economics

1. which factor of production is needed first in order to set up a new business?
a capital
b_ enterprise
c_ labour
d land

2 assuming nothing else changes, which change in an economy’s labour market will cause the
production possibility curve to shift to the left?
a _anincrease in worker immigration
b_anincrease in the retirement age
c_anincrease in labour productivity
d_anincrease in the school leaving age

3 what is not a characteristic of a mixed economy?
a_ the government has no role in setting prices.
b_ the government manages taxation rights.
c_ the government prevents firms from earning excessive profits.
d_ the government provides services not provided by the private sector.

4 what is not likely to result from the use of division of labour?
a adecrease in average costs
b_anincrease in motivation
c_anincrease in productivity
d  animprovement in quality of the final product

5 price plays a number of functions in the allocation of resources.
which statement best illustrates the function that relies upon consumer choice (sometimes known
as the incentivising function)?
a_ a price fall can show consumers that a good is becoming less popular.
b_ aprice fall tends to persuade some producers not to stay in the market for the good.
c_ aprice rise means consumers cannot afford to buy so much of a good.
d_ apprice rise tends to reduce competitiveness in the market for a good.

6 which pair of products are substitutes both in consumption and production?
a barley and cotton
b gold and silver
c soap and toothpaste
d_ spinach and cabbage

7 there is a worldwide shortage of oil. the diagram shows the consumption and production of oil
(billion tonnes) for selected countries.
united
states
key
japan [em consumption
[_] production
russia
britain
0 0.2 0.4 0.6 0.8 1.0
billion tonnes
what can be concluded from the diagram?
a in britain, oil has zero opportunity cost.
b_in japan, there is self-sufficiency in oil.
c_ in russia, there is no shortage of oil.
d_ inthe united states, rationing is the only solution to oil shortage.

8 the cross elasticity of demand between bus travel and rail travel is +2. a rise in the price of bus
fares caused the demand for rail travel to rise by 10%.
which change in bus fares would have caused this?
from to
(cents) (cents)
a 20 21
b 30 33
cc 40 45
d 50 60

9 achange in the price of a good causes an increase in the quantity of the good demanded.
what would be the nature of the good and the direction of price change for this to be certain to
happen?
a inferior fall
b inferior rise
cc normal fall
d normal rise

10 a specific tax is placed upon each bottle of perfume sold. in the diagram, s is the supply curve
before tax, s; is the supply curve after tax.
“ ss,
price
ss
ww,
r passers
q form=ony fy xx
an 1
1) no
e) ¥ z
quantity
which area represents that part of the tax revenue paid by producers?
a orwy b pqut c prwt d qrwu

11 the diagram shows the supply curve of a firm.
price
ss

0 quantity
which statement about the price elasticity of supply (pes) along this curve is correct?
a_ pes is greater than unity at all points along the supply curve.
b_ pes is the same at all points along the supply curve.
c_ pes is elastic when the price is low and becomes more inelastic when the price rises.
d_ pes rises when the supply rises.

12 the diagram shows the market for electric cars with x as the initial equilibrium.
what will be the new equilibrium when the price of electric car batteries falls and consumers
become more environmentally aware?
d, d d,
price
$ e ss,
lif
1 c s,
o electric cars

13 what would cause a market disequilibrium?

a when a decrease in the demand for a product leads to a price fall that results in some
producers leaving the market

b_ when a decrease in the demand for a product leads to some producers being unable to sell
products at the current price

c_ when a decrease in the supply of a product leads to a price rise that results in the market for
the product clearing

d_ when a decrease in the supply of a product leads to a price rise that makes it too expensive
for some poorer households

14 inthe diagram, area op;m,q, is equal to area op2m2q2.
price
p,|--\m,
p|
i: d

a q, q quantity
what is the value of the price elasticity of demand if the price is halved from p, to p2?
a -1
b -0.5
c zero
d _ infinity

15 the table shows changes in a consumer’s expenditure on various goods when her income
increases from $20 000 to $24 000.
income income
$20 000: $24 000:
good | amount spent | amount spent
on good on good
($) ($)
www 100 96
x 100 100
¥ 200 224
zz 200 248
assuming all else remains unchanged, for which goods is the consumer’s income elasticity of
demand greater than 1.0?
a w,yandz
b wand z only
c wonly
d zonly

16 which combination of government measures is most likely to increase the consumption of a merit
good?
a setting an effective maximum price on the product and paying producers a subsidy
b setting an effective maximum price on the product and imposing an indirect tax on producers
c setting an effective minimum price on the product and paying producers a subsidy
d setting an effective minimum price on the product and imposing an indirect tax on producers

17 the table contains some figures from the balance of payments account of the united states (us)
for a given year.
fess ition
exports of goods 1632639
balance of trade in goods -741 462
imports of services 477428
balance of trade in services 233 138
what cannot be concluded about us trade from the table?
a_ exported services were valued at over us$477 428.
b_ imported goods were valued at over us$1 632 639.
c_ the value of exported services was less than the value of exported goods.
d_ there was an overall current account deficit.

18 which change is shown directly by the use of aggregate demand and aggregate supply analysis?
a the nominal income level
b | the price level
c_ the unemployment level
d_ the wage level

19 why might aggregate demand increase when a country’s price level falls?
a_ domestic interest rates will tend to fall.
b_ imports become more price competitive.
c_ real incomes fall.
d_ the purchasing power of savings falls.

20 what is used to convert nominal gdp to real gdp?
a_ exchange rates
b_ changes in the price level
c interest rates
d taxation

21 the diagram shows a basic two-sector circular flow of income.
factor market —
=] ee
p la product market _—t
what can be concluded about the direction of flows?
a consumer expenditure flows anticlockwise.
b_ goods and services flow clockwise.
c_ incomes flow anticlockwise.
d_ resources flow anticlockwise.

22 the table shows the types of unemployment and their possible solutions.
which combination is not correct?
esl possible solution
unemployment

a technological introduce minimum wage legislation
b cyclical raise government spending
cc frictional increase advertising of job vacancies
d structural retrain workers

23 which combination of policies would be most effective in reducing a balance of payments current
account surplus?

a decrease in a devaluation of the an expansionary

tariffs on imports exchange rate monetary policy
a no yes no
b no no yes
cc yes no yes
d yes yes no

24 if acountry is experiencing a period of high inflation, which groups will benefit the most from this?
companies at fixed income those with
apart ihe: majority earners high debts
of their output
a yes yes no
b no yes yes
cc yes no no
d no no yes

25 what will definitely change a country’s terms of trade?
1 when the price of imported raw materials increases
2  achange in inflation rates
3. anappreciation of the exchange rate
a 1,2and3 b 1and2only c 1and3only d 2and3only

26 the world consists of two countries, m and n. the graphs show their production possibilities for
wheat and rice.
country m country n
100
rice rice
75
0 0
0 100 0 50
wheat wheat
countries m and n operate on their production possibility curves and, before specialisation,
country m produces 60 units of wheat and country n produces 30 units of wheat.
what will be the change in the world output of rice if both countries decide to specialise
according to comparative advantage?
a it will fall by 5 units.
b it will fall by 30 units.
c_itwill rise by 5 units.
dit will rise by 30 units.

27 the diagram shows the current equilibrium of an economy.
the government introduces a contractionary monetary policy.
as
price
level
ad
(e) output
what is the most likely outcome?
a a fallin investment and a fall in inflation
ba fall in investment and a rise in inflation
c_ arise in investment and a fall in inflation
d_ arise in investment and a rise in inflation

28 a government wishes to reduce the deficit on the secondary income section of its current
account.
which policy would be most effective?
a_anincrease in subsidies to exporters
b_anincrease in the tariffs on imports
c_ areduction in the number of migrant workers allowed into the country
d_ areduction in overseas aid donations

29 supply-side policies can be used to correct cost-push inflation.
which policy would best achieve this aim in the long run?
a allowing trade unions to maintain work practices irrespective of productivity
b_ encouraging workers to work extra hours for extra pay
c increasing total labour supply by employing more unskilled workers
d supporting the replacement of labour-manned machines by the use of robots

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