economics

1 what is the opportunity cost to a person of spending $20 on a new pair of sports shoes?
a all the other things the person could have bought
b_ the cost of getting to the sports shop
c the current value of his old pair of shoes
d_ the next best thing that could have been bought with the $20

2 which statement is correct?
a_ inthe short run all factors of production are fixed; in the long run all factors are varied.
b_ inthe short run at least one factor is fixed; in the long run all factors can be varied.
c_ inthe short run at least one factor is varied; in the long run all factors are fixed.
d_ inthe short run at least one factor is varied; in the long run at least one factor is fixed.

3 what is correct at any point along an economy’s production possibility curve?
| sew [eae
are fully employed is fully used
a correct correct
b correct false
cc false correct
d false false

4 ‘the local government of tokyo should use a policy of taxation to reduce traffic congestion in the
city centre.’
what can be concluded about this statement and the type of economic policy?
a normative macro
b normative micro
cc positive macro
d positive micro

5 which statement about market disequilibrium is correct?
a price is likely to change.
b supply is equal to demand.
c_ the government must intervene.
d_ there must be shortages.

6 in the diagram, d, and s, represent the demand for and supply of luxury watches. equilibrium is
initially at point x.
the cost of raw materials for manufacturing watches rises. at the same time the incomes of the
rich increase.
which point on the diagram is most likely to represent the new equilibrium?
s,
; b
price s,
a
s,
x ,
d,
d,
d,
(6) .
quantity

8 when is the supply curve for a car manufacturing firm most likely to be price elastic?
a_ when the firm finds it difficult to recruit new labour
b_ when the firm has a large quantity of stock
c_ when the firm is operating in the short run
d_ when the firm is operating near to full capacity

9 the diagram shows a market for wheat.
100
price of
wheat ss
tanne we
bypomonsai |
| de
0 ht ;
0 qq, q; 100
quantity of wheat
what is the response of demand for and supply of wheat when the price of wheat falls from p2
to p,?
([eerena [sao
a elastic elastic
b elastic inelastic
cc inelastic elastic
d inelastic inelastic

10 the table shows the demand schedule for avocados in a market on a particular day.
the supply of avocados was fixed on that day.
avocado demanded

2.60 500

2.40 640

2.20 740

2.00 820

1.80 900
which statement is correct?
a_ lf the supply was 490, at a price of $2.60 there was an excess demand of 10 avocados.
b if the supply was 650, at a price of $2.40 there was an excess demand of 10 avocados.
c_ if the supply was 810, at a price of $2.00 there was an excess supply of 10 avocados.
d_ if the supply was 890, at a price of $1.80 there was an excess supply of 10 avocados.

11. the diagram shows the demand and supply curves of a normal good (x). qp; is the initial
equilibrium.
s,
price s,
aaa
i ou d,
po
o
oo quantity
other things being equal, what may cause the change in the market equilibrium to q2p2?
a _afall in household incomes and an increase in interest rates
b_ arise in workers’ real wages in all sectors of the economy
c_anincrease in income tax and a rise in the specific tax levied on x
d_anincrease in the price of a substitute product for x and a fall in the costs of producing x

12 the diagrams show the supply curves in four different markets.
in which market is the price elasticity of supply always equal to one?
a b
price price ss
ss
a quantity a quantity
cc d
price price s
ss
a quantity o quantity

13 the diagram represents the market for electric cookers.
price ss
y
x
d,
d,
o quantity
what is most likely to explain the change in the equilibrium from point x to point y?
a _§afall in the price of electric cookers
b_anincrease in a specific tax on electric cookers
c_anincrease in the number of households
d_anincrease in the price of electricity

14 the diagram shows the effect on the market for rice of a change in government policy that
causes a shift in the supply curve from s to s;.
price s
s,
j f-------4----- nyy
d
oo quantity
what does the area jklm represent?
a the cost to the government of a subsidy to rice growers
b the extra saving to importers of the removal of a tariff on rice
c the increase in consumer surplus from the introduction of a maximum price for rice
d the loss in government revenue from the reduction in a lump sum tax on rice

15 which statement is not an argument in support of the process of privatisation?
a_ private companies are motivated to make the best use of their resources.
b_ privatisation allows more firms to enter an industry, increasing competition in the market.
c_ privatisation can create companies that exploit the consumer.
d_ selling state-owned assets to the private sector raises significant revenue for the
government.

16 governments are trying to reduce the burden of transfer payments in economies with an ageing
population.
which policy would help to achieve this aim?
a __ introducing financial support for university students
b _ linking pension increases to the consumer price index during inflation
c_ raising the retirement age
d_ reducing state pensions to finance an equal rise in unemployment benefit

17 doctors are concerned about the negative health effects of sugary drinks.
when would a tax on sugary drinks be least effective in improving health?
a when the demand for sugary drinks is income elastic
b~ when the demand for sugary drinks is income inelastic
c_ when the demand for sugary drinks is price elastic
d_ when the demand for sugary drinks is price inelastic

18 the diagram illustrates what happens to aggregate demand (ad) and aggregate supply (as) in
an economy during a year.
as
general
price level
pippnsecene ei
p }eeeaneneeee ad,
sap
ie) q q,
real output
what explains the rise in the general price level?
a boom in consumer spending
b higher taxes on company profits
c_ reduction in government-financed projects
d rising costs of raw materials

19 how is a rate of inflation that is lower than that expected likely to affect lenders and borrowers in
an economy?
[ [efecto enders | feat on borne |
a beneficial beneficial
b beneficial harmful
cc harmful beneficial
d harmful harmful

20 a country devalues its currency in the expectation that a deficit on the current account of the

balance of payments will be reduced.

what is necessary to make this happen?

a any tariff on imports must be matched by a subsidy on goods to be exported

b the elasticity of demand for imports and the elasticity of demand for exports must both be
greater than 1

c the rate of domestic inflation is equal to the rate of inflation in the foreign market

d_ the sum of the elasticities of demand for domestic imports and the foreign demand for
exports is greater than 1

21 +=‘|the current account of the balance of payments for nigeria changed from usos99m in 2014 to
us$ -15 763 m in 2015.
assuming that nothing else changes, what is likely to be the impact in 2015 on gdp and the
exchange rate in nigeria?
[cor | exchange ate
a falls appreciates
b falls depreciates
cc rises appreciates
d rises depreciates

22 australias aggregate demand decreased over the last year.
what might have been the cause of this?
a areduction in consumer saving
bareduction in direct taxes
c  areduction in imports
d_areduction in investment

23 the diagram shows the effect of introducing an import quota on the market for good x.
price saomastic s seaisstie + quota
of x
: zo
f | h 1 i s world
dgomestic
2) gd 9 os
quantity of x
what is the change in domestic supply and the size of the import quota?
change in size of
domestic supply import quota
a q1q2 q2qs
b 193 194
c g14 192
d 2q3 q3q4

24 country x joins a customs union with country y and will remove the tariff on its imports of good m
from country y.
under which conditions will trade creation in country x be the smallest?
existing size of price elasticity
country x’s tariff on of demand for
imports of good m good m in country x
a large -0.8
b large -1.4
cc small -0.8
d small -1.4

25 an australian family purchases a holiday to new zealand and an australian mining company
sells coal to china.
four students, a, b, c and d, are asked where these transactions appear in the current account
of australia’s balance of payments.
which student is correct?
holiday to .

| new zealand coal to china

a service export good export

b service export good import

cc service import good export

d service import good import

26 what is likely to be the least effective store of value during a period of rapid inflation?
a antique furniture
b fixed interest government securities
c houses
d _ shares of industrial companies

27 an increase in what will shift the aggregate demand curve in an economy to the right?
a __ budget deficit
b consumer savings
c general price level
d interest rate

28 acountry’s balance of payments current account is in deficit.
how can this be restored to equilibrium, assuming the marshall-lerner condition holds?
a increase the exchange rate
b_ reduce income tax
c_ reduce primary income
d subsidise domestic producers

29 monetary policy does not usually work immediately.
which time lag is likely to be the least concern to a government whose priority is a rapid
domestic impact?
a the time it takes for policymakers to recognise the cause of a problem
b _ the time it takes for the economy to respond to the introduction of the policy
c the time it takes for the foreign exchange rate to respond to the effect of the policy
d_ the time it takes to put the chosen policy measure into place

30 what is the best example of an expansionary supply-side policy?
a_ the argentinian central bank’s decision to cut the interest rate in 2018
b_ the us president’s plan to cut income tax rates in 2017
c_ the uk government’s plan to build 500 new schools by 2020
d_ the chinese government's decision to devalue their currency by almost 7% in 2016

Solve 9708_s19_qp_13