economics

1 aperson buys two pairs of socks.
what does the purchase of the second pair of socks lead to?
a adecrease in marginal productivity
b- adecrease in marginal utility
c_anincrease in marginal productivity
d_anincrease in marginal utility

2 what does an indifference curve show?
a_ the amount of two products achievable with given income and prices
b _ the different combinations of two goods that give a consumer equal utility
c_ the income available to buy the two goods
d_ the rate at which marginal utility changes as consumption changes

3. the table shows the total amount consumers are willing to pay for different quantities of good x
and the total external benefits that arise from the consumption of x.
quantity of consumers’ total external
good x willingness to pay benefits
(000 units) ($000) ($000)
1 100 20
2 180 38
3 240 54
4 280 68
5 300 80
what is the value of the marginal social benefit when 5000 units are consumed?
a $12000 b  $32000 c $80000 d $380000

4 the statement and the table provide information about a production function.
the production function represents the amount of ......1...... obtainable from each
combination of ......2...... and can be used to give information about ......3.......
which words correctly complete gaps 1, 2 and 3?
es ee ee ee
a demand labour returns to scale
b demand labour normal profit
cc output inputs returns to scale
d output inputs supernormal profit

5 two firms selling the same type of product find it more efficient to merge.
which combination describes how the merged firm’s average costs of production and demand
curve are expected to change?
[| average costs | demand oune |
a fall more elastic
b fall more inelastic
cc rise more elastic
d rise more inelastic

6 the diagram shows the costs and revenues of a firm operating in an imperfect market.
mc
cost,
revenue
ac
\mr i!
a ar
o w xyz
output
the firm is currently producing at the profit maximising level of output. it wishes to produce at the
sales maximising level of output.
what would be the change in its output?
a ow to ox b owto oy c owtooz d oyto oz

7 inwhich market structure is dynamic efficiency least likely to occur?
a oligopoly
b monopolistic competition
c monopoly
d perfectly competitive

8 which type of employment contract is most likely to overcome the principal agent problem?
a_ increasing monthly salaries of waiters in a restaurant to decrease their dependence on tips
from customers
b _ linking workers’ pay with the profits of the firm to motivate them to raise the profitability of the
firm
c_ making full fee payment in advance to a lawyer to motivate him to prepare a legal case well
d_ offering permanent contracts to give workers job security

9 company r manufactures steel. company s produces ships. company t operates oil tankers.
company v operates cruise liners.
which statement is correct?
a_ if r takes over s, this is an example of forwards vertical integration.
b if s takes over v, this is an example of backwards vertical integration.
c_ if t takes over s, this is an example of diversification.
d_ if v takes over s, this is an example of horizontal integration.

10 there are two firms in an industry. firm x faces a choice. it can either act independently or work
with its rival. if it acts independently its profit could be $900 a week but it could be only $400 a
week depending on what its rival does. if it works with its rival the joint profit of the two firms
together would be $1400, $700 each. it has no knowledge of what the rival’s policy will be.

which concept describes this situation?
a_ contestable market

b_ kinked demand curve

c principal agent problem
d_prisoner’s dilemma

11 a government wishes to use market forces to remove a negative externality in the consumption

of a good.

which policy is likely to be the most effective?

a_ it should provide information about the undesirable side-effects of the good.

b_ it should give producers a subsidy, to allow consumers to purchase the product more
cheaply.

c_ it should impose an indirect tax on consumers, to reduce consumption to the socially efficient
level.

d_ it should not interfere at all, to allow the free market to generate maximum efficiency.

12 a government decides to replace a private company with its own company to collect household
waste.
why could such action be justified?
a_ waste collection is a public good.
b_ costs of waste collection are bound to be lower if paid out of local taxes.
c_ private companies are always less efficient than government companies.
d_ private companies might put profits before customer needs.

13 what is a failure of government microeconomic intervention?
a_ an indirect tax equal to external costs is imposed on cigarettes and the demand falls.
b_ limits are placed on a trade union’s restrictions that increase labour mobility.
c_ price controls on bread are removed which allow a free market to operate.
d tariffs are imposed on imported goods which cause the gini coefficient to increase.

14 what would shift the marginal revenue product curve for workers producing electric vehicles to
the right?
a adecrease in the price of petrol vehicles
b adecrease in the productivity of electric vehicles workers
c_anincrease in the price of electric vehicles
d_anincrease in the wage rate of electric vehicles workers

15 the diagram shows a perfectly competitive firm’s average product of labour (apl) and marginal
product of labour (mpl) curves.
wage ($),
average
product,
marginal
product
(units) = wy----—- rn rn
| \
| ! | mpl |
o n, n, n3 n,
workers employed
how many workers will the firm employ at a wage of w?
a on, b on2 c on; d on,

16 which change is likely to result in a decrease in the demand for money?
a adecrease in the use of credit cards by consumers
b_aswitch from monthly to weekly payments of wages
c_ adecrease in interest rates
d_anincrease in the perceived risks involved in holding government bonds

17. which combination of factors is most likely to lead to a decrease in structural unemployment?
a _afall in inflation and an increase in lending for low income households
b a fall in real wages and an increase in subsidies for technological improvements
c_anincrease in tariffs and lower taxes for new businesses
d _ the introduction of a national minimum wage and better working conditions

18 why might country x have a higher natural rate of unemployment than country y?
a there is a higher level of trade unionisation in x.
b_ there is more training and education in x.
c_ there are greater incentives to find work in x.
d_ there is a higher level of job vacancy information in x.

19 over the period of a year, nominal national income increased by 2%, inflation was 3% and
population increased by 1%.
which statement is correct?
a_ real income decreased by 2% per head.
b_ real income increased by 1% per head.
c_ real income increased by 4% per head.
d_ there was no change in real income per head.

20 what is likely to be the most effective policy to reduce inflation caused by a rapid rise in import
prices?
a adecrease in the domestic rate of interest
b adecrease in the rate of income tax
c_anincrease in trade tariffs on imports
d_ arevaluation of the exchange rate

21, which macroeconomic policy objective will not apply to a government in a closed economy?
a achieving a low and steady rate of inflation
b_ achieving a more equal income distribution
c_ achieving a surplus on the balance of payments
d_ achieving a sustainable rate of economic growth

22 a government increases its budget deficit to spend money on infrastructure development. it
finances this by printing money.
how is this policy likely to affect the government's main macroeconomic policy objectives?
higher
: lower lower
sree unemployment inflation
growth y
a less likely less likely more likely
b less likely more likely less likely
cc more likely more likely less likely
d more likely more likely more likely

23 the government increases interest rates in order to reduce the rate of inflation.
what will also result from this action?
a adepreciation of the country’s currency
ba fall in the level of savings
c  areduction in economic growth
d  areduction in unemployment

24 the diagram shows the relationship between the income tax rate and tax revenue.
tax | | ner
revenue |
o zz y
income tax rate

which statement is correct?
a_ a tax rate cut from y to z will cause tax revenue to decrease.
b_ at tax rates below z a tax rate cut will cause tax revenue to increase.
c_ the greater the rate of tax beyond z, the smaller will be the tax revenue generated.
d_ tax revenue will always increase as the rate of income tax increases.

25 in which situation is devaluation of the currency most likely to cause inflation?
a excess capacity is available.
b_ import tariffs are reduced.
c_ local substitutes of imported raw materials are unavailable.
d_ the demand for exports is price inelastic.

26 a country imports most of the raw materials used as factor inputs.
which policy is most likely to control cost-push inflation?
a anappreciation of the exchange rate
b_anincrease in the rate of income tax
c_anincrease in the rate of interest
d_anincrease in the rate of sales tax

27 germany, one of the world’s strongest trading nations, achieved a surplus on current account of
the balance of payments in 2021-2022.
which income flow would not have been included in the calculation of germany’s current
account?
a_ declining sales of german cars for export overseas.
b_ falling earnings of foreign exchange from visitors to germany.
c increasing transfers of aid to less developed countries.
d_ investment in a natural gas pipeline link to its main foreign supplier.

28 acountry maintains its foreign exchange rate against the united states dollar, within a narrow but
changing band.
what is this type of exchange rate?
a fixed
b floating
c managed float
d_trade-weighted

29 the lorenz curves in the diagram show different distributions of income and of wealth.
_4100
it % of income
we or % of wealth
gf 4
ae 2
pea, 0
0 100
% of households
at first, income in a country is more equally distributed than wealth.
in a period, the distribution of income becomes more unequal but the distribution of wealth
becomes more equal.
which movement would show the effects of these changes on the distribution of income and
wealth within the country?
| | distribution of income distribution of wealth
a shift from curve 1 to curve 2 shift from curve 4 to curve 3
b shift from curve 2 to curve 1 shift from curve 3 to curve 4
cc shift from curve 3 to curve 4 shift from curve 2 to curve 1
d shift from curve 4 to curve 3 shift from curve 1 to curve 2

30 what is likely to happen in a developing country as it becomes more developed?
a_ a lower percentage of people will go to university.
b_ average life expectancy will rise.
c_ the rate of population growth will increase.
d_ the tertiary sector will decline in importance.

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