economics

15 a large privately owned firm is the sole supplier of electricity to a city.
which combination of characteristics is likely to exist for this firm?
| barriers to entry long-run profit
a high high price maker
b high low price taker
cc low high price maker
d low low price taker

16 when a firm produces 200 units, its total variable cost is $600 and its total fixed cost is $2000.
what is the average cost at this output?
a $3 b $10 cc $13 d $2600

2 the diagram shows the choices for an individual between leisure and earnings.
24
hours of 909
leisure
perday 16
x
12
¥
8
4
0
20 40 60 80 100 120
earnings $
the person decides to take a job that gives more leisure time.
what is the opportunity cost to the individual of moving from position y to position x?
a $20
b $80
c 4hours of leisure per day
d 12 hours of leisure per day

14 what is not a benefit of trade union membership for a worker?
a achieving higher wages for workers
b__ negotiating a higher rate of interest on a bank loan for workers
c providing support to workers when being made unemployed
d  animprovement in health and safety standards at work

15 what will happen to a firm that expands to take advantage of economies of scale?
a_ average costs of production will decrease.
b_ average costs of production will increase.
c profits will decrease.
d_ the price of the firm’s products will increase.

16 the table shows total fixed and total variable costs at different levels of output for a firm.
total total
output fixed cost variable cost
$ $

100 1000 1000
200 1000 1500
300 1000 2000
400 1000 2500

what happens as output rises?

a average fixed cost falls.

b_ average fixed cost rises.

c_ average variable cost remains constant.

d_ average variable cost rises.

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

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.

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

3 what is most likely to increase enterprise as a factor of production in an economy?
a adecrease in government spending on education
b-adecrease in regulation on firms
c_anincrease in emigration
d_anincrease in taxation on firms

7 what is the most likely cause of a product having a price elasticity of demand greater than one?
a_ the product has a close substitute.
b_ the product is a habit-forming good.
c_ the product is a necessity.
d_ the product requires only a small proportion of consumer income.

8 for some illnesses, wearing a face mask has a benefit as it could prevent people from getting
infected. not all people are willing to wear face masks.
based on the statement above, why would there be an inefficient allocation of face masks in the
free market?
a consumers in the free market only consider private costs and benefits.
b face masks are non-rival and non-excludable.
c_ there is abuse of monopoly power by the producer of face masks.
d_ there is perfect information in the free market.

12 acountry’s central bank raised the rate of interest from 1% to 4% per year.
how would this change have affected the amount saved and the cost of borrowing by individuals?

amount cost of
saved borrowing

a decreased decreased

b decreased increased

c increased decreased

d increased increased

13 which factor would not increase the bargaining strength of a trade union to raise wages?
a arapidly growing economy
b high union membership in the industry
c legislation limiting strike action
d_ workers are in short supply

14 which conditions are most likely to attract small firms to enter a market?
the market for fixed uni of
entering the
the product ‘
industry

a local high

b local low

cc national high

d national low

15 the diagram shows a firm's total cost (tc) curve.
tc
a
cost !
$
10
z 10
units of output
what is the average variable cost if the firm produces 10 units of output?
a $4 b $5 cc $40 d $50

16 the table shows the units of factors of production that a firm needs to employ for two different levels
of output.
5 2 4 100
10 4 8 150
what is the firm experiencing?
a constant returns to scale
b_ diseconomies of scale
c_ external diseconomies of scale
d_ external economies of scale

28 acountry imposes a quota on imported cars.
what is the most likely outcome of this action?
a adecrease in the domestic output of cars
b- adecrease in the domestic price of cars
c_anincrease in the tax revenue from car imports
d_anincrease in the total revenue of domestic car producers

4 what is an example of a macroeconomic indicator?
a agricultural prices
b_ average earnings in the secondary sector
creal gross domestic product (real gdp)
d total costs of german pharmaceutical firms

8 what might be an external benefit of an increase in the number of university graduates in an
economy?
a _anincrease in revenue for the universities from fee-paying students
b_anincrease in tax revenue from a more productive labour force
c_anincrease in graduate employment as a percentage of the working population
d_anincrease in wages for graduates

12 one of the functions of money is to act as a measure of value.
what does this mean?
a money allows people to borrow and lend.
b money allows people to save their surplus income.
c money is used to buy goods and services.
d money is used to compare the worth of different goods and services.

13 which trade union activity will be beneficial for firms?
a balloting for industrial action to prevent redundancies
b campaigning to raise wages of trade union members
c instructing workers to strike over a safety dispute
d providing training which raises productivity of workers

14 what is not a variable cost of production?
a cost of fuel
b cost of raw materials
c_ extra pay for working additional hours
d rent of offices

15 what is a definition of a firm’s revenue?
a money received from sales
b _ sales volume
c surplus over costs
d_ tax payments

16 what could cause internal diseconomies of scale for a firm?
a _afall in demand for the products produced by the firm
b  amerger with another firm that results in slower decision-making
c_ spending more on research and development to create new products
d the lack of skilled labour in the geographical area where the firm is based

9 in agiven year, the world output of coal was 3.94 billion metric tonnes at an average yearly price
of $252 per metric tonne.
several years later, world output was 3.66 billion metric tonnes at an average yearly price of
$120 per metric tonne.
what might have caused such a fall in the price of coal?
a almost half the world’s coal reserves were in just two countries
b__ the exhaustion of coal seams throughout the world
c the switch to renewable sources of energy
d the use of coal as a raw material as well as a fuel

26 whatis nota reason for the decline in manufacturing industries in developed economies in recent
years?
a growth of newly industrialised competitor countries
b _ invention of automated production methods
c_ rising costs of factor inputs in the steel industry
d_ considerable skill shortages as school-leavers prefer to work in the service sector

4 what is not a microeconomic decision?
a_ a firm decides to increase the price of its product.
b  agovernment decides to increase interest rates.
c a household decides to reduce its demand for fuel.
d_ a trade union decides to go on strike.

11. which row shows a characteristic of money and a function of money?
a
a acceptability medium of exchange
b cash measure of value
c divisibility portability
d store of value bank deposit

12 when will a central bank act as lender of last resort to a commercial bank?
a when a commercial bank faces a liquidity crisis
b when a commercial bank fails to make a profit
c when acommercial bank needs to raise share capital
d when a commercial bank reduces its lending rates

13 what is likely to increase the bargaining power of a trade union?
a_ when the economy is experiencing rising cyclical unemployment
b_ when the labour market moves from long-term to short-term contracts of employment
c_ when the price elasticity of demand for the product is price-elastic
d_ when the trade union supplies all the labour required by the employer

14 what is a likely reason why firms do not grow in size?
a_ external diseconomies of scale occur at high levels of output.
b internal economies of scale occur at high levels of output.
c internal economies of scale occur at low levels of output.
d internal diseconomies of scale occur at low levels of output.

15 the table shows the activities of four firms.
shoe website shoe shoe
manufacture design manufacture retailer
which combination of firms would be an example of horizontal integration?
a 1and2 b 1and3 c 2and4 d 3and4

16 what is a reason why firms making similar products sometimes locate near each other?
a competition is decreased.
b_ there are external economies of scale.
c_ there are internal economies of scale.
d_ transport costs may be eliminated.

18 which government measure would lead directly to more exports of goods?
a adevaluation of the currency
b arestriction of bank credit creation
c_anincrease in the rate of interest
d the issue of more bank notes and coins

22 which pair is most likely to be provided by the private sector in a mixed economy?
a courts and prisons
b hospitals and tax collection
c insurance and banks
d weapon manufacture and defence

12 a farmer introduces machinery to help workers at harvest time. the farmer also reduces the number
of workers by 50%. as a result, the total harvest increases by 25%.
what has happened?
a labour productivity has decreased and production has decreased.
b labour productivity has decreased and production has increased.
c labour productivity has increased and production has decreased.
d labour productivity has increased and production has increased.

11. the diagram shows the demand and supply curve of labour for a firm. the initial wage rate is given
by w, and the equilibrium quantity of labour employed is lo.
a trade union that represents all of the workers negotiates a rise in wage rate to w,.
wage ss
rate
| of |
o ly ky b
quantity of labour
what is the amount of unemployment that results from this wage rise?
a ol, b_ lol. c lyk d ll,

13 a firm has fixed costs of $20 and the following total variable costs.
what happens to average total cost over this output range?
a it falls continuously.
b it falls then rises.
c it rises continuously.
d_itrises then falls.

14 the table shows the costs and output of a firm.
total cost $10000
total variable cost $8000
what is the average fixed cost of the firm?
a $200 b $800 cc $1000 d $2000

15 aclothing manufacturer expands by taking over a clothing retailer.
which type of merger is this?
a __ backward vertical
b_ conglomerate
c forward vertical
d horizontal

22 what is necessary for a worker to be classified as unemployed?
the worker does |_ the worker is the werker all
‘ accept the
not have a paid prepared to
' current wage
job work
rate
a yes no no
b yes no yes
c yes yes no
d yes yes yes

24 the introduction of a minimum hourly wage in an industry aims to reduce poverty among low-paid
workers.
what is an advantage to workers of an effective national minimum wage?
a_ all workers get paid according to their level of productivity.
b_ firms may look to increase capital equipment rather than labour.
c_ levels of employment become more dependent on wage differences.
d_ redistribution of a firm’s income rewards labour rather than owners.

5 what is likely to cause an extension in demand for a firm’s fruit drink?
a_ a period of hot weather
b_areduction in the cost of producing the drink
c_arival firm leaving the market
d_ asuccessful advertising campaign by the firm

12. which combination shows the advantages of a small firm over a larger firm?
better greater
a 5 lower average cost
communication independence
a no no yes
b no yes no
c yes yes no
d yes yes yes

13 what is a variable cost for a firm?
a the cost of raw materials
b the interest payment on existing loans
c_ the rent on the factory
d the insurance on the factory buildings

14 the table shows the daily average revenue and units of output sold for a firm producing bicycles
over a five day period.
revenue ($) | output sold

1 200 2

2 160 4

3 120 8

4 80 14

5 40 16
what can be concluded from the table?
a the firm's highest total revenue occurs at 2 units of output sold.
b_ the firm's highest total revenue occurs at 14 units of output sold.
c_ the firm's prices are always greater than total revenue.
d_ the firm's total revenue always increases as output rises.

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

13 what is a trade union most likely to protect?
a | the profit of a firm
b _ the rights of a group of workers
c the satisfaction of consumers
d the social welfare of everybody

28 acountry imposes a tariff on an imported product.
what is the effect of this change?
the price of the ite saa gf the
: product imported
product increases cer
is fixed
a no no
b no yes
c yes no
d yes yes

3. what is capital?
a the ability to organise the factors of production
b__ the energy used in production
c the factory used in production
d_ the money invested in a firm

4 what are features of a market economy?
private ownership | public ownership government
of factors of of factors of allocation
production production of production
a no no yes
b no yes yes
c yes no no
d yes yes yes

12 in most countries, which organisation controls the banking system?
a central bank
b commercial bank
c_ investment bank
d world bank

14 anairline takes over an online clothing company.
what is an advantage of such a move by the airline?
a to diversify their operations
b_ to generate economies of scale
c_ to improve lines of communication
d_toincrease market share

15 in which type of industry is a firm most likely to make a large profit in the short run and in the long
run?
number of firms barriers to entry
in the industry into the industry
a many high
b many low
c one high
d one low

16 a firm produces five units of output at an average cost of $20 per unit. the cost of the sixth unit is
$26.
what is the average cost of six units?
a $4.33 b $6 c $8.33 d $21

15 howis total revenue calculated?
a price divided by the total output
b total output divided by the price
c total output multiplied by the price
d total output multiplied by total costs

18 why would devaluing the international value of an economy's currency help reduce unemployment?
a _ devaluing the currency would increase the cost of production.
b_devaluing the currency would increase the confidence of investors.
c_devaluing the currency would increase the foreign demand for domestic products.
d__devaluing the currency would increase the demand for imports.

5 what is a determinant of price elasticity of demand (ped)?
a availability of stocks of the product
b_ change in the income of consumers
c_ degree of necessity of the product
d_ existence of monopoly

7 what would increase the price elasticity of supply (pes) of a product?
a _anincrease in the cost of inputs
b_anincrease in the firm’s profits
c_anincrease in the number of close substitutes
d_anincrease in the time a product can be stored

14 what is the most likely goal of a state-owned enterprise providing health services?
a profits
b public satisfaction
c sales revenue
d © survival

15 some governments allow monopoly markets to exist.
what is a reason for this?
a to attract entry into the market
b to fund research and development
c_toincrease prices for consumers
d_ to maximise monopoly profits

16 the table shows the costs incurred by a firm producing computers.
output total costs
(thousands) ($ thousands)
0 20
1 1200
2 1350
3 1450
what are the fixed costs if 3000 computers are produced?
a  $20000 b  $1430000 c $1450000 d $4020000

4 which person is most likely to make a microeconomic decision as part of their job?
a agovernment finance minister
b _ the global administrator of the human development index
c__ the governor of the central bank
d_ the manager of a private sector firm

12 aclothes retailer borrows money to finance the opening of another clothes shop.
which type of growth is this?
a _ internal and horizontal
b _ internal and vertical
c_ external and horizontal
d external and vertical

13 what is meant by internal diseconomies of scale?
a average cost for the firm decreases when the output of the firm increases
b_ average cost for the firm decreases when the output of the industry increases
c_ average cost for the firm increases when the output of the firm increases
d_ average cost for the firm increases when the output of the industry increases

14 a food-processing firm decides to change from a labour-intensive production method to a
capital-intensive production method.
what is likely to decrease as a result of the change?
a fixed costs as a percentage of total cost
b output per worker per hour
c the level of total output
d_ variable costs as a percentage of total cost

15 what is an example of a fixed cost?
a electricity
b insurance
craw materials
d wages

16 what is the definition of profit maximisation?
a the firm is allocating a proportion of profit to other business objectives.
b_ the firm is making as much profit as possible.
c_ the firm is making higher levels of profit this year than last year.
d_ the firm is making the same amount of profit this year as last year.

27 which statement shows two benefits for consumers from specialisation at a national level?
a decreased prices and better quality
b_ decreased profits and high-quality raw materials
c increased choice and high transport costs
d_ increased productivity and increased economies of scale

9 agovernment intends to build a new international airport in an area of outstanding natural beauty.
what would be an external cost of this decision?
a __ the cost of importing construction materials
b_ the enjoyment lost by those unable to use the countryside
c the increase in profits for local businesses
d_ the wages paid to the construction workers

13 the diagram shows the average total cost (atc) for a firm, in the long run.
~ \
qni«
atc,
ie) output
what would cause the shift from atc, to atc,?
a difficulties in controlling the firm
b_ external economies of scale
c managerial economies of scale
d_ technical economies of scale

15 a firm’s average revenue is $20. it sells 1000 units.
what are the firm’s total revenue and the price of the product?
total revenue price

($) (8)
a 20 20
b 1000 50
cc 20000 20
d 20000 50

18 what is the money supply?
a the total quantity of foreign currency available within the economy
b _ the total quantity of money available within the economy
c the total quantity of money issued by the central bank
d the total quantity of money within commercial banks

20 what is the definition of economic growth?
a__litis an increase in the general level of prices over time.
b_itis an increase in the level of a nation's output over time.
c_itis an increase in the level of total demand over time.
d_itis an increase in wages, interest, profits and rent over time.

24 workers in switzerland earn more on average than workers in mexico.
what is a likely cause of this?
a_ agreater percentage of workers in switzerland work part-time than in mexico.
b_ the average worker in switzerland is more productive than the average worker in mexico.
c_ the average worker in switzerland pays more income tax than the average worker in mexico.
d the unemployment rate is higher in switzerland than in mexico.

3 the diagram shows the choices for an individual between leisure and earnings.
18
hours of 45
leisure
perday 12
xx
9
y
6
3
0 10 20 30 40 50 60
earnings $
what is the opportunity cost to the individual of the extra earnings when moving from position x to
position y?
a $10
b $40
c 3 hours of leisure per day
d_ 6 hours of leisure per day

10 what is a function of a commercial bank?
a_ accepting deposits
b_ controlling money supply
c issuing notes and coins
d lending money to the government

13 employers based in large cities often pay employees special allowances above standard pay rates.
what is the most likely reason for this?
a job security and promotion prospects tend to be restricted.
b living costs and transport costs tend to be high.
c_ there are few alternative job opportunities available.
d_ trade unions negotiate nationwide wage levels.

14 workers in a country have been concerned about their wages not keeping pace with inflation.
how can trade unions assist workers in getting a pay rise?
a advise the workers to ask individually for a pay rise
b negotiate on behalf of their members to secure a pay rise
c offer to contribute financially to a pay rise
d request improved working conditions

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