economics

1 what causes economic agents to make choices?
a limited needs and wants
b the existence of finite resources
c the existence of free goods
d_ the market mechanism

2 a government announces that it will spend an extra $10bn on healthcare, financed by reducing
expenditure on defence.
what is the economic concept represented by this decision?
a_ expansionary monetary policy
b_ increased spending on a public good
c_ opportunity cost
d the operation of the market mechanism

3. the diagram shows a production possibility curve (ppc) for digital televisions and cd players.
digital televisions
z
www
oo cd players

which movement shows an increase in the use of existing resources to increase production for
both digital televisions and cd players?

a xtow b xtoz cc ztow d ztoy

4 the diagram shows points on two demand curves.
price
j
k l
m
d, ‘d,
ie) quantity
which movement between points shows a contraction in demand?
a ktoj b ktom c ltok d mtol

5 what would not cause a shift in the supply curve?
a_ changes in costs of production
b_ changes in direct taxes
c_ changes in indirect taxes
d_ changes in a subsidy from the government

6  forhealth reasons, consumers decide that they want to eat more vegetables and less meat.
what price signals would the market system send to reallocate resources so that consumers get
what they want?

price of price of
vegetables meat

a decrease decrease

b decrease increase

cc increase decrease

d increase increase

7  whatis a likely benefit of a country moving from a mixed economy to a market economy?
a less inequality
bmore nationalisation
c_ more public goods
d_ reduced costs of production

8 what is an external cost of smoking cigarettes?
a the cost of the cigarette packaging
b__ the cost to non-smokers’ health
c_ the cost to smokers
d the tax on cigarettes

9 a firm is considering doubling the price of its product.
which price elasticity of demand (ped) for its product would give it the greatest increase in revenue?
a 0.0 b -0.5 cc -1.0 d -2.0

10 the table shows information about four financial institutions.
which institution is most likely to be a commercial bank?
tise . it is owned by
government's
shareholders
bank

a no no

b no yes

c yes no

d yes yes

11. what shows a forwards vertical merger?
a asmartphone producer buys a computer chip producer.
ba steel producer buys a car producer.
c_ a tractor producer buys a wheat producer.
d anoven producer buys a washing machine producer.

12 the diagram shows the demand for and the supply of labour for farm workers. the initial equilibrium
is x.
what will be the new equilibrium if there is an increase in labour productivity?
ss
wage s,
rate ss
o:
: d,
d,
ds
o quantity

13. which service is most likely to be supplied by a small business?
a _ banking
b_ dental treatment
c_ energy distribution
d rail travel

14 when a firm produces 100 units, its total variable cost is $1000 and its total fixed cost is $4000.
what is the firm’s average total cost?
a $10 b_ $30 cc $40 d $50

15 ata price of $5, the demand for a firm’s product is 1000 units per week. when its price rises to
$10, the demand for its product falls to 600 units per week.
what are the changes in the firm’s average revenue (ar) and total revenue (tr) per week when
the price of its product rises?
change in ar change in tr
$ per week
$

a +5 +1000

b +5 +6000

cc +10 +1000

d +10 +6000

16 a monopoly firm can often earn greater profits than a firm in a competitive market.
which characteristic of monopoly is most likely to cause this?
a _ltcan restrict the entry of new firms.
b_itis a price-taker.
c_itis protected by the government.
d its total costs are usually low.

17 aneconomy is experiencing a period of deflation with lower output and rising unemployment.
which policy measure would the government be most likely to use to correct this?
a_ improve education and training
b increase interest rates
c_ reduce income tax
d reduce unemployment benefits

18 what is likely to increase with economic growth?
a cyclical unemployment
b_ income per head
c the budget deficit
d the stock of natural resources

19 aneconomy has a high rate of inflation.
which monetary policy measure is required to reduce inflation?
a adepreciation of its currency against the us dollar
b_anincrease in the money supply
c_anincrease in the rate of interest
d_anincrease in the basic rate of income tax

20 three statements about policy measures are listed.
1. improved education and training
2 deregulation
3. reduction in the basic rate of income tax
what are the supply-side policy measures that would enable the government to make the income
distribution more equal?
a 1,2and3 b 1and2only c= 1and3only d 2only

21. inamixed economy, a government provides some goods that markets cannot.
what is the name of these goods?
a _ free goods
b_ economic goods
c_ merit goods
d public goods

22 which of these people would be classed as unemployed?
a astudent who does not work
ba person who does not have a job and is actively looking for one
c_aretired person who does not work
dan adult who does not have a job and stays at home to provide childcare

23 the table shows the weights attached to four items in the consumer prices index of a country in
year 1 and in year 2.
food 33 33.5
transport 18 175
rent 11 10.5
clothing 9 10
which conclusion can be drawn?
a __ food prices were higher in year 2 than in year 1
b_ people spent less on transport in year 2 than in year 1
c_ people spent more on food in year 2 than in year 1
d  agreater proportion of income was spent on clothing in year 2 than in year 1

24 the table shows the percentage (%) shares of income going to different household income groups
in a country in two years.
household income year'l year'2
% share % share

highest 20% 50 53
next highest 20% 20 22
next highest 20% 15 18
next highest 20% 10 5
lowest 20% i) 2

what can be concluded about the change over the period?

a the distribution of income has become more unequal.

b_ the number of households in the highest 20% has increased.

c_ the proportion of households in absolute poverty has increased.

d_ the proportion of households in relative poverty has fallen.

25 an economy has a high rate of population growth.
what is most likely to have caused this?
a_ the average years of schooling is relatively high.
b_ the birth rate is lower than the death rate.
c_ the retirement age has increased.
d_ there are more immigrants than emigrants.

26 what is the most likely cause of an increase in poverty in developing economies?
a _anincrease in poor nutrition and ill-health
b_anincrease in education provision
c_anincrease in international tourism
d_anincrease in trade union bargaining power

27 two countries wish to use their scarce resources to specialise in production and trade with each
other.
under which conditions is this most likely to happen?
the ability of each
the resource
: country to
allocations of the ‘
é reallocate their
two countries
resources
a different difficult
b different easy
cc similar difficult
d similar easy

28 what is a likely effect of imposing a tariff?
a it encourages home industries to be more efficient.
b_ it increases the demand for home-produced goods.
c it reduces the price of home-produced goods.
d_ it reduces the price of imports.

29 the diagram shows the foreign exchange market for the singapore dollar (s$) in exchange for the
united states dollar (us$). the initial equilibrium point is at x.
the following month, singapore imports more goods from the us but there is no change in singapore
exports to the us.
what is the new equilibrium point?
s3 s,
s2
price of s$
in us$ d es.
d; d, dz
ad quantity of s$

30 what is included in the primary income component on the current account of the balance of
payments?
a _ dividends and interest from investment in other countries
b_ expenditure on accommodation by international tourists visiting a country
c_ expenditure on imported raw materials
d social security payments paid to residents living abroad

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