economics

1. which statement about a product with external costs must be correct?
a the consumption of the product has positive effects on third parties.
b_ the private costs of its production exceed the social costs of its production.
c_ the production of the product has negative effects on third parties.
d_ the social costs of its production exceed the social benefits of its production.

2 what is correct if a firm in a perfectly competitive market is maximising its long-run profits?
[a
efficient efficient
a no no
b no yes
cc yes no
d yes yes

3 the table shows the results of a cost-benefit analysis undertaken by a government when it was
considering investing us$200 million in building a new airport.
fess ton |
private benefits 230
private costs 200
external costs 50
the government will build the airport if the net social benefit creates a return of at least 10% on
its investment.
what will the minimum external benefit need to be in us$ million to achieve this?
a 10 b 20 cc 30 d 40

4 the diagram shows a total utility curve for a consumer.
at which point does marginal utility equal zero?
total c
utility
b
d
q quantity

29 [he diagram shows a consumers indifference curves and a buaget line for electronic goods and
food.
if income and prices remain the same, at which point on the diagram will the consumer maximise
satisfaction?
electronic
goods
a
cc
b 1,
i
d 2
i,
(6)
food

6 the diagram shows a consumer's total utility.
total
utilit
ths
tu,
tu
tu,
a quantity
which curve would mean that marginal utility is diminishing?
a tu, b tu, c tu; d tu,

7 which is an internal economy of scale?
a_ cheaper loans from a local bank resulting from a merger
b _ efficient local transport networks
c _ specialist training facilities provided by a local college
d the reputation of an area for a particular product

8 why might a firm continue in production in the short run even though the price of its product has
fallen below its average total costs of production?
a it anticipates a rise in variable costs.
b_ it expects the fall in price to be temporary.
c_iithas large fixed costs of production.
d_ithas no control over the price of its product.

9 the diagram shows that a producer increases output from q, to qo.
mc
cost,
revenue
\ - ac
i :
ar
© q; q) quantity
mr
what will be the result?
a increased increased
b increased reduced
cc reduced increased
d reduced reduced

10 what is true about economies of scale but not diseconomies of scale?
a they occur because average revenue is increasing.
b_ they occur because of management policy changes.
c_ they occur in the short run.
d_ they occur with decreasing average cost.

11. what is most likely to be found when comparing the long-run equilibrium outcome in monopolistic
competition with that in perfect competition?
a agreater degree of excess capacity in monopolistic competition
b= ahigher level of profit in monopolistic competition
ca larger number of firms in monopolistic competition
d amore price-elastic demand curve in monopolistic competition

12 a government divides a nationalised rail service and sells it to five private companies. the largest
of these companies dominates the four smaller companies.
how will these changes affect the market structure for rail services?
a it will change from monopoly to monopolistic competition.
b _ it will create an oligopoly with the possibility of price leadership.
c_ it will encourage freedom of entry due to lower capital costs.
d_ it will guarantee ticket prices based on average costs.

13 what is meant by ‘real wages’?
a the marginal physical product of labour
b_ the opportunity cost of labour
c_ the purchasing power of money wages
d_ wages net of tax

14 the graph shows the percentage growth in average earnings for the uk economy.
uk average a a
weekly earnings 26 2.6
growth (%)
2.4 33
22 2.2 22 53
a jan april
2017 2017
what is the most likely cause of the pattern shown in the graph?
a adecrease in the supply of labour
b adecrease in the interest rate
c_anincrease in productivity
d_anincrease in the size of the labour force

15 which combination of policy changes is most likely to redistribute income from the richest
households to the poorest households in an economy?
-— means-tested benefits
indirect taxes :
benefits for everyone
a decrease increase decrease
b decrease increase increase
cc increase decrease increase
d increase decrease decrease
a

16 the diagram shows the impact on the labour market of the introduction of a national minimum
wage (mw).
wage rate supply
mw xx y z
demand
labour

what do the distances xy and yz represent?
2

a increase in employed workers redundant existing workers

b redundant existing workers unemployed new entrants

cc redundant existing workers increase in employed workers

d unemployed new entrants redundant existing workers

17 at present, motorists who drive their cars within area 1 on the map pay a daily congestion charge
of $8.
ex
& 7
areal2}
which car journeys would decrease in number if the congestion charge area were extended to
include area 2?
a _ journeys from point x to point z
b_ journeys from point x to point y
c_ journeys from point y to point z
d_ journeys from point z to point y

18 what is most likely to be the biggest contribution to sustainable economic growth in a developed
economy?
a  amovement of people from rural to urban areas
b_anincrease in technical training
c_anincrease in the size of the population
d_ rising consumer credit levels

19 when calculating national income by the income method, what would not be included?
a income from abroad
b profits of private sector businesses
c_ rent from the ownership of land
d transfer payments

20 which changes to basic income at points w and x might be included in the calculation to reach
disposable income?
basic income
add w =
gross income
subtract x =
disposable income
popo
a bonus payment direct taxes
b bonus payment indirect taxes
cc cost of living direct taxes
d cost of living indirect taxes

21 in a closed economy with no government sector, when will an increase in investment spending
generate the largest increase in equilibrium national income?
a when households have a high level of autonomous consumption
b_ when households have a high level of compulsory saving
c_ when households have a high marginal propensity to consume
d_ when households have a high marginal propensity to save

22 the table shows economic data for four different countries for 2015.
which country is most likely to be classed as ‘developed’?
[ [op per annumis) | hot | population |
a 10.9 trillion 0.727 1.37 billion
b 2.4 trillion 0.897 66.8 million
cc 481 billion 0.527 182.2 million
d 19 billion 0.516 15.6 million

23 vwhat is an example of a keynesian macroeconomic policy that would reduce cyclical
unemployment?
a_anincrease in government spending on new infrastructure such as roads
b_anincrease in government spending on retraining workers
c_ areduction in the rate of tax on imports
d  areduction in the rate of tax on goods and services

24 the graph shows changes in the unemployment rates in countries x, y and z over the period
2000 to 2010. all three countries faced recession between 2008 and 2010.
10 f
unemployment la
rate % 87 wort x
ee ! “sie
4
2 :
0 ;
2000 2005 2008 2010
year
which conclusion can be drawn from the graph about the period 2000 to 2010?
a_ all three countries experienced an upward trend in unemployment over the period.
b- country x had the highest number out of work in 2010.
c_interms of unemployment, the country least harmed by the recession was country y.
d_ the total number out of work in the three countries was higher in 2010 than in 2000.

25 the diagram shows the annual percentage (%) change in employment and output in the uk
private sector between 2000 and 2012.
4 output 10
employment 94... \ —— 5 output
0 ca j ten, 1
) employment 5
—4 -10
-6 -15
2000 02 04 06 08 10 12
in which year did labour productivity decrease the most?
a 2001 b 2008 c 2011 d 2012

26 recently, among european countries the netherlands had the highest percentage of part-time
employees and an average working week for all employees of 32 hours. greece had a smaller
percentage of part-time employees but an average working week for all employees of 41 hours.
which conclusion may be drawn from this information?

a greece has a higher percentage of its workforce in full-time employment than the
netherlands.

b on average part-time employees work longer in greece than in the netherlands.

c the average working week in greece for full-time employees is longer than in the
netherlands.

d_ there are more part-time employees in the netherlands than in greece.

27 in 2017 a report suggested that by 2030 automated robots could threaten 33% of existing jobs in
the uk, compared with 38% in the us and 21% in japan. manufacturing and retail jobs faced the
greatest threat.

which type of unemployment is illustrated in the above paragraph?
a demand-deficient unemployment

b | frictional unemployment

c seasonal unemployment

d © structural unemployment

28 which diagram shows the effect of a policy of quantitative easing on the rate of interest?
a b
rate of rate of i
interest | interest
a | lp,
_ lp, lp,
o o
ms mey quantity my quantity
of money of money
cc d
rate of rate of i
interest interest
hs | lp,
| >= lp, lp,
o o
mey ms; quantity my quantity
of money of money

29 whnicn macroeconomic policy is most likely to be used as a long-run means of reducing
inflationary pressures?
a exchange rate policy
b fiscal policy
c monetary policy
d supply-side policy

30 what may prevent a government achieving a faster rate of growth of real gdp?
a consumption and investment expenditure are interest rate elastic.
b the consumer price index is below its target set by the central bank.
c_ the economy is operating on the long-run aggregate supply curve.
d_ there is a large negative output gap in the economy.

Solve 9708_m20_qp_32