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1

Nolwazi lived in a rural area in Botswana and made baskets to sell to the tourists. The local government gave her a loan to buy a car to take the baskets to the city market. Which factor of production increased?

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

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2

What, according to the definition of opportunity cost, is sacrificed when a decision is taken?

1. The basic economic problem  →  1.3. Opportunity cost

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

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3

A friend said his French grandmother kept switching off the lights but left the tap running. His Namibian relative left the lights on while shouting at him to turn off the water. Which availability of resources and level of prices would make economic sense of these consumer actions?

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

1. The basic economic problem  →  1.1. The nature of the economic problem

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4

The table shows the value of output for some parts of an economy. $ billion fishing 25.0 mining 23.0 manufacturing 130.5 financial services 100.3 other services 170.0 Which conclusion may be drawn from these statistics?

3. Microeconomic decision makers  →  3.5. Firms

3. Microeconomic decision makers  →  3.3. Workers

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

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5

What is not one of the basic questions in Economics?

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

1. The basic economic problem  →  1.1. The nature of the economic problem

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6

A government decides that an economy should make more use of the market. Which policy might help to achieve this?

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

4. Government and the macroeconomy  →  4.3. Fiscal policy

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7

The diagram shows an initial equilibrium point (in a market and a new equilibrium point (Y). O price quantity Y X Which combination of changes in demand and supply could have caused the movement from X to Y?

2. The allocation of resources  →  2.6. Price changes

2. The allocation of resources  →  2.4. Supply

2. The allocation of resources  →  2.3. Demand

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8

A large supermarket applied to build on land which was an area of natural beauty. The local government allowed the building, even though the natural beauty of the area would be lost, because many jobs would be created and much needed income would be brought to the local community. Which economic ideas cannot be found in the above statement?

1. The basic economic problem  →  1.1. The nature of the economic problem

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

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9

For what would price elasticity of demand be used?

2. The allocation of resources  →  2.7. Price elasticity of demand (PED)

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10

What is an external benefit when a charge is made for vehicles entering a city centre?

3. Microeconomic decision makers  →  3.5. Firms

1. The basic economic problem  →  1.3. Opportunity cost

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

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11

The diagram shows a demand and supply schedule for tomatoes. The market is in equilibrium at point X. quantity of tomatoes 0 D D S S X 100 130 price of tomatoes $ per kg What will happen if the government imposes a maximum price of $1 per kg?

2. The allocation of resources  →  2.6. Price changes

2. The allocation of resources  →  2.5. Price determination

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12

A product has a price elasticity of demand that is greater than one. What will happen to total revenue if the price of the product is reduced by 3 %?

2. The allocation of resources  →  2.7. Price elasticity of demand (PED)

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13

In August 2007 the Central Bank of Swaziland increased its interest rate from 9.5 % to 10 %. Which effect would this be likely to have on producers and consumers?

3. Microeconomic decision makers  →  3.1. Money and banking

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

4. Government and the macroeconomy  →  4.3. Fiscal policy

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14

Why might a family increase the proportion of its income it spends on food?

4. Government and the macroeconomy  →  4.6. Economic growth

3. Microeconomic decision makers  →  3.2. Households

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15

In 2007 the average annual pay of a scientist in the UK was £37 290. The average annual pay of a laboratory technician was £26 157. What could explain this difference in earnings?

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16

The workers in a company belong to a trade union. Which change might the union use to support a claim for an increase in its members’ wages?

3. Microeconomic decision makers  →  3.4. Trade unions

3. Microeconomic decision makers  →  3.3. Workers

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17

What distinguishes a multi-national company from other companies?

2. The allocation of resources  →  2.9. Market economic system

6. International trade and globalisation  →  6.1. International specialisation

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18

Cadbury Schweppes, the confectionery business, is reported to want to reduce the number of its offices in an attempt to decrease its general and administrative costs. Which type of cost does Cadbury Schweppes hope to decrease?

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

1. The basic economic problem  →  1.3. Opportunity cost

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

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19

Prices tend to be lower in a competitive industry than in a monopoly. Why is this?

3. Microeconomic decision makers  →  3.8. Market structure

2. The allocation of resources  →  2.8. Price elasticity of supply (PES)

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20

India is experiencing rapid growth in air travel. The number and size of airlines is increasing every year. Which effect arising from this growth is an external economy of scale?

3. Microeconomic decision makers  →  3.5. Firms

4. Government and the macroeconomy  →  4.6. Economic growth

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21

The table shows the total cost of a firm. It can sell the units for $4 each. quantity produced 5 total cost $ How many units will the firm produce to maximise profits?

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

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22

A firm has fixed costs of $20 and the following total variable costs. output total variable costs ($) What happens to average total cost over this output?

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

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23

Economic growth can be defined as A an increase in a country’s exports. B an increase in a country’s population. C an increase in the productive capacity of an economy. D a reduction in inflation.

4. Government and the macroeconomy  →  4.6. Economic growth

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24

A country has different rates of income tax depending on the level of income earned. The highest rate of income tax is cut from 40 % to 38 %. From this statement it can be deduced that taxation will become A less indirect. B less progressive. C less regressive. D more difficult to evade.

4. Government and the macroeconomy  →  4.3. Fiscal policy

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25

The government pays a subsidy for each worker employed by a firm in an area of high unemployment. When would this policy be most successful in reducing unemployment?

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

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26

What is the main reason why indirect tax is thought to be unfair?

4. Government and the macroeconomy  →  4.3. Fiscal policy

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27

The table shows some of Japan’s expenditure on social services (actual and projected) as a percentage of Gross Domestic Product. actual projections expenditure medical care 7.2 8.4 pensions 14.3 15.3 education 4.3 3.8 unemployment 0.3 0.3 family benefits 1.0 1.0 total 6.2 10.4 4.0 0.3 1.0 21.9 27.1 28.8 Which population group will benefit most from the projected changes?

5. Economic development  →  5.3. Population

3. Microeconomic decision makers  →  3.3. Workers

5. Economic development  →  5.2. Poverty

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29

In 2008 inflation was close to 100 000 % in Zimbabwe. In a bid to reduce this high rate, the Zimbabwean Government imposed maximum prices on a range of products. This caused price rises amongst those goods sold unofficially or illegally. What could explain this?

2. The allocation of resources  →  2.6. Price changes

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

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30

The table shows a number of economic indicators for four countries in 2004. Which country best fits the description of ‘the fastest real economic growth with the strongest international position’?

4. Government and the macroeconomy  →  4.6. Economic growth

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31

As a result of a decrease in the demand for coal, several coal mines were closed. What type of unemployment would this cause?

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

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32

Which factor is most likely to reduce the average age of a population in a developed country?

5. Economic development  →  5.3. Population

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33

What is most likely to be found in a typical developing country?

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

5. Economic development  →  5.1. Living standards

3. Microeconomic decision makers  →  3.5. Firms

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34

The Chinese Government is concerned about two population problems – overpopulation and a gender imbalance, with males outnumbering females. In 2007 it reduced the number of babies that foreigners are allowed to adopt; almost all of the babies are girls. What effect might this have on the size of China’s population and gender imbalance in the short run?

5. Economic development  →  5.3. Population

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35

The expansion of the European Union has caused net migration into the UK. What is the most likely effect in the UK in the short run?

5. Economic development  →  5.3. Population

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

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36

What benefit is likely to result from the extension of specialisation within manufacturing?

6. International trade and globalisation  →  6.1. International specialisation

3. Microeconomic decision makers  →  3.6. Firms and production

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37

Which two items, as well as trade in goods and services, are included in the current account of the balance of payments?

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

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38

Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that a reduction in tariffs would destroy the emerging drinks industry with large-scale imports of cheap drinks. Which argument for protectionism are they putting forward?

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

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39

Which is an invisible export in France’s balance of payments?

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

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

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40

The United States is the most important destination of India’s exports. In 2006, 29 % of India’s exports went to the United States. Which change in economic policy in the United States is most likely to increase employment in India?

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

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