economics

1. howcan the economic problem be described?
a as insufficient capital to satisfy our wants
b _as insufficient income to satisfy all our needs
c as insufficient resources to satisfy our unlimited wants
d as insufficient wealth to satisfy all our needs

2 what would be included in the factor of production land?
a bread
b _ factory building
c sports arena
d_ wheat

3 adeposit of shale oil is discovered in an area of farming.
the following estimates are made for a ten-year period.
¢ — ifthe land is used only for farming, it would yield income after tax of $10 billion.
a if the land is used only for shale oil extraction, it would yield income after tax of
$40 billion.
* — the government would receive $5 billion in taxes from farming and $10 billion in
taxes from shale oil extraction.
what is the opportunity cost of using the land only for farming?
a $25 billion b_ $30 billion c $35 billion d $45 billion

4 what three key questions determine resource allocation?
a what, how, for whom
b~ what, when, for whom
c_ where, what, how
d_ where, how, for whom

5 in the diagram, x represents the original equilibrium point in the labour market for engineers. an
increase in the skills of engineers results in an increase in productivity.
which point represents the new equilibrium in the labour market for engineers?
wage
g s,
a é
b s;
d
d;
d; a
o ,
quantity of labour

6 anexplosion in an important oil pipeline causes the world price of a barrel of oil to increase from
$50 to $100. before the explosion, the world demand for oil was 100 million barrels per day. the
world price elasticity of demand for oil is —0.2.

what is the new global demand for oil (barrels per day) as a result of the explosion?
a 20 million

b80 million

c 90 million

d = 120 million

7 what is included in the study of microeconomics?
a demand-pull inflation
b_ diseconomies of scale
c increasing unemployment
d the size of the budget deficit

8 the price elasticity of supply (pes) of a product is 1.0.
the price of this product is $10 and the quantity supplied is 200 units.
if the price of the product increases to $11, by how many units will the quantity supplied increase?
a 1 unit
b10 units
c 20 units
d 200 units

9 the government wishes to reduce the harmful emissions from road transport.
which measure would be effective in helping to achieve this aim?
a __ increased expenditure on oil exploration
b _ introducing a subsidy on public transport
c_ reduced taxation on the production of private vehicles
d reducing incentives to purchase electric vehicles

10 what function does a central bank provide for an economy?
a __itissues bank notes to encourage spending.
b_ it manages the debt of private sector firms.
c it offers high interest rate accounts to encourage savings.
d_ it provides mortgages to encourage home ownership.

11. a firm changes from producing individual pieces of wooden furniture by hand to a mechanised
production process using the division of labour.
what is the most likely set of outcomes as a result?
| ewenet [eee [ cotones
a | worker motivation | average total cost total costs will
will increase will increase increase
b | worker motivation | average total cost total costs will
will decrease will increase increase
c | worker motivation | average total cost total costs will
will decrease will decrease increase
d | worker motivation | average total cost total costs will
will decrease will decrease decrease

12 what is the best definition of a trade union?
a agroup of countries that negotiates trade agreements
b_ agroup of firms that negotiates removing obstacles to trade
c  agroup of workers that negotiates collectively on pay
d_ agroup of workers that negotiates fixing prices

13 what is most likely to be a disadvantage when operating a small firm?
a_alack of external economies of scale
ba lack of external diseconomies of scale
c_alack of internal economies of scale
d_alack of internal diseconomies of scale

14 a firm increased output from q, to q, and achieved economies of scale.
how is this shown on the firm's average total cost curve (atc)?
a b
costs atc costs atc
c, \ ce kf
ie) q, q o q, q
output output
c d
costs) cy)-ssee-e-4s costs ¢,}---------;
c, f c, aan
atc | atc
fe) q, q. je) q, qy
output output

15 abusy restaurant employs a large number of highly skilled chefs to individually prepare high quality
meals.
what is an advantage to the restaurant of this type of production?
a a highly skilled chef is paid more than an unskilled cook.
b_ itis easier to prepare a wide variety of meals.
c it takes time to train a highly skilled chef.
d_ the quality of a meal varies according to which chef prepares it.

16 howis the average cost of a product calculated?
a __ by adding total variable and total fixed costs
b by dividing total cost by output
c by multiplying total variable cost by output
d by subtracting fixed cost from total cost

17. why might measures to reduce unemployment also make inflation rise?
a_ they encourage cheap imports.
b_ they increase demand.
c_ they reduce firms’ costs.
d_ they require wages to fall.

18 the diagram shows selected areas of government spending for a country.
; |
national $32.2bh
defence | |
education $36.4bn
health $81.8bn
unemployment
benefits siti ial
0 20 40 60 80 100 120 140 160 180 200
what was the total government spending on merit goods?
a $32.2 billion
b_ $81.8 billion
c $118.2 billion
d $261.9 billion

19 what correctly explains the effect of monetary policy measures on macroeconomic aims?
a_ a higher exchange rate will make imports more expensive and improve the balance of
payments.
b_ anincrease in interest rates will encourage investment and lead to higher economic growth.
c_ an increase in the money supply in an economy without spare capacity will result in
demand-pull inflation.
d_ higher interest rates result in less income from savings and therefore higher unemployment.

20 what is the most likely impact of lower direct taxes on demand and on supply?
[ene [a
a decrease decrease
b decrease increase
c increase increase
d increase decrease

21 the table shows the annual change in gross domestic product (gdp) before adjustments for
inflation have been made and the annual rate of inflation in four countries.
which country has the highest rate of growth in real gdp?
change in gdp inflation rate
% %
a 5 6
b 10 i
cc 15 14
d 20 40

22 which type of unemployment is generally regarded by economists as the least serious for the
economy?
a cyclical
b frictional
c regional
d © structural

23 the consumer prices index (cpi) for a country rose during one year from 125 to 150.
what was the country's rate of inflation?
a 20% b 25% c 125% d 150%

24 what does the human development index (hdi) indicate?
a_ economic development
b level of unemployment
c living standards
d rate of inflation

25 what best describes relative poverty?
a_ a 12-year-old boy has never been able to access a doctor or school.
b_ aperson earns less than the minimum defined level of income.
c_ apperson has a lower living standard than the minimum level acceptable in a society.
da person is unable to afford the basic necessities of life.

26 the table shows population statistics for three countries in a particular year.
birth rate death rate
population size} (per thousand | (per thousand ‘ ’
country se ; : net migration
(millions) of population | of population
per year) per year)
x 20 10 8 +20000
y 30 20 18 +50 000
z 40 40 35 -1000000
what can be concluded from the table?
a country x has fewer females than country y
b_ country y has the smallest population increase
c_ country y has the highest living standards
d_ country z has a decreasing population

27 what is most likely to promote international specialisation?
a _ similarities in climate in different countries
b _ similarities in the availability of natural resources in different countries
c _ instability in foreign exchange rates
d the abolition of tariffs and customs duties

28 whatare the effects on price and equilibrium quantity of the imposition of an import tariff on a good?
tice equilibrium
p quantity
a decreases decreases
b decreases increases
c increases decreases
d increases increases

29 the diagram shows the market for the indian rupee in us$.
price of s,
rupees
(in $)
d,
d,
0 quantity
of rupees
what will cause the demand curve for rupees to shift from d, to d,?
a afall in indian exports to the us
b a fall in the us inflation rate
c arise in foreign direct investment into india
d arise in interest rates in the us

30 the diagram shows china’s trade with brazil for two years.
china’s exports key
[__] year 1
china’s imports gm year 2
0 1 2 3 4 5
$ billion
what happened to china’s trade balance with brazil between year 1 and year 2?
a it experienced a falling surplus.
b it experienced a rising deficit.
c_ it moved from deficit to surplus.
d_ it moved from surplus to deficit.

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