economics

1. the demand for a product is inversely related to its price, ceteris paribus.
what does ceteris paribus mean in this context?
a factors affecting demand other than price are held constant.
b_ factors affecting price other than demand are held constant.
c_ price changes result from changes in demand.
d_ price falls result in increased quantity demanded.

2 what is not an example of the role of the factor enterprise in a modern economy?
a deciding on new export markets for the company’s goods and services
b making payments to suppliers for raw materials and capital goods
c_ reducing costs through the introduction of a new shift system for employees
d transforming the production process with the introduction of robots

3. the production possibility curves show the abilities of four economies to produce trucks and cars.
in which economy is the opportunity cost of producing cars lowest?

6-

trucks 5

(thousands)
4
3 d
2
in
0
0 1 2 3 4 5 6
cars
(thousands)

4 john sells cakes for $10. aisha offers online tutoring for $20 per hour. one hour of aisha’s
tutoring is worth two of john’s cakes.
which function of money is being illustrated?
a medium of exchange
b _ standard of deferred payment
c _ store of value
dunit of account

5 in the diagram, d, is the initial demand curve for student places at universities.
my, pe
o

student places
what could cause the demand curve to shift to d2?
a adecrease in student fees for universities
b  adecrease in the level of youth unemployment
c_anincrease in graduate earnings compared with non-graduate earnings
d higher a level grades demanded for university entrance

6 inthe diagram, area op;m,q; is equal to area op2m2q>.
price
p; = m,
paf-+\we
i: d

° qq; quantity
what is the value of the price elasticity of demand if the price is halved from p, to p2?
a -1
b -0.5
c zero
d _ infinity

7 which elasticity values indicate that cars are normal goods and that petrol is a complement to car
use?
income elasticity of cross elasticity of demand
demand (yed) for cars (xed) for petrol relative to
changes in car prices

a yed is negative xed is negative
b yed is negative xed is positive
cc yed is positive xed is negative
d yed is positive xed is positive

8 what is it necessary to know in order to calculate the price elasticity of supply of a product when

its price changes?

a the amount of the price change; the quantity demanded at the original price; the quantity
supplied at the new price

b_ the equilibrium market price; the quantity demanded at equilibrium; the quantity supplied at
equilibrium

c_ the original and new market price; the quantity supplied at the original price; the quantity
supplied at the new price

d_ the quantity demanded at the new price; the price change; the quantity supplied at the new
price

9 the government fixes a minimum price for a product above the current equilibrium price.
which value for the product’s price elasticity of supply will result in the smallest excess supply in
its market?
a between zero and one
b_ greater than one
c one
d zero

10 the demand for a good falls at the same time as its costs of production decrease.
what will be the combined effect of these changes on the price and on the quantity supplied of
the good?
a decrease decrease
b decrease uncertain
cc uncertain decrease
d uncertain uncertain

11. the final of a major sports event is held in a stadium which has a fixed capacity of 40000 people.
the price for a seat is set at p-, but when the tickets go on sale all tickets are sold very quickly
with many disappointed people unable to buy a ticket.

which diagram best represents this?
a b
ss ts)
rice rice
pp a pp
p_|-----------------}----
d d
a 40000 ® 40000
quantity quantity
c d
ss
is)
_  p_}-----n------=--5 .
price =f f price
pi <
i) , o
“ 40000 id 40000
quantity quantity

12 in the diagram s and s; are the supply curves for an agricultural product in years 1 and 2
respectively. d is the demand curve in years 1 and 2.
in year 1 the government purchased an amount necessary to ensure that the price was op.
s ss,
price (year1) (year 2)
p a
rit dt
[e) wx y zz
quantity
the price is held at op in year 2.
how much more must the government buy in year 2 than it bought in year 1?
a wz b xy cc xz d yz

13 the diagram shows the european airline market. the original demand curve is d, and the original
supply curve is s;. there is then an increase in the demand for air travel.
f
price
$ g
s;
m
h i}
k a
j d, d,
ie) rt
number of passengers
which areas show the consumer surplus and producer surplus at the new equilibrium?
consumer producer
surplus surplus
a fmh hmj
b fmh jmto
cc gnk knj
d gnk knro

14 the diagram shows the demand and supply curves for a good.
rice 2
p p, —— ge
| ~d
o q; q qs;
quantity
the government fixes a maximum price of op;.
what would happen?
a consumers would have to be rationed to quantity oq;.
b_ the government would have to introduce a subsidy of pp;.
c_ the market equilibrium quantity oq would be demanded and supplied.
d_ the supply of quantity oq2 would be guaranteed.

15 a government decreases the tax rate on goods and services and increases the tax rate on
incomes.
what is the likely outcome on the distribution of income and the incentive to work?
distribution incentive
of income to work
a less equal decreased
b less equal increased
cc more equal decreased
d more equal increased

16 the diagram shows the equilibrium price, p1, and quantity bought and sold, q:, in a market
before a subsidy is granted.
. s,
rice
pi s,
rig prmmrsrigg aceon
pfenann-nnnohnt kn
| d,
oo q, q,
quantity
what represents the producer incidence (benefit) after the subsidy is granted and what is
government expenditure on the subsidy?
producer government
incidence (benefit) expenditure
a p,p2nm p,p,nm
b p,p2nm p3p2nl
cc p,p3lm p,p3lm
d p,p3lm p3p2nl

17 when is a transfer payment most likely to be an individual’s main source of income?
a when employed
b_ when investing
c_ when saving
d_ when unemployed

18 which argument is used to justify a policy of nationalisation?
a_ a firm exposed to market forces is more likely to be efficient.
blt avoids the wasteful duplication of resources.
c_ the stock market can exert effective discipline on the industry.
d_ there are benefits from wider share ownership.

19 the table illustrates macroeconomic data for an economy. all figures are in $ billions.
what is the equilibrium real output?

consumption investment government exports imports real output
expenditure expenditure

a 110 100 50 10 20 100

b 120 100 60 20 30 200

cc 140 100 70 30 40 300

d 160 100 80 40 50 430

20 the diagram shows an economy's aggregate supply curve.
price as
level s/s
0 output
what is likely to cause the curve to shift to the left?
a_anincrease in investment due to a reduction in interest rates
b_anincrease in the marginal rate of income tax
c improvements in technology
d__ schemes to increase the geographical mobility of labour

21 the diagram shows the change in an economy’s rate of inflation over 4 years.
inflation rate ! |
(%) a t '
0 q '
1 2 3 4
year
what happened to the general price level over the 4 years?
[seat] year [eer [year]
a constant constant fell constant
b rose constant fell fell
cc rose rose rose constant
d rose rose rose fell

22 the table shows selected items of the balance of payments of a country in 2015.
fits
net portfolio investment +40
trade in goods -100
trade in services +50
interest, profit and dividends (primary income) +10
current transfers (secondary income) +10
transactions in financial assets -10
what was the country’s current account balance in 2015?
a -$40 billion b_ -$30 billion c -$20 billion d -$10 billion

23 vvnat is likely to explain an increase in the deficit on a countrys current account of the balance of
payments?
a_anincrease in government foreign aid to countries abroad
b_anincrease in government tax rates
c_anincrease in other countries’ exchange rates
d_anincrease in the proportion of income saved by the country’s residents

24 the diagram shows the determination of the floating exchange rate between the us$ and the
uke£. d is the demand curve for pounds and s is the supply curve for pounds. the initial
equilibrium exchange rate is e.

exchange s
rate
($ per £)
ebvesresne’s
d
o quantity
of pounds
which change might cause an increase in the uk exchange rate?
a aswitch by us consumers from chocolate produced in the uk to chocolate produced in the
us
b_aswitch in the destination of uk tourists from africa to the us
c awheat crop failure in the uk leading to increased wheat imports from the us
d_ increased investment by us residents in financial and real assets in the uk

25 the table shows the ability of two countries, p and q, to produce two goods, y and z.
mee ee
per person per person
country q 1500 2000

which statement is correct?
a phas an absolute advantage in z and q has a comparative advantage in y.
bp has an absolute advantage in z and q has an absolute advantage in y.
c phas a comparative advantage in y and q has an absolute advantage in z.
d phas a comparative advantage in z and q has an absolute advantage in y.

26 which action increases and which action decreases the level of protectionism?
a imposing an embargo reducing subsidies to
domestic producers
b imposing exchange controls lowering quota levels
cc introducing voluntary increasing subsidies to
export agreements domestic producers
d removing quotas introducing embargos

27 country m imposes a tariff on imports of steel.
which price elasticity values will result in the smallest reduction in steel imports into m?
pice ‘elasticity a price elasticity of
supply ot domestic demand for steel in
steel producers in
country m
country m

a 0.2 0.4

b 1.0 0.8

cc 1.5 1.0

d 2.0 1.2

28 in 2012, the indian government stated that it aimed to reduce its duaget deficit to 9.1% of gdp.
which policy is most likely to help this aim?
a adecrease in import tariffs
b adecrease in the rate of interest
c_anincrease in the sale of state-owned assets
d_anincrease in government pension payments

29 which policy is most likely to help to correct an adverse balance on the current account of the
balance of payments?
a abolishing tariffs
b_ devaluing the currency
c_ reducing direct taxes
d_ reducing indirect taxes

30 a government reduced the tax on company profits from 28% to 20%.
which statement best describes this policy?
a itis both a contractionary fiscal policy and a supply-side policy.
b_itis both an expansionary fiscal policy and a supply-side policy.
c_itis both an expansionary fiscal policy and an expansionary monetary policy.
d_itis both an expansionary monetary policy and a supply-side policy.

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