economics

1 a factory introduces an automated production line to take advantage of division of labour.
what is most likely to increase?
a average cost of production
b_ job satisfaction of workers
c_ range of skills of each worker
d_ worker productivity

2 consumers do not use enough of a product to maximise their private benefit because they have
imperfect information about the product.
how would an economist classify this product?
a demerit good
b_ free good
c_ merit good
d public good

3 the table shows different combinations of rings and bracelets that can be produced by luke and
zoe in the same time period.
18 0 20 0
12 6 16 8
6 12 12 16
0 18 8 24
which statement is not correct?
a luke has a larger opportunity cost than zoe for making bracelets.
b_ the opportunity cost of producing rings is constant for both luke and zoe.
c zoe should specialise in making rings.
d  zoe’s opportunity cost for each bracelet is 2 rings.

4 what is an example of a free good?
a agovernment sponsoring a free vaccination programme for its citizens
b_ ahospital providing free treatment to the poor
c_ aschool providing free education to outstanding students
d_ anything that provides free utility but is not scarce

5 the diagram shows the market for computers in pakistan.
w supply
price
x x
demand
o
7 quantity
which areas represent consumer surplus and consumer expenditure?
consumer consumer
surplus expenditure
a wxy oxy
b wxy oxyz
cc wyo oxyz
d wyo oyz

6 the supply curve for a firm is a horizontal straight line.
what can be concluded from this statement?
a quantity supplied is infinite at the given price.
b quantity supplied is infinite below the given price.
c quantity supplied remains constant at all prices.
d quantity supplied is perfectly inelastic.

7 when the incomes of consumers of good x fall by 5%, under which conditions will the demand
curve shift furthest to the right?
nature erancd & income elasticity of
9 demand for good x
a inferior good -0.8
b inferior good -1.2
c normal good +0.9
d normal good +1.5

8 good p and good q are substitutes. there is a decrease in supply of good p because of a
shortage of materials.
which row describes what will happen to demand?
[ost [aot]
a contraction extension
b contraction shift to right
cc shift to left shift to left
d shift to left shift to right

9 the pressure to reduce the use of fossil fuels has led to oil companies reducing the level of
investment in the exploration of new reserves.
what will be the long-run effect of such a policy on the market for oil?
a upward movement price decreases
along the demand curve
b downward movement price increases
along the demand curve
cc supply shifts to the left price increases
d supply shifts to the left price decreases

10 the price elasticity of demand for a product is —0.6.
the supplier wants to clear all surplus stock of a product and reduces the price of a good by 50%.
what is the effect of this price change on the quantity purchased and the expenditure on the
good?
aaeintity expenditure
demanded

a rises by 30% falls

b rises by 30% rises

cc rises by 60% falls

d rises by 60% rises

11 a firm is producing 100 units at a price of $10. the price elasticity of supply is 0.5 and the price is
raised to $12.
what is the new level of output?
a 75 b 110 c 125 d 150

12. ina town, bus fares fall by 50% and this leads to an increase in bus use by 30%. the effect on
car use is very low with only a 1% reduction.
what is the value of the cross-elasticity of demand between car travel and bus travel?
a -0.60 b  -0.02 cc +0.02 d +0.60

13 in the diagram, the demand and supply curves for wheat in australia are shown. initial equilibrium
is at x. the government imposes a sales tax on wheat at the same time as increasing the rate of
income tax.

which point could represent the new equilibrium?
s,
price a s
s:
d
b
d,
cc d
d2
o quantity

14 a free market is currently experiencing excess supply at a price of p}.
what will be the effect on the current market situation if a maximum price is set above p,?
a_ the excess supply will increase.
b_ the market will move into an equilibrium position.
c_ there will be no effect.
d_ there will be excess demand.

15 what is a likely disadvantage of a government's provision of transfer payments to the
unemployed?
a_ decrease in the standard of living
b_ disincentive to accept paid work
c increase in inequality
d increase in poverty

16 which combination of policies would increase the inequality of the distribution of income and
wealth?
progressive minimum transfer
taxes wage payments
a decrease increase reduce
b decrease reduce reduce
cc increase increase increase
d increase reduce increase

17 which changes will increase the circular flow of income?
[a [|
imports investment taxation
a yes no no
b yes yes no
cc no yes yes
d no yes no

18 an economy in equilibrium has a trade deficit of $20bn and a budget surplus of $20bn.
investment spending is $50bn.
what is the total saving?
a $5bn b  $10bn c $15bn d $20bn

19 a finance company incurs heavy losses and makes an accountant redundant.
the accountant seeks a new job through an employment agency which specialises in jobs in
accounting.
what describes the type of unemployment of the accountant who is seeking a new job?
a frictional
b_ seasonal
c _ structural
d technological

20 an aggregate demand curve slopes downwards from left to right.
one reason for this is that a reduction in the average price level will lead to
a adecline in the country’s international competitiveness.
b_anincrease in interest rates.
c_anincrease in the real value of money balances.
d_ the expectation of further price falls.

21 which components are included as primary income in the current account of the balance of
payments?
trade current erniployicienit
f income from
in goods transfers abroad
a j jv v key
b v x x v= included
cc x v x x = not included
d x x v

22 what is not included in the measurement of national income?
a dividends paid to shareholders
b_ overtime payments
c_ rents from government-owned houses
d_ welfare benefit payments

23 the graph shows the rate of inflation for seven countries for 2015 and 2016.
v4
6
5
4
ttt a
f- ore
a) 2) oo mae
cm: 6) gomme od
oi |
costa ecuador india japan malaysia mauritius -_—"
4 rica
-2
what can be concluded from this graph?
a_ prices in costa rica rose in 2015 but remained constant in 2016.
b_ prices in ecuador and mauritius were lower in 2016 than in 2015.
c_ prices in india and malaysia remained constant in 2016 and 2015.
d prices in thailand and japan were lower in 2016 than in 2015.

24 country r and country s are going to trade 1 unit of product x for 4 unit of product y.

with a given amount of resources:
e country r can produce either 30 units of product x or 50 units of product y
e country s can produce either 20 units of product x or 25 units of product y.

which statement is correct, according to the theory of comparative advantage?

a free trade will benefit both r and s.

b_ free trade will benefit neither r nor s.

c_ free trade will benefit r but not s.

d_ free trade will benefit s but not r.

25 what is the most likely cause of a current account deficit on the balance of payments?
a anundervalued exchange rate
b_arelatively low rate of inflation
c_ ashrinking domestic economy
d  ageneral fall in national productivity

26 the diagram shows the long-run aggregate supply (lras) and aggregate demand (ad) curves
for an economy.
lras
price
level
y,
x
ad
a real output
the initial equilibrium is at point x.
which combination of monetary policies will shift the equilibrium position to point y?
money rate of
supply interest
a increase increase
b decrease increase
cc increase decrease
d decrease decrease

27 the government undertakes a policy of financing training and retraining for unemployed workers.
which terms are most likely be used to classify this policy?
[| emanesite | suprside | fical | monstany|
a yes no yes no
b yes no no yes
cc no yes no yes
d no yes yes no

28 which combination of initial equilibrium and supply-side policy is likely to be least effective when
attempting to increase the real output of an economy?
[near eat ouput | suppvsitepoey measure

a below full employment abolition of national minimum wage
b below full employment extra spending on training

c full employment extra investment in infrastructure
d full employment reduction in the rate of income tax

29 a government aims to reduce unemployment through expansionary fiscal policy and borrows
more from the commercial banks, increasing its borrowing requirement.
what will be the result?
a adecrease in the budget deficit
b adecrease in the national debt
c_anincrease in the balance of payments deficit on the current account
d_anincrease in the interest rates

30 a government wants to use an expansionary monetary policy.
what should the government increase?
a credit regulations
b_ the exchange rate
c the interest rate
d_ the money supply

Solve 9708_w23_qp_13