economics

1 the statements are from a report by a water company that supplies water to homes and
businesses.
which statement is normative?
a itis important that we continue to invest in our infrastructure.
b our investment will have wider benefits, attracting visitors to the region.
c_ weare investing more than ever in the region.
d we use local suppliers on construction projects which boosts the local economy.

2 the combinations of output of goods x and y shown in the table could all be produced using the
existing resources in a country to their maximum capacity.
breese
brrbb
y 10 25 40 70 100
which statement about the opportunity cost of good y in terms of good x is correct?
a_ it decreases as the output of y increases.
b_ itis always below 1y = 1x.
c_itis constant throughout the range of output shown.
d_itis never above 1y = 2x.

3 the diagram shows two production possibility curves for goods and services in an economy.
goods
ps) >
[e) ,
services
what would not cause the economy’s production possibility curve to shift from ppc, to ppc2?
a_anincrease in the level of employment
b_anincrease in the retirement age
c_anincrease in the skills level of employees
d_anincrease in the use of capital by firms

4 what is a statement of the non-rivalrous nature of public goods?
a _ltis not possible to stop a non-payer from using the product.
b one person consuming the product does not reduce the amount of it available to others.
c_ people consume too little of the product because they are unaware of its true benefits.
d_ there is an unlimited supply of the product.

5 what is not held constant when aggregating individual firms’ supply curves to give the short-run
market supply curve?
a the number of firms in the industry
b _ the price of the product
c the prices of factors of production
d the state of technology

6 the diagram shows the demand for a product for which there are only three buyers, freeman,
hardy and willis.
25>5°-"™
price !
(8) 20-4----1---
15s
1d fool
' ' ' + d
0 ; i ; i
0 10 20 30 40 50
quantity
the table shows the demand from two of the three buyers.
10 24 6
15 15 5
20 6 4
which statement about the demand for the product from willis is correct?
a ithas unitary price elasticity of demand.
b_ it is a downward-sloping straight-line demand curve.
c_ itis a perfectly elastic demand curve.
d_ itis a perfectly inelastic demand curve.

7 which statement about price elasticity of supply is correct?
a it cannot change in the short run.
b_ it increases as the time period lengthens.
c itis infinite in the momentary time period.
d itis zero in the long run.

8 ata price of $4 a manufacturer supplies 20 units of a good per week. the value of the price
elasticity of supply is 2 over the range of price.
how many goods will be supplied at $5?
a 10 b 25 cc 30 d 40

9 consumers wishing to listen to music at home can now access it online. this has resulted in the
closure of shops selling music cds.
how can this be represented on a demand and supply diagram for music cds?
a b cc d

10 an international oil company announced that it would stop exploring for oil off the coast of
namibia. this was because there was only enough oil to support a local power station for
namibia and not enough to allow exports of oil.

what might be a possible advantage and disadvantage to namibia of this decision?
a a cut in taxes paid by the oil the conservation of a natural resource
company to the namibian government
b a reduction in potential the loss of cheaper oil
costs of pollution
cc a saving in costly research a loss of employment opportunities
paid for by the oil company
d the exhaustion of a natural resource the loss of potential exports

11 the table shows a competitive market in equilibrium in two periods.
. market price .
sited maced
1 50 10000
2 60 12000
what could explain the change from period 1 to period 2?
a anincrease in the price of a complement
b_anincrease in the price of a substitute
c_ the imposition of a minimum price of 60 cents by a government
d_ the imposition of an indirect tax on suppliers

12 inthe diagram d, is the demand curve for indian tea and 5s; is the initial supply curve.
s,
price
s,
a d,
(0)
quantity
the indian government imposes a tax on tea, which causes the supply curve to shift to s2.
which areas in the diagram measure the resulting tax revenue to the indian government and the
new producer surplus?
tax new
revenue producer surplus

a wtx v

b wtx ww

cc wtxty vv

d wtxty ww

13 the diagram shows the supply and demand curve for bananas.
price ¥v s
p, wo.
y
pj rosnnicemecins
zz d
(9) :
quantity
what happens to consumer surplus when the price increases from p, to p2?
a it decreases by p2vw.
b_ it decreases from p;vy to p2vw.
c_itincreases by wxy.
d_ it increases from p;yz to p2wyz.

14 a......1...... price set below the market equilibrium will cause a ......2...... of the product, and a

...:.:3...... price set above the market equilibrium will cause a ......4...... of the product.
which words complete gaps 1, 2, 3 and 4?
ee

a maximum shortage minimum surplus

b maximum surplus minimum shortage

cc minimum shortage maximum surplus

d minimum surplus maximum shortage

15 the diagram shows the original demand curve d, and original supply curve s, for a good.
price s,
$
30 f-----n-nn nny bs
v2) anal
20 pooteeesesesseeny es onl
5 pooeewseemey ca”,
- d,
0 5 6
quantity
the government introduces a subsidy.
what will be the total consumer spending after the introduction of the subsidy?
a $75 b $120 c $125 d $180

16 which is a transfer payment?
a dividends paid to private shareholders
b__ income paid to civil servants
c pensions paid to retired people
d_ rent paid to landlords

17 a flood-control dam is an example of a good provided directly by a government.
which statement relating to the direct provision of a flood-control dam is not correct?
a direct provision of a flood-control dam allows the government to tackle the failure to provide
public goods.
b direct provision of a flood-control dam forces the government to incur an opportunity cost.
c direct provision of a flood-control dam involves the supply of a merit good.
d direct provision of a flood-control dam is an example of government allocation of resources.

18 there has been a worldwide move towards market economies and away from state controlled
nationalised industries.
which policy would limit this transition?
a development of well-functioning capital markets
b_ establishment of a stable, convertible currency
c national and international liberalisation of markets and trade
d_ regulation of prices of former nationalised industries’ products

19 an economy has an equilibrium level of real output y, but wishes to move towards its full

employment level of real output yre.

price as

level

: sad }
fe) y tre
real output

which combination of policy measures is most likely to achieve this wish without high inflation?
a decreasing interest rates and raising investment in new technology
b_ decreasing the money supply and raising corporation tax rates
c increasing interest rates and raising income tax thresholds
d_ increasing the money supply and raising welfare benefit payments

20 in the diagram, ad, and as are an economy’s original aggregate demand and aggregate supply
curves.
price as
° ><
ad, ~ad,
° real output
what will cause the aggregate demand curve to shift to ad2?
a anappreciation of the currency
b_anincrease in the money supply
c_anincrease in the price level
d_anincrease in the real wage

21 acountry experiences a fall in the consumer price index.
what must be associated with such a fall?
a adecrease in average wage rates
b- adecrease in borrowing
c adecrease in consumers’ expenditure
d  adecrease in the cost of living

22 the balance of payments accounts are arranged in the following way.
which total is the current account balance?
[bales oftedeingoods |_|
| financiatbalance |
[errs and omissions |

23 the us central bank lowers its interest rate. this has an effect on the exchange rate of the us$.
the diagram shows the resulting changes in the demand for and supply of us$ in the foreign
exchange market.

ww
exchange x
rate of us$
¥
z
o
quantity
of us$
a change is shown by a move from a curve numbered 1 to a curve numbered 2.
what should curves w, x, y and z be labelled to show the effect of the interest rate fall on the
exchange rate?
pofwi x ty fz
a si so d, de
b si so d2 d,
cc so s; d, d2
d so ss; d2 d,

24 the table refers to a particular country.
| sie | sie
year prices prices
(2010 = 100) (2010 = 100)
2015 122.4 120.8
which statement about the period 2005 to 2015 is correct?
a the balance of payments worsened.
b_ the current account balance improved.
c_ the exchange rate appreciated.
d_ the terms of trade fell.

25 two countries, northland and southland, produce two goods, food and drink. the table shows
how many hours each has to use to produce one unit of each product. after specialising
according to comparative advantage, they decide to trade.

eos [ar]
northland 10 hours 4 hours
southland 20 hours 12 hours
which exchange rate will allow both countries to benefit from trade?
a 1 unit of food to + unit of drink
b 1 unit of food to 1 unit of drink
c 1 unit of food to 2 units of drink
d 1 unit of food to 3 units of drink

26 vvhat is a characteristic of a customs union but not of a free trade area’?
a acommon external tariff
b  acommon tariff between member countries
c_ fixed exchange rates between member countries
d the abolition of all tariffs between member countries

27 in the diagram, da and sg represent the domestic demand and supply curves for a product.
sw represents world supply of the product when there is free trade, at a world price of py. the
initial domestic market equilibrium level of consumption of the product is at e.

if a tariff of t were to be imposed, world supply would now be represented by s,, + tariff, at a price
of p, +t.
x
' sa
price
~~ f
i at a _
p ss.
w _— w
dy
o q, q, q,; q,
quantity of product
what would be the level of domestic production and the total of government revenue from tariffs
after the tariff of t were imposed?
level of total level of
domestic production revenue from tariffs

a oqz2 jkmn

b oq, oq:mpy

cc q1q2 ejkl

d q2q3 klm + jne

28 which government policy is most likely to focus on an increase in the quantity of skilled labour?
a exchange rate policy
b fiscal policy
c monetary policy
d supply-side policy

29 acountry has a long-running current account deficit on the balance of payments.
its government was using an expenditure-switching policy but decides to change to an
expenditure-reducing policy.
what could have been the old policy and its new policy?
a export subsidies quotas
b income tax interest rate
cc quotas exchange rate control
d tariffs income tax

30 the government increases interest rates in order to reduce the rate of inflation.
what will also result from this action?
a adepreciation of the country’s currency
b a fall in the level of savings
c  areduction in economic growth
d  areduction in unemployment

Solve 9708_w18_qp_13