economics

1. the diagram shows a production possibility curve for an economy that is producing at point p.
150
good y p
100
50
0
0 50 100 150
good x
which quantity of x is given up to produce the quantity of y shown?
a 40 b50 cc 100 d 110

2 the indian government operates a pension scheme.

which statement about this scheme would be classed as normative?

a_ to be eligible, individuals must be above the age of 60 and live below the poverty line.

b_ in january 2020, eligible individuals aged over 70 received 500 rupees per month.

c_ in 2018, the supreme court said the government must review pension payments because
they are unrealistic.

d_ in january 2020, the indian government announced that it might increase the payment to
1000 rupees per month.

3 economics students have to fill in the gaps in the following passage.
‘the three basic questions arising from the economic problem of scarcity are ......1...... to
produce, ......2...... to produce, and ......3...... to produce.’
which combination is correct?
eee
a how when where
b how where for whom
cc what how for whom
d what when where

4 what is not a function of money?
a itis a medium of exchange.
b_itis a store of value.

c_itis a unit of account.
d_itis a measure of satisfaction.

5 the producer of a good with a price-elastic demand observes that a rise in its price is
accompanied by a rise in total revenue.
what might explain this?
a_ the good is an inferior good.
b_ the rise in price was due to an increase in demand for the good.
c_ the supply of the good was inadequate to meet the demand.
d_ the supply of the good was price-inelastic.

6 what will increase the producer surplus of farmers that grow carrots?
a adecrease in the demand for carrots
b  adecrease in the price of carrot seed
c  adecrease in the price of cabbage
d  adecrease in the subsidy on carrots

7 a popular band is due to perform at a music concert in a venue that has a 5000-seat capacity.
recent appearances and the release of a new album have made the band even more popular. d,
and s represent the original demand and supply curves for concert tickets and d2 the new
demand curve.

which diagram best represents the likely outcome on the market for concert tickets?
a b
$ d, d,
. , ss
price price
d,
d,
(e) 5000 [e) 5000
quantity quantity
cc d
d,; dz s d, d,
price price
| \\
o 5000 [e) 5000
quantity quantity

8 why does an individual's demand curve generally slope downwards to the right?
a_ the additional satisfaction an individual gets from consuming most goods decreases as
consumption increases.
b_ the additional satisfaction an individual gets from consumption decreases as income rises.
c_ the individual has finite income which is used to attempt to satisfy many wants.
d_ for most goods the price charged by producers falls as the quantity purchased increases.

9 what is price elasticity of supply?
a_ the change in the quantity supplied when a price changes
b_ the change in the quantity supplied when demand changes
c_ the comparison of the proportionate change in supply to the proportionate change in demand
d_ the comparison of the proportionate change in supply to the proportionate change in price

10 what is necessary for consumer surplus to be zero?
a demand is perfectly elastic.
b demand is perfectly inelastic.
c supply is perfectly elastic.
d_ supply is perfectly inelastic.

11 when will the price mechanism not function as a system for allocating goods?
a_ when the government bans advertising
b_ when the government maintains an effective maximum price
c_ when there is a limited supply of the good
d_ when there is a powerful company able to set the market price

12 the price of a product is above the market equilibrium price.
which combination of changes is certain to result as the market adjusts towards equilibrium?
[| uanty demanded | quanti supe’
a falls falls
b falls rises
cc rises falls
d rises rises

13 what can be concluded about a good with a positive cross-price elasticity of demand?
a its price will be sensitive to changes in prices of close substitutes.
b _ its price will be sensitive to changes in quantity demanded of close substitutes.
c_ the quantity demanded for this good will be sensitive to changes in prices of close substitutes.
d_ the quantity demanded for this good will be sensitive to changes in quantity demanded of
close substitutes.

14 which row shows the effect of the maximum and minimum prices described in the headings of
the table?
maximum price maximum price minimum price
above below above
equilibrium price equilibrium price equilibrium price
a excess demand no effect no effect
b excess supply no effect no effect
cc no effect excess demand excess supply
d no effect excess supply excess demand

15 a government decides to introduce tolls (charges) to drive on all major roads.
what is most likely to happen to the number of journeys made on major roads and on minor
roads?
journeys on journeys on
major roads minor roads
a reduce increase
b reduce no change
cc no change increase
d no change no change

16 ihe table shows aata trom a bus company that was privatised in 2013.
from previous year (%)
2012 470 +5
2013 495 +2
2014 430 -2
2015 440 =
what is the most likely conclusion that can be made from the data?
a_ average prices were higher in 2012 than 2015.
b_ average prices were higher in 2015 than 2014.
c_ the number of passenger journeys remained the same since privatisation.
d_ profits have increased since privatisation.

17 the diagram shows the market for electricity in a country that has a fixed supply of electricity and
introduces a maximum price to make it affordable for poorer households.
is)
price of
electricity
= 2a eeneo------------market price
oro+--------maximum price
d
(e) .
quantity of electricity

what will be the effect of this?
a it will encourage producers to build more power stations in the future.
b it will encourage the development of renewable sources of electricity.
c_ it will increase producer surplus.
d it will increase the probability of power cuts.

18 what is an example of a transfer payment?
a government spending on hospitals
b government spending on motorways
c minimum wage
d_ welfare benefits

19 turkey can produce a good but also imports some of the good from egypt. the turkish currency
depreciates against the egyptian currency.
how is this most likely to affect production of this good in egypt and in turkey?
| | production in egypt production in turkey
a decrease decrease
b decrease increase
cc increase decrease
d increase increase

20 the table shows a country’s total output and its average price in each of three years.

1 10 20
2 12 24
3 13 26

what can be concluded about output?

a nominal output and real output increased at the same rate.

b nominal output rose at a faster rate than real output.

c_ nominal output rose at an increasing rate.

d_ real output rose at a constant rate.

21 the diagram shows the change in the supply curve of imports, s—s, to curve s—so, after the
introduction by the government of a trade protection measure.
price of oe
imports
ss ss,
fe) ' ‘
quantity of imports
what is the form of protection?
a_ an ad valorem tariff
b  anembargo
c aquota
d_aspecific tariff

22 the aggregate demand (ad) and aggregate supply (as) diagram shows an economy in
equilibrium at x.
in this economy, a severe shortage of raw materials causes a large rise in their price.
the effect of this change is shown by a move to which point?
ad; as,
ad,
general ad, as,
price level
cc
b
d
a
o ' :
real national income

23 vvhy might a country s government impose a tax on fuel exports?
a to encourage domestic refineries to increase production
b_ to improve the country’s trade balance
c to reduce fuel prices for domestic consumers
d to reduce the government's budget surplus

24 what leads to a fall in a country’s terms of trade?
a _afall in the price of exports relative to the price of imports
b a fall in the price of imports relative to the price of exports
c a fall in the quantity of exports relative to the quantity of imports
da fall in the quantity of imports relative to the quantity of exports

25 the diagram has three lines that show the values of an economy’s exports, imports and trade
balance between 2011 and 2019.
+ i *, fe 1
4 ca si ee
0} =. 3
2011 2015 2019
year

how should the lines be labelled?
[tet [tne [ne

a exports imports trade balance

b exports trade balance imports

[e imports exports trade balance

d imports trade balance exports

26 vvnat would be the best policy to increase the value of a currency?
a_ impose tariffs on imported goods with price-inelastic demand.
b increase interest rates.
c_ reduce income tax.
d_ sell the currency on the foreign exchange markets.

2/ he central bank of an economy decides to raise interest rates in order to attract capital intlows
and improve the financial account of the balance of payments.
when is the central bank’s decision least likely to be effective?
a when the currency of the economy is expected to lose its value
b_ when the economy is politically and economically stable
c_ when the interest rate of the economy is higher than that of other countries
d_ when the reserves of foreign currencies held by the central bank are high and rising

28 what could be described as an expansionary fiscal policy?
a adecrease in the budget deficit
b  adecrease in the budget surplus
c adecrease in the exchange rate
d  adecrease in the money supply

29 why will a contractionary monetary policy reduce inflation?
a_ banks will lend more.
b consumers will have higher disposable income.
c consumers will pay more tax.
d consumers will save more.

30 the government of a country is worried about a large deficit on the current account of its balance
of payments and an increasing rate of inflation. the country has a fixed exchange rate for its
currency.

which policy measure is most likely to help the government to reduce the current account deficit
and lower the rate of inflation?

a devaluation of the currency

b_ increasing government spending

c_ decreasing the direct taxes

d increasing the interest rate

Solve 9708_s22_qp_11