economics

2
1. when will an economic activity create a net social benefit?

a when (private benefit + external benefit) — (private cost + externa

b~ when (private benefit + external benefit) — (private cost + externa

c_ when (private benefit + private cost) — (external benefit + externa

d_ when (private benefit + private cost) — (external benefit + externa

2 the diagram shows the private and social costs and benefits of pro

result in market failure.
msc
costs,
fit
benefits mpc
| ! | m
ses
o klm n

output

which change in output would be necessary to overcome this market
a from k tom
b_ from m to n
c fromm tol
d from n tol

3
3 the diagram shows the production possibility curve for an economy.
good y
el
o good x
what might make it possible for consumers in this economy to c
goods x and y indicated by the point l?
a areduction in unemployment
b_ the achievement of productive efficiency
c the elimination of a monopoly in the production of good x
d_ trade with other economies
4 the diagram shows two indifference curves for a consumer.
good y
r
q ic,
ic,
o
dk

4
5 when the price of a good falls the effect on the quantity demande
effect and a substitution effect.
which statement about these effects is correct?
a for inferior goods the income effect and the substitution effect we
b_ for inferior, but not giffen, goods the income effect outweighs th
c_ fornormal goods the income effect and substitution effect work i
d_ for normal goods the income effect outweighs the substitution ef
6 where is the long-run equilibrium output of a perfectly competitive firr
a where average costs are at a minimum
b- where average costs are falling
c_ where marginal costs are at a minimum
d_ where marginal costs are falling
7 a firm estimates that, all else remaining unchanged, an increase i
equal proportionate increase in its revenue.
what can be concluded from this?
a the demand curve for the firm’s product is horizontal.
b_ the firm operates in a monopolistically competitive market.
c_ the price elasticity of demand for the firm’s product is —1.
d_ the supply of the firm’s product is perfectly inelastic.

6
11 the diagram shows the demand curve for a firm’s product.
price
0 output
which diagram shows the shape of the firm’s total revenue (tr) curve
a b cc
revenue revenue revenue |
o output o output o output
12 the diagram shows a firm in monopoly producing oq units.
mc atc
price
$
.s avc
mr d
oo i eee

8
15 the lorenz curves in the diagram show different distributions of incor
_4, 100
ra % of in
ae or % oo
a 4
we 2
ez 0
0 100
% of households
income in a country is more equally distributed than wealth.
in a period the distribution of income becomes more unequal bt
becomes more equal.
which movement would show the effects of these changes on the
wealth within the country?
| | distribution of income distribution of wealth
a shift from curve 1 to curve 2 shift from curve 4 to curve
b shift from curve 2 to curve 1 shift from curve 3 to curve
cc shift from curve 3 to curve 4 shift from curve 2 to curve
d shift from curve 4 to curve 3 shift from curve 1 to curve
16 a government wishes to discourage tax avoidance.
eee = = cr a ‘

9
17 the diagram shows the supply and demand situation in a particular le
sui
wage rate n
:
m 1
j !
dema
o k
quantity of labc
when the market is in equilibrium, which areas measure the econom
received by employees?
[| -eeonemie ent [ wanster earings |
a jln oklj
b jml oklj
cc nml oklm
d oklm nml
18 in 2015 a company drilling for oil wished to reduce its workforce bec
oil. the workers’ trade union opposed the proposal.
which situation would have helped the trade union in the negotiations
a capital and labour were close substitutes.
b_ the cost of labour had been a small percentage of total cost.
c the demand for oil had been price inelastic.

10
20 what is typically associated with a relatively low level of income per c
a low exports
b _ low inflation
clow investment
d low population
21 during a certain period, a country with a constant population expand
experiences a significant increase in river and atmospheric pollution.
in the absence of any other changes, which measure would show ad
a_ gross domestic product per head
b_ gross national product per head
c human development index
d measure of economic welfare
22 the graphs below show percentage changes in money gdp and c
between 2008 and 2010.
6
9% 10 %
4
2
2008 2009 2010 2008 2
% change in
money gdp c
which conclusion may be drawn from the graphs?

11
24 the table shows the levels of consumption expenditure for given fami
family income expenditure
($) ($)

2000 2150

3000 3100

4000 4000

5000 4850

6000 5650

7000 6380
over the range of disposable income shown, as income rises wh
propensity to consume?
a it falls and then rises.
b it falls continuously.
c_itrises and then falls.
d it rises continuously.

25 which could cause the official statistics for the national income per h
to overstate the true level of economic well-being of its inhabitants?
a _ if there is dependence on barter in internal trade
b _ if subsistence agriculture dominates total economic activity
c_ if services are an important component of exports
dif there is extreme income inequality

12
26 the table shows some united nations population statistics for 2010 a
total total urban urban
types of region population | population | population | populati
(m) 2010 | (m) 2050 | (m) 2010 | (m) 20£

more developed regions 1237 1275 930 1100

less developed regions 5671 7875 2556 5186

least developed regions 855 1673 249 914
which relationship can be confirmed from the table?

a_ the least developed regions have the largest urban populations
years.

b the more developed regions have the lowest growth rate of urb
2050.

c_ the type of region with the greatest total population in 2010 is pi
rate of population growth by 2050.

d_ the type of region with the greatest urban population in 2010 is |
level of urbanisation by 2050.

27 in 2015, the world bank agreed to give a loan of $650 m to angola tc
the bank said angola needed to have a fiscal policy that would enc
its economy.

which policy would be consistent with this requirement?

a the lowering of interest rates to encourage investment in solar po
b the relaxing of regulations to allow the development of a new hyc
c_ the spending of the loan supporting its oil industry after oil prices
d_ the subsidising of a partnership with a french company to establ

13
29 in the short run, which policy measure would tend to reduce a cot
deficit but increase its inflation rate?
a adecrease in the level of import tariffs
b- anappreciation of the country’s currency
c_anincrease in the level of indirect taxes
d  areduction in government spending
30 in an economy with unemployed resources the government increases
when would this be least likely to increase national income by the full
a_ when the level of autonomous private investment is increased
b~ when the marginal propensity to save is reduced
c_ when the government allows money supply to expand
d_ when the level of interest rates rises

1 when will an economic activity create an external cost?
a when its social cost minus its private cost is negative
b_ when its social cost minus its private cost is positive
c_ when its social cost minus its social benefit is negative
d_ when its social cost minus its social benefit is positive

2 a government is planning to intervene in a free market to fix output at the level that maximises
the economic welfare of society.
msc = mpc
costs,
benefits
¥
se
xe |
ns
| ot msb
i] mpb
[e) w r
output
to achieve its objective, what should the government introduce?
a asubsidy of ts
b- asubsidy of yx
c ataxofts
d_ atax of yx

3 ina two-person economy, x has an income of $100, whereas y has an income of $50.
according to the pareto criterion, which income change would constitute a definite increase in the
economic welfare?
x’s income | y’s income
($) ($)
a 75 75
b 85 70
cc 95 100
d 130 50

4 the diagram shows three budget lines, qr, qt and sr.
qr is a consumer's initial budget line.
good y
q
ss
(e) r t
good x
which combination of changes could cause the budget line to shift to sr?
price of consumer's
good x income
a decrease decrease
b decrease increase
cc increase decrease
d increase increase

9 vvhen aitirm increases ail its inputs by 100%, its output increases by 00%.
what does this illustrate?
a decreasing returns to scale
b_ economies of scale
c the law of diminishing returns
d the law of variable proportions

6 the demand curve for a good has unit price elasticity throughout its length.
which statement about marginal revenue is correct?
a it always has a negative value.
b_ it decreases continuously as price decreases.
c itis always zero.
d_ it always has a constant positive value.

7 what is true about the average fixed costs of a firm?
a they fall as output rises at first, but then rise.
b_ they fall continuously as output rises.
c_ they increase continuously as output rises.
d_ they remain unchanged at all output levels.

8 inthe diagram
mc = marginal cost; ac = average cost; mr = marginal revenue; ar = average revenue.
mr mc
cost,
revenue ac
adi) air
o wxyz
output

what will be the output of a profit-maximising firm whose cost and revenue functions are shown
above?
a ow b ox cc oy d oz

9 the diagram shows a firm's total revenue curve.
revenue : ”
oo output
at the curve’s highest point
a marginal revenue is equal to marginal cost.
b_ average revenue is equal to average cost.
c marginal revenue is equal to average revenue.
d_ marginal revenue is zero.

10 the diagram shows two indifference curves for a consumer.
~ no
ic,
ic,
oo good x
what necessarily differs between ic, and ic2?
a level of income
b level of satisfaction
c price of good x
d price of good y

11 firms in a market advertise their products with different brand names. some make more profit
than others in the short run but all make normal profit in the long run.
which market structure is this?
a perfect competition
b monopolistic competition
c oligopoly
d monopoly

12 which feature of an oligopoly can be explained by the kinked demand curve model?
a collusion between firms in the determination of the industry price
b price leadership by one firm in the industry
c the ability of firms to earn abnormal profits in the long run
d_ the reluctance of firms to alter prices

13 the table shows percentage (%) market share of smartphone operating systems (os) for great
britain (gb) and the united states (us) in january 2012 and july 2015.
vv 49.3 54.3 43.0 65.6
ww 15.7 1.0 3.3 0.4
xx 29.3 32.7 50.6 30.1
¥ 2.4 12.0 2.1 3.8
z 3.3 0.0 1.0 0.1
what can be concluded from the table about changes between 2012 and 2015?
a the dominant firm in each country increased its market power.
b_ the firms counted in the three-firm concentration ratio remained the same in both countries.
c_ the three-firm concentration ratio decreased in both countries.
d_ the three-firm concentration ratio showed the same trend in both countries.

14 the diagram shows a lorenz curve, with two areas, x and y, identified.
(oq pee sheesh see se sere
cumulative line of j
% of income perfect
equality
¥)
lorenz
curve !
0 100
cumulative %
of households
how is the corresponding gini coefficient calculated?
a x divided by (x plus y)
b  xplus y divided by x
c xplus y divided by y
dy divided by (x plus y)

15 the government of a country wants to achieve a more equitable distribution of income.
which combination of measures is likely to be most effective in achieving this aim?
[| awe income atowance | __wellarebenefis

a decrease reduce means-tested benefits
b decrease reduce universal benefits
cc increase increase means-tested benefits
d increase increase universal benefits

16 a shopkeeper earns $75 per week, but he would be willing to carry on working in his shop for up
to $25 per week less. therefore, $50 is his level of
a marginal revenue product.
b_producer’s surplus.
c economic rent.
d transfer earnings.

17 the diagram shows the supply and demand for labour in an industry.
is)
wage rate
| oo
pod | d
o l mn
employment
initially the industry’s labour market is in equilibrium.
what effect will the introduction of a minimum wage ow have on the level of employment in the
industry?
a it will decrease by lm.
b it will decrease by ln.
cit will increase by ln.
d it will increase by mn.

18 immigrants are awarded entry points according to their ability to fulfil criteria set by the canadian
government. a new express entry system for the immigration of skilled workers was introduced.
the diagram shows the change in the relative importance or weighting given to these criteria
between the old and new systems.

criteria weighting (%) for skilled worker immigration
skill transferability
' 100
work experience %
adaptability 80
age
60
education
40
language 20
job offer 0
old express
system entry
system
what can be concluded from the diagram?
a canada intended to maintain the same level of skilled immigrants under both systems.
b canada wanted a smaller number of highly educated skilled immigrants.
c_ certainty of employment for skilled immigrants was made the main criterion.
d skilled immigrants needed to have fewer years of work experience than previously.

19 it has been observed that increased growth in consumer spending results in an increase in
investment by firms.
which principle of macroeconomic theory explains this relationship?
a the accelerator
b | the liquidity trap
c_ the marginal efficiency of capital
d_ the multiplier

20 what is the value of the multiplier in an economy with no government where the marginal
propensity to save is 4 and the marginal propensity to import is +?
a 3 b 13 cc 2 d 3

21 the table refers to an open economy with a government sector.
in which situation is the economy in disequilibrium?
pope tits | ei ri x | m|
a 400 150 80 150 200 120 100
b 450 150 100 150 230 120 90
cc 480 150 110 150 210 120 100
d 520 150 120 150 210 120 90

22 how do commercial banks create money?
a by cashing cheques for their customers
b by increasing their reserves at the central bank
c_ by making loans to customers
d_ by charging customers for banking services

23 what are the variables identified on the axes of a kuznets curve diagram?
[vera ais varitie [prc ans variable
a cumulative % of income cumulative % of families
b measure of inequality income per capita
cc measure of standard of living economic growth rate
d tax revenue tax rate

24 a developing country experiences economic growth.
the economic growth is most likely to lead to economic development when it
a causes rapid rural to urban migration.
bis based on the extraction of mineral raw materials.
c mainly rewards the country’s entrepreneurs.
d_ results from the expansion of labour-intensive industries.

25 between 2014 and 2015 the polish economy expanded at a rate of 3.3%.
what necessarily follows from this statement?
a_ the cost of living rose by 3.3%.
b_ the output of the industrial sector rose by 3.3%.
c_ there was increased demand which caused inflation.
d_ there was positive economic growth.

26 the graphs indicate economic performance in a country between 2011 and 2014.
annual % increase in annual % increase annual % increase
industrial production in consumer prices in gdp
125 ad

27 what will result in the short run from rising unemployment in an economy?
a the government’s budget deficit will fall.
b_ any existing inflationary pressure will be reduced.
c_ potential output will fall.
d_ the economy’s production possibility curve will move inwards.

28 in 2015 a political party proposed a policy of quantitative easing (the creation of money by the
central bank).
when would such a policy be least likely to destabilise the macro economy in the short run?
a when the economy was experiencing a high level of inflation
b_ when the economy had price stability but there was full employment of the labour force
c_ when there existed a deep recession with high levels of unemployment
d_ when there was full employment and a current account balance of payments deficit

29 in 1979 in the uk the marginal rate of income tax imposed on the highest earners was 83%
which increased to 98% if income was received from interest or dividends. by 1989 the highest
marginal rate was reduced to 40%. despite this reduction, the tax revenue raised from the
highest earners increased substantially.

which theoretical concept illustrates this relationship between tax rates and tax revenue?
a the j curve

b_ the laffer curve

c_ the marshall-lerner condition

d_ the phillips curve

30 which factor has been least associated with the rapid growth of many economies recently?
a high savings rates as a percentage of national income
bmore efficient mechanisms for transmitting funds from savers to investors
c more emphasis on detailed government planning
d more openness to foreign trade and investment

Solve 9708_s17_qp_32