Question 1

Offering opinions within an argument is part of [ 1 ]

A microeconomics.

B macroeconomics.

C positive economics.

D normative economics.

Question 2

The diagram below shows the demand curve for tablet computers. [ 1 ]

The shift of the curve from D1 to D2 would most likely have been caused by

A A fall in wages in the tablet computer industry.

B A rise in price of a good complementary to tablet computers

C A fall in the price of tablet computer components

D A rise in the price of a substitute to tablet computers

Question 3

The table below shows indices of labour productivity for two firms between 2014 and 2017. [ 1 ]

Which one of the following can be concluded from the data?

A Output was identical for Firm X and Firm Y in 2015

B Labour productivity fell at a faster rate in Firm X than in Firm Y between 2014 and 2017.

C Productivity in both Firms X and Y was in equilibrium in 2016

D Firm X was more profitable in 2014, but less profitable in 2017.

Question 4

Question 7

The diagram below shows the demand and supply curves of soft drinks in the [ 1 ]

UK, where X is the initial equilibrium.

If there is a fall in the number of people drinking soft drinks following media

reports of the link between soft drinks and obesity, and at the same time,

there is a rise in productivity in the soft drinks industry, where will be the new equilibrium?

A A

B B

C C

D D

Question 8

Which of the following would be expected to cause a movement along, rather than a shift of, the UK’s aggregate demand curve?

A A rise in economic growth in China

B A cut in income tax in the UK

C A rise in oil prices

D A fall in consumer confidence

Question 9

The diagram below shows the production possibility frontier private sector [ 1 ]

output and public sector output.

In terms of the production possibility frontier above, the opportunity cost of moving from point L to point V is

A Zero.

B MN of private sector output.

C 0B of private sector output.

D MZ of private sector output.

Question 10

The diagram below shows a country’s aggregate demand and supply [ 1 ]

schedules, with equilibrium at point X.

If the government now decides to pursue an expansionary monetary policy, which of the following will be most likely to occur?

A The elimination of spare capacity

B A rise in the budget deficit

C A rise in unemployment

D A fall in inflationary pressure

Question 11

If there is a positive value for the cross elasticity of demand between two goods, this means that the two goods are

A complementary to each other.

B substitutes for each other.

C both inferior goods.

D unrelated to each other.

Question 12

The diagram below shows the growth rate of an economy over time. [ 1 ]

The distance AB is best described as

A the level of unemployment.

B the size of the budget surplus

C the size of the budget deficit.

D the positive output gap.

Question 13

Which of the following goods or services would be least likely to be provided by the free market?

A Train travel

B Insurance

C Flood defences

D University education

Question 14

The diagram below represents the cost and revenue curves for a firm

operating as a monopoly supplier.  The firm currently produces  quantity Q and sells its product at a price of P. [ 1 ]

In order to increase its profits, the firm should

A produce a higher quantity and leave price unchanged.

B take no action as profits cannot be increased.

C produce a lower quantity and sell for a higher price.

D produce a higher quantity and sell for a lower price.

Question 15

Which of the following could explain why a product is price inelastic? [ 1 ]

A It is priced higher than its competitors

B There are few substitutes

C Its demand rises as incomes rise

D Buying it takes up a large proportion of somebody’s income

Question 16

The diagram below shows the marginal private benefit and the marginal

social benefit (MPB and MSB) curves and the marginal private cost and the marginal social cost (MPC and MSC) curves for education. The free market level of output is Q1 at price P1.

To achieve an efficient level of education, the government should

A provide a subsidy of P3-P2

B impose a minimum price of OP2.

C provide all education for free

D provide a subsidy of Q1-Q2

Question 17

Other things being equal an appreciation in the value of the pound against the euro is most likely to occur if

A UK imports from countries using the Euro increase

B the Bank of England allows the money supply to expand

C the UK base rate is lowered

D the number of European tourists visiting the UK increases

Question 18

Consider the table of information below showing the output of cars and [ 1 ]

bicycles in Country X and Country Y.

From the data, it can be concluded that

A one unit of cars has an opportunity cost of 1.25 units of bicycles in country Y

B country Y has a comparative advantage in producing cars

C country X has a comparative advantage in producing cars

D one unit of bicycles has a cost of one unit of car in country Y

Question 19

Smoking cigarettes generates negative consumption externalities. This means that

A the social costs of smoking exceed the private costs of smoking.

B smoking should be banned.

C the price of cigarettes includes the external benefits of smoking.

D the social benefit from smoking is less than the private benefit from smoking.

Question 20

The diagram below shows a firm’s long run average cost curve. [ 1 ]

A movement from X to Y is most likely to occur because there has been

A more government regulation.

B an increase in barriers to entry.

C a worsening of available capital.

D an increase in competitiveness in the market.

Question 21

Firms admit price-fixing of concrete drainage products

Two materials firms have admitted breaking competition laws by taking part in a cartel. The Competition and Markets Authority discovered that price fixing meetings went on for seven years from in the concrete drainage sector.

Stanton Bonna Concrete Ltd and CPM Group Ltd have admitted breaking competition law by taking part in a cartel.

The products were used in large infrastructure projects across Great Britain, including water management, roads and railways.

Typical customers include engineering and construction companies; utilities providers; and local and national government.

Michael Grenfell, Executive Director of Enforcement, said: “Cartels damage  competition and lead to less choice, less innovation and increased prices for customers.

“We’ve provisionally found that these three firms secretly shared out the market and colluded on prices for construction products used in many

building projects across Great Britain.

Source: www.constructionenquirer.com (adapted extract)

(a) Explain the characteristics of an oligopoly market. How and in what ways could the behaviour of the firms in the article be best explained in terms of being an example of an oligopoly market? [ 5 ]

(b) Explain with the use of a diagram why, if there is no collusion, oligopoly firms will be reluctant to compete on the basis of price. [ 5 ]

(c) Analyse with the use of a diagram why it is argued that oligopoly firms will seek to fix prices and maximise profits if successful collusion occurs. [ 4 ]

(d) Evaluate the view that “Cartels damage competition and lead to less choice, innovation and increased prices for consumers” [ 6 ]

Question 25

Explain the different components of aggregate demand and analyse how and [ 20 ]

why consumption spending might rise. Evaluate, using appropriate diagrams the likely effects of a significant rise in consumption spending.

Question 26

Explain the different types of unemployment and analyse how and why

unemployment might increase in an economy. Evaluate, using diagrams

where appropriate the extent to which fiscal policy is effective in combating unemployment in an economy.