economics

1 studies show that some dentists replace patients’ teeth more often than is necessary.
which factor helps to explain why excessive dental treatment may take place?
a the existence of asymmetric information
b the existence of dynamic efficiency
c_ the existence of positive externalities
d_ the existence of social benefits

2 the diagram shows an individual’s indifference curve, i,, for apples and pears.
apples
19 4------y
12 .
—_ i;
0 i i
0 2 4
pears
what can be concluded from the movement from point x to point y on this curve?
a the individual can afford more apples than pears.
b_ the individual has not changed their total utility.
c_ the individual prefers apples to pears.
d_ the individual has gained more utility by moving from point x to point y.

3 what is not necessary for successful price discrimination?
a ability to separate markets
b_ different price elasticities of demand in each market
c monopoly power
d price leadership

4 the diagram shows the cost curves of a firm.
what is the level of output below which the firm will shut down in the long run?

mc

cost or atc

price | \

$ 1
avc

je) a b c od
quantity

5 steel producer x takes over its main competitor, steel producer y.
what would x expect to happen to the average revenue for its product and its long-run average
cost as a result of this takeover?
average long-run
revenue average cost
a decrease decrease
b decrease increase
c increase decrease
d increase increase

6 which statement is correct?
a_ external benefit minus private benefit equals social benefit.
b_ private benefit minus external benefit equals social benefit.
c_ social benefit minus external benefit equals private benefit.
d_ social benefit plus private benefit equals external benefit.

7 what can be done to help to overcome moral hazard?
a_ charging the same insurance premium to all people in the same age group
b_ designing insurance contracts so that the insurance company and client share any loss
c giving unconditional financial support to banks to protect jobs
d guaranteeing jobs for bank managers to provide a sense of security

8 which action would produce a positive externality of production?
a_ achild is vaccinated against measles.
b  aconsumer donates products to a local food bank.
c_ a firm rebuilds a local road when constructing its new factory.
d a government pays a subsidy to firms producing cars.

9 a privately owned sole supplier of gas operates in an unregulated market with high barriers to
entry and exit.
which row is most likely to indicate the economic efficiency resulting from the firm’s position in
this market?
productive allocative dynamic
efficiency efficiency efficiency
a no no no
b no no yes
cc no yes yes
d yes no yes

10 a government increases the protection that patents offer to inventors of new products and
processes.
which barriers to entry into an industry are higher as a result of this increase?
a cost barriers
b legal barriers
c_ market barriers
d physical barriers

11. the table shows how a firm’s total cost changes as more workers are employed.
number of total costs
workers $
1 1200
2 2000
3 2700
what would be the effect of employing a third worker on the firm’s average costs and its marginal
costs?
[| average costs | merc costs_
a decrease decrease
b decrease increase
cc increase decrease
d increase increase

12 a government hopes to build an athletics stadium to hold the world games. the stadium would
have high private and external costs, but it would increase national pride.
why would it be difficult to use cost-benefit analysis to decide whether to build the stadium?
a_ the materials needed to build the stadium will need to be imported.
b_ the external costs of clearing land for building will outweigh the private costs.
c_ the stadium will not be used much for athletics after the world games.
d_ the valuation of national pride will be complex to assess.

13 what will lead the demand curve for labour to shift to the right?
a adecrease in the marginal productivity of labour
b  adecrease in the wage rate
c_anincrease in the marginal productivity of labour
d_anincrease in the wage rate

14 the production schedule indicates how total output increases as up to five workers are employed
per week.
employment total product
of workers (units)

0 0

1 6.0

2 13.0

3 21.0

4 27.5

5 33.5
what is the marginal product when the average product per worker equals 7.0 units?
a 6.0 units b 6.5 units c_ 7.0 units d 8.0 units

15 what is likely to cause a more equal distribution of income in the long run?
a areduction in the top rate of taxation
b_anincrease in government spending on education and training
c_ anincrease in unemployment
d privatisation of the education sector

16 immigrants are awarded entry points according to their ability to fulfil criteria set by the canadian
government. a new express entry system for the immigration of skilled workers was introduced.
the diagram shows the change in the relative importance or weighting given to these criteria
between the old and new systems.

criteria weighting (%) for skilled worker immigration
skill transferability
' 100
work experience %
adaptability 80
age
60
education
40
language 20
job offer 0
old express
system entry
system
what can be concluded from the diagram?
a canada intended to maintain the same level of skilled immigrants under both systems.
b canada wanted a smaller number of highly educated skilled immigrants.
c_ certainty of employment for skilled immigrants was made the main criterion.
d skilled immigrants needed to have fewer years of work experience than previously.

17 a government imposes a maximum price for electricity.
which statement justifying this measure might be considered valid on economic grounds?
a it will encourage electricity suppliers to invest in additional capacity.
b _ it will increase the incentive for consumers to conserve energy.
c_ it will prevent the monopolistic exploitation of consumers.
d it will prevent the rationing of electricity through power cuts.

18 which statement best describes demand-induced investment?
a it is spending on capital goods by firms because the rate of growth in demand for final goods
and services increases.
b_itis spending on capital goods by firms because the cost of borrowing has fallen.
c_ it is spending on capital goods by firms because they want to access new technology to
improve the output per worker.
d_itis spending on new capital goods by firms replacing old and obsolete capital goods.

19 middle eastern countries earn foreign exchange from exports of oil and natural gas. the world
economic forum has encouraged oil producers to assist low-income countries in achieving
economic growth.

which policy by middle eastern countries would be least likely to achieve this economic growth

in low-income countries?

a assisting low-income countries to overcome foreign exchange shortages by writing off debts

b_~ enabling low-income countries to undertake capital projects for supplies of clean water
through financial aid

c hiring mainly labour from low-income countries to build infrastructure in the middle east

d_ reducing exports of fuels to low-income countries to lower pollution of the environment

20 an open economy has injections, j, into the circular flow of income and withdrawals, w.

fee ww

injections and

withdrawals

ss
|
os q e
national income

if the full employment level of national income is oq, what represents the inflationary gap?
a qe brt c sr d st

21. which condition will produce the highest value of the national income multiplier in an open
economy with a government sector?
a high average and marginal tax rates
b high marginal propensity to save
c low level of autonomous consumption
d_ low marginal propensity to import

22 which type of unemployment can be classified as voluntary?
a cyclical
b frictional
c _ structural
d technological

23 increased borrowing by the government results in higher interest charges and this leads to less
private investment expenditure.
of what is this an example?
aan automatic stabiliser
b crowding out
c_ the accelerator
d_ the substitution effect

24 governments set economic policy aims.
what will be least likely to occur if all these aims are achieved?
a adecrease in the average standard of living
b adecrease in the currency’s foreign exchange rate
c_anincrease in the level of frictional unemployment
d_anincrease in the rate of inflation

25 the government decides to raise the rate of value added tax (general sales tax).
what does this suggest is the government's main macroeconomic objective?
ato reduce the budget deficit
b_ to reduce the inequality of income distribution
c_ to reduce the level of unemployment
d_ to reduce the rate of inflation

26 an economy imports most of the factors of production used in the manufacture of its exported
goods.
what effect would depreciation of this economy’s rate of exchange have?
price of imported price of exported
goods in the goods in the
domestic currency domestic currency
a fall fall
b fall rise
c rise fall
d rise rise

27 the table shows the human development index (hdi) values for india in 2014 and 2020.
[rotate |
2020 0.64
which conclusion is most likely to be drawn from the table about the change in the hdi value
from 2014 to 2020?
a india had a fall in life expectancy at birth.
b india had a fall in real national income per head.
c india had a rise in environmental pollution and crime rates.
d_ india had a rise in the mean years of schooling of the adult population.

28 the diagram shows a j curve which indicates that a fall in the exchange rate will worsen the
current account position before it starts to improve.
j curve
current
account
surplus
ie)
time
current
account
deficit
what is said to explain this?
a_ atime lag before recognising that prices have changed
b animprovement in the quality of goods produced
c the demand for imports and exports is elastic in the short run
d_ the supply of goods is price elastic

29 which country is likely to be the most highly developed?
[even [sme | ser

a high high high

b low low low

cc low low high

d low high low

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