economics

1 an american family is choosing between four holiday destinations in europe, each at the same
price. the table shows the family’s order of preference for these holiday destinations.
destination preference
barcelona 1st
london = 3rd
paris 2nd
venice = 3rd
if the family goes to barcelona, what is the opportunity cost of this choice?
a_ barcelona
b_ london and venice
c paris
d london, paris and venice

2 ~the diagram shows two production possibility curves for an economy.
services
o goods
which combination of movements correctly illustrates these changes in production?
short-run long-run no
economic growth economic growth economic growth

a ktol ltom mton
b ktol m to n ltom
cc mton ktol ltom
d m ton ltom ktol

3 what distinguishes the very long run from the long run?
a the ability to change resource allocation
b the ability to change the state of technology
c_ the absence of government market intervention
d_ the existence of variable factors of production

4 which statement is a positive statement?
a the distribution of income and wealth in most western european countries is unequal.
b_ the government ought to increase income tax on high earners.
c_ there should be more legal rights given to workers to protect their status in the workplace.
d wages of those on low incomes should be increased.

5 what could not cause a shift in an individual's demand curve for good z?
a achange in advertising expenditure on z
b- achange in the individual’s income
c_ achange in the individual’s tastes
d  achange in the price of z

6 the diagram shows the market for sugar which is initially in equilibrium at a price of op.
ss
price
r
p,{---.- $i nu
‘ ; |
py ae
(e) l. m on
quantity
a government then fixes a maximum price of op.
what will happen as a result?
a areduction in farmers’ revenue equal to prsp,
b_ expenditure on sugar will be equal to prmo
c_ farmers’ revenue would be p; uno
d producer surplus will be p,;sp.2

8 which example of consumer behaviour would create consumer surplus?
a when aconsumer does not spend all of her income each month
b when aconsumer pays less than they are willing to pay for a good
c_ when aconsumer throws away vegetables because they bought too much
d_ when a good is purchased in order to resell it at a higher price

9 a manufacturer reduces the price of its goods after developing a more efficient manufacturing
process. it makes leather belts that compete against belts made of artificial material.
what are the likely outcomes of the change in the manufacturing process?
supply of price of
leather belts artificial belts

a decreases decreases

b decreases increases

cc increases decreases

d increases increases

10 what is the likely price elasticity of supply of highly perishable goods and goods that have low
stocks?
highly goods that
perishable have low
goods stocks
a elastic elastic
b elastic inelastic
cc inelastic elastic
d inelastic inelastic

11. the diagrams show the initial demand curve d, and supply curve s, for steel in the european
union (eu). in 2018 european steel firms experienced rising energy prices.
which diagram shows the likely impact of this?

a b
. ss; ’ s;
price price
d, d,
d, dz
o quantity oo quantity
cc d
s; s2
price s2 price s;
d, d,
o quantity oo quantity

12 the market for wheat is in equilibrium at price p with supply at 40 million tonnes. due to a
drought in the growing season, supply falls to 20 million tonnes.
is)
price of
wheat po fr--nqronn oh
per tonne
p '
p, ms
| nd
o 20 40 60
quantity of wheat
(million tonnes)
which immediate action should be taken to maintain the equilibrium price of p?
a grant a subsidy to farmers equivalent to pp,
b_ impose an indirect tax equivalent to pp2
c plant more wheat to increase supplies to 40 million tonnes
d_ use existing stocks of wheat to increase supplies by 20 million tonnes

13 what is used to calculate the price elasticity of demand?
a change in price
change in quantity demanded
b change in quantity demanded
change in price
cc percentage change in price
percentage change in quantity demanded
d percentage change in quantity demanded
percentage change in price

14 after a series of poor harvests, a government imposes an effective maximum price on cereals.
what would be a consequence of this policy?
a both rich and poor people would satisfy their demands equally.
b illegal buying and selling through a black market would be prevented.
c_ rationing would be necessary to ensure a fair distribution of cereals.
d_ the market would fail to clear leaving a surplus of cereals.

15 what would be a transfer payment?
a the payment made by a company to its shareholders out of its profits
b_ the payment made for a legal document to transfer ownership of a house
c_ the payment made to a retired person in the form of a pension
d_ the payment made to a professional sports team for the transfer of a player

16 the government redistributes income by raising the top rate of income tax and using the money
raised to finance additional benefits to students and the unemployed.
under which conditions will total spending in the economy increase the most?
income elasticity income elasticity
of demand of top of demand of
rate income students and the
taxpayers unemployed
a >1 >1
b >1 <1
cc <1 >1
d <1 <1

17 a government wishes to increase the supply of houses. it pays a subsidy to brick manufacturers
to increase supplies of bricks to sp.
the diagram shows the supply of and demand for bricks.
price of ss;
bricks
py [--- o> s2
pabespeontas ie |
oe,
(6) 5 ‘
quantity of bricks
which size of subsidy per unit is required to increase supply to s2?
a op; b_ p,p. c pyp3 d p2p3

18 why is national defence provided by the government?
a_ ina free market it is excludable and rival in consumption.
b_ ina free market it is non-excludable and non-rival in consumption.
c_ the government has perfect information, so it can set the correct quantity required.
d_ the private sector firm would charge a high price for its use as it is a necessity.

19 which statement about a rise in the general price level in a country is correct?
a _itis likely to create economic winners and losers in the country.
b_itis never acceptable to modern governments.
c_ it means that no goods have fallen in price.
d_ it must make the average citizen poorer.

20 acountry’s terms of trade changed from 100 to 95.
what is most likely to have caused this change?
a adepreciation of the country’s currency
b= areduction in import tariffs
c arise in the price of exported goods
d  animprovement in the balance of trade

21 a country replaces a floating exchange rate system with a managed floating exchange rate
system.
which statement is correct?
a its central bank would have to intervene more frequently in the foreign exchange market.
b its central bank would need to hold fewer foreign currency reserves.
c_ the value of its currency would be determined by its major trading partners.
d_ the value of its currency would be determined by the value of the us dollar.

22 what will be the immediate effect of a devaluation of an economy's foreign exchange rate?
a_ the price of imported goods in the domestic currency will fall.
b_ the price of imported goods in the domestic currency will rise.
c_ the price of imported goods in the foreign currency will fall.
d_ the price of imported goods in the foreign currency will rise.

23 acountry has a deficit on the current account of its balance of payments.
what might help the country to reduce its deficit?
a adecrease in its rate of income tax
b- adecrease in its tariffs
c_anincrease in its level of employment
d_anincrease in its subsidies to exporters

24 the diagram shows the effect of removing a tariff on imports of good x into country y.
sx domestic
price of x
(us$)
20 [os sx worg + tariff
10 wa fi fi 1 1 sx world
| dx domestic
0 8 10 17 20
quantity of x
(millions)
what is the volume, in million units, of the extra international trade created by removing the tariff?
a 3 b 5 cc 10 d 12

25 which item should be recorded in the financial account of a country’s balance of payments?
a foreign aid by china to assist in infrastructure projects in african countries
b_ investments by middle eastern oil producing countries through the purchase of land and
property assets in europe
c payments by the usa to other countries which house american military bases
d le and dividends paid by multinational companies based in indonesia to shareholders in
sia

26 the table shows a country’s consumer prices index (cpi) for march and april 2018.
| cr
march 2018 151.3
april 2018 148.6
which statement correctly describes what happened between these two months?
a_ there was a decrease in the annual rate of inflation.
b_ there was a decrease in real interest rates.
c_ there was an increase in the purchasing power of money.
d_ there was an increase in the standard of living.

2/ {he diagram shows the rate of intlation over time in four countries.
which country has a rising real value of money over time?
a
inflation
rate
b
os cc
0 ;
_ time
d

28 the table shows the consumer prices index (cpi) for an economy expressed as an index
number.
2016 100
2017 103
2018 101
2019 97
which action is the government most likely to take to achieve price stability?
a appreciate the exchange rate
b_ decrease the budget deficit
c_ increase the money supply
d increase the rate of interest

29 other things being equal, what is most likely to be reduced by falling labour productivity?
a the balance of trade deficit
b | the internal value of money
c the level of unemployment
d_ the rate of domestic inflation

30 a government spends money building more schools.
how might this be classified?

fiscal supply-side monetary
policy policy policy

a v v x

b v v v

cc v x x

d x v x

Solve 9708_m21_qp_12