economics

1. which statement about economics is not correct?
a_ economic actions can produce unexpected side effects.
b_ economic thinking is usually based on logical reasoning at the margin.
c_ the use of scarce resources to produce a good always has a cost.
d_ the value of a good or service involves a purely objective judgement.

2 a farmer is able to grow three crops, x, y and z, on his land.
the farmer decides to grow at most two crops in any year.
the table shows six possible combinations of units of output of the three crops.
ee ee

xx 0 0 80 40 40 0
y 0 60 0 30 0 30
z 40 0 0 0 20 20

what is the opportunity cost of 1 unit of x?

a 1.33 units of y

b 1.5 units of y

c 0.5 units of z

d = 2.0 units of z

3 the diagram shows a production possibility curve for an economy that produces capital goods

and consumer goods.

capital

goods

o
consumer
goods

why is the production possibility curve drawn concave to the origin?
a capital goods are a more labour intensive output than consumer goods.
b consumers always seek to maximise their satisfaction from consumption.
c_ profit maximisation for firms always ensures efficiency in production.
d some resources are more efficient in production of some goods than others.

4 the bureau of alcohol, tobacco, firearms and explosives is a branch of the united states
government which regulates markets.
what does its name imply is most likely to be its main responsibility?
a to prevent harm from demerit goods
b to provide subsidies for essential goods
c_ to raise revenue from goods in elastic demand
d_ to safeguard employment in manufacturing industry

5 what is treated as a variable in constructing a market demand curve?
a consumers’ tastes
b _ the distribution of income
c the price of related goods
d the price of the good

6 the diagram shows how the quantity demanded of four goods changes as income changes.
which good has an income elasticity of demand which is always +1?
a b c
quantity
of good
demanded
d
oo :
income

7 the table shows three different prices and quantities supplied per week of two products, x and y.

($) supplied of x ($) supplied of y
10 80 30 60
15 100 40 64
20 110 50 80

which statement about price elasticity of supply (pes) is correct?

a the pes of x is elastic for a fall in its price from $15 to $10.

b_ the pes of x is unitary for a rise in its price from $15 to $20.

c_ the pes of y is elastic for a fall in its price from $40 to $30.

d_ the pes of y is unitary for a rise in its price from $40 to $50.

8 in 2016 car drivers bought more fuel (gas) because the price of oil from which it was made had
fallen.
which diagram represents this change in the market for fuel?
a b
price s price
of fuel of fuel
1 d, | @
ii i,
s quantity a quantity
of fuel of fuel
c d
price s price s,
of fuel of fuel s,
i d, j |
d, ' b
e quantity ® quantity
of fuel of fuel

9 the market demand for a product is made up of the demand from three firms, x, y and z.
the table shows the demand from each firm and the market supply.
demand from x | demand from y | demand from z market supply

a 3300 3300 3300 3300

8 3100 2900 3100 6200

9 2800 2500 2900 8200

10 2500 2100 2700 10000

what is the equilibrium price in the market?
a $7 b $8 cc $9 d $10

10 the diagram represents the market for diamonds.
s,
price
pe tt ss,
nop
o q, q,
quantity
what could have caused price to change from p, to p2?
a afall in the price of substitute gems
b a fall in the tax on diamonds
c arise in the productivity of diamond miners
d_ arise in the wages of diamond miners

11 good x has a substitute, good y, and a complement, good z. the price of good y decreases and
the price of good z increases.
why might the equilibrium price of good x remain unchanged?
a_ producers of good x adopt new technology.
b_ producers of good x receive a subsidy.
c_ some firms stop production of good x.
d_ the tax on the production of good x is cut.

12 at first, a television service is available at no charge. the television company then charges
viewers $6 per hour to watch its programmes. the demand curve is d.
10
price
($)
6
d
0
0 2000 5000
number of
hours viewed
what is the value of the loss in consumer surplus and what value of consumer surplus remains
after the introduction of the hourly charge?
lost consumer remaining consumer
surplus ($) surplus ($)
a 9000 4000
b 9000 16000
cc 21000 4000
d 21000 16000

13 the diagram shows the european airline market.
price r s;
s,
m
g
h <n
j i.
k a. d
[e) rt .
quantity
new entrants have come into the market, shifting supply from s, to so.
which area represents the new producer surplus?
a gmj b  hnf c hnk d knto

14 which benefit is most likely to result from a rise in the minimum price of labour (wage rate)?
a areduction in costs of production
b_areduction in income inequality
c  areduction in the level of unemployment
d_ areduction in the rate of inflation

15 the diagram shows the equilibrium price and quantity of good x.
price s
f
e
d
o quantity
the initial market equilibrium is shown by point e.
what might cause the market equilibrium to move to point f?
a adecrease in the costs of producing good x
b  adecrease in the demand for good x
c_anincrease in the price of a substitute good
d__ the imposition of a specific sales tax on producers of good x

16 the table shows the demand and supply schedules for a product before and after the
government pays a subsidy of $4 per unit to the producers.
fixe quantity quantity supplied | quantity supplied
p $ demanded before subsidy after subsidy
(units) (units) (units)
6 250 50 150
8 200 100 200
10 150 150 250
12 100 200 300
14 50 250 350
assuming that any extra sales are to new consumers, how much do the original consumers of the
product save as a result of the subsidy?
a $300 b_ $600 c $900 d $1500

17. which statement about transfer payments is correct?
a_ transfer payments are intended to reward productive economic activity.
b_ transfer payments are only financed by government.
c_ transfer payments may result in a disincentive to work.
d_ transfer payments will include the sales of new cars.

18 what is the major problem associated with a government directly providing the correct amount of
a public good?
a competition from private producers
b_ estimation of demand
c_ increased trade diversion
d rivalry in consumption

19 an aggregate demand curve slopes downwards from left to right.
one reason for this is that a reduction in the average price level will lead to
a adecline in the country’s international competitiveness.
b_anincrease in interest rates.
c_anincrease in the real value of money balances.
d_ the expectation of further price falls.

20 inthe diagram an economy is initially in equilibrium at point x.
the government increases spending on education. this coincides with an increase in wage rate
inflation.
which point shows the most likely short-run equilibrium of the economy?
sras,
price level ¢ sras
2 b sras,
a
ad,
ad, ad
s real output

21 during one year the national output of a country valued in terms of money prices increased by
8% while the index of the prices of all goods and services produced in the country increased by
3%.

by how much did the real national output increase?
a 3% b 5% c 8% d 11%

22 the table shows the cpi rate of inflation (%) in the united states from 2006 to 2013.
2006 2007 2008 2009 2010 2011 2012 2013
3.0%
what can be concluded from the figures about the period 2006 to 2013?
a_ there was one year of constant prices.
b_ there were three years of deflation.
c_ there were only four years of inflation.
d_ there were eight years of rising living costs.

23 in 2014 australia and china negotiated a trade agreement. this removed chinese tariffs on 95%
of australian exports in exchange for greater access to the australian economy for chinese
investors.

how would the agreement be expected to affect the australian balance of payments in the
short run?
[exert account [nancial account|

a greater inflow greater inflow

b greater inflow greater outflow

cc greater outflow greater inflow

d greater outflow greater outflow

24 turkey can produce a good but also imports some of the good from egypt. the turkish currency
depreciates against the egyptian currency.
how is this most likely to affect production of this good in egypt and in turkey?
| | production in egypt production in turkey
a decrease decrease
b decrease increase
cc increase decrease
d increase increase

25 the table shows the terms of trade for saudi arabia.
2000 100
2010 105
2015 137
what can be concluded from the table for saudi arabia?
a export prices rose relative to import prices.
b_ the balance of trade surplus increased.
c_ the volume of exports exceeded the volume of imports.
d_ the volume of exports rose faster than the volume of imports.

26 what is present in a customs union but not in a free trade area?
a acommon external tariff with the rest of the world
b  acommon monetary system
c acommon system of taxation
d_ the free movement of all goods, services and factors of production

27 which argument in favour of protectionism is not generally regarded as economically valid?
a itincreases the standard of living of the population in general.
b_ it prevents heavily-subsidised imports from competing unfairly against domestic goods.
c_ it provides time for the protected industry’s workers to be retrained for other work.
d_ once the protected industry becomes established, it will produce efficiently.

28 which action is classified as a fiscal policy measure?
a fixing a currency to another country’s currency
b managing changes in the level of government debt
c providing guidance to industry and the public
d tightening reserve asset requirements for financial institutions

29 acountry has a deficit on the current account of the balance of payments.
which policy would be expected to increase the deficit?
a anappreciation of the exchange rate
b_anincrease in domestic productivity
c_anintroduction of import quotas
d_ arise in subsidies to domestic firms

30 which type of policy would have the most immediate effect in dealing with a deflationary
economic downturn?
a increasing the government's budget surplus
b _ increasing liquidity by assisting banks to lend more
c__ investing in projects to improve transport networks
d switching the burden of taxation from earning to spending

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