy?

4. Government and the macroeconomy  →  4.5. Supply-side policy

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18

The table shows a government’s receipts from taxation. $m air passenger duty company profits tax import duty income tax inheritance tax sales tax (VAT) What is the total amount of revenue raised by direct taxes?

4. Government and the macroeconomy  →  4.3. Fiscal policy

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19

Which policy combination will be the most effective if a government wishes to increase the level of employment?

4. Government and the macroeconomy  →  4.3. Fiscal policy

4. Government and the macroeconomy  →  4.7. Employment and unemployment

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20

What is most likely to lead to a rise in the rate of inflation?

4. Government and the macroeconomy  →  4.8. Inflation and deflation

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21

Which measures, in addition to Gross Domestic Product per capita, are included in the Human Development Index?

5. Economic development  →  5.1. Living standards

5. Economic development  →  5.4. Differences in economic development between countries

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22

The table gives information about three economic indicators in four countries. inflation % interest rates % unemployment % country W 1.4 3.4 10.2 country X 3.7 8.7 12.3 country Y 3.6 7.3 14.2 country Z 2.1 6.0 7.7 What may be concluded from this information?

4. Government and the macroeconomy  →  4.7. Employment and unemployment

4. Government and the macroeconomy  →  4.8. Inflation and deflation

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23

Which type of government policy would be most suitable to control external costs of production?

4. Government and the macroeconomy  →  4.3. Fiscal policy

4. Government and the macroeconomy  →  4.4. Monetary policy

4. Government and the macroeconomy  →  4.5. Supply-side policy

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24

The diagrams show birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in two years, 1 and 2. There was no migration. BR, DR year X BR DR year Y BR DR year Z BR DR BR, DR BR, DR Where was there a rise in population in year 1 and a fall in population in year 2?

5. Economic development  →  5.3. Population

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25

Why might the emigration of workers help the economy of a developing country?

3. Microeconomic decision makers  →  3.3. Workers

4. Government and the macroeconomy  →  4.7. Employment and unemployment

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26

What combination of changes in the birth rate and death rate is most likely to increase the dependency ratio in a country?

5. Economic development  →  5.3. Population

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27

What might cause the balance on the current account of Mauritius to improve?

6. International trade and globalisation  →  6.4. Current account of balance of payments

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28

A country says that it wishes to increase its trade protection policies. What might that involve?

6. International trade and globalisation  →  6.2. Globalisation, free trade and protection

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29

It has been suggested that all countries producing arms should ban the export of weapons and cut production in order to reduce the risk of war. What would happen if this occurred?

6. International trade and globalisation  →  6.4. Current account of balance of payments

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30

The value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1. What effect will this have on the price of Pakistani products sold in the US and the price of US products sold in Pakistan?

2. The allocation of resources  →  2.6. Price changes

6. International trade and globalisation  →  6.3. Foreign exchange rates

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