Component 1 – Exemplar MCQs

Questions
1 Which one of the following is a factor of production?

A elasticity
B enterprise
C environmental sustainability
D equilibrium

Your answer [1]

2 Opportunity cost is

A a financial expense
B measured in terms of what has been foregone
C the best way to allocate resources
D zero when a market is in equilibrium

Your answer [1]

3 A business which operates in the tertiary sector

A assembles components
B extracts raw materials
C makes finished goods
D produces services

Your answer [1]

4 Which one of the following would cause an inward shift of the demand curve for hats?

A a National increase in wage rates

B bad weather
C more hats are made
D wearing a hat becomes less fashionable

Your answer [1]

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 S

Price
5

Quantity

This supply curve shows that

A a rise in price will cause an increase in quantity supplied

B consumers prefer low prices
C demand for this product is price inelastic
D increasing the quantity supplied will cause prices to rise

Your answer [1]

6 The table below provides information about the market for Ditsies

Price per kilogram Quantity of Ditsies Quantity of Ditsies supplied

(kg) demanded per week (kg) per week (kg)
£10 70 000 190 000
£15 90 000 180 000
£20 110 000 170 000
£25 130 000 160 000
£30 150 000 150 000
£35 170 000 140 000

What is the equilibrium price for a kilogram of Ditsies?

A £5
B £10

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Qualification Awaiting Accreditation
 C £30
D £35

Your answer [1]

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7 A market with a single producer is

A always in equilibrium
B called an oligopoly
C difficult for new firms to enter
D highly competitive

Your answer [1]

8 An increase in productivity is most likely to lead to

A fewer economies of scale

B higher average costs
C increased supply
D lower profits

Your answer [1]

9 National insurance is charged at a rate of 12% of gross pay. Petra’s gross monthly pay is
£1500. How much is Petra’s monthly national insurance contribution?

A £180
B £1320
C £1680
D £12 500

Your answer [1]

10 Which one of the following businesses operates in the financial sector?

A a jewellery manufacturer
B a travel agent
C an auction house
D an insurance company

Your answer [1]

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Component 2 - Exemplar MCQs
Questions
1 Which one of the following is not a cause of economic growth?

A a reduction in the retirement age

B advances in technology
C improvements in education and training
D the discovery of a new natural fuel

Your answer [1]

2 A movie actor is between jobs. Which one of the following types of unemployment is the
movie actor experiencing?

A cyclical
B frictional
C seasonal
D structural

Your answer [1]

3 Doza has a job which pays him £32 000 a year. He owns a car worth £25 000 and has £8000
savings in his bank account. His bank account pays interest at a rate of 1% per year.
Doza’s annual income is

A £32 000
B £32 080
C £33 000
D £33 080

Your answer [1]

4 Last year Marco spent an average of £320 on his monthly shop. What will be the effect on
the cost of Marco’s average monthly shop this year if the rate of inflation was 3% last year?

A the cost will fall to £310.40

B the cost will fall to £319.20
C the cost will increase to £320.80
D the cost will increase to £329.60

Your answer [1]

5 Which one of the following is an example of a direct tax?

A council tax
B income tax
C tax on petrol
D VAT

Your answer [1]

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6 UK interest rates are set by:

A British consumers
B The Bank of England
C The EU
D The UK government

Your answer [1]

7 Which one of the following is a supply side policy which the government could use to help
meet its economic objectives?

A an improved apprenticeship programme

B an increase in the rate of corporation tax
C higher unemployment benefits
D quantitative easing

Your answer [1]

8 Which one of the following is an example of a positive externality?

A a government budget surplus

B a motorway improvement scheme
C more exports than imports
D noise pollution

Your answer [1]

9 Britons holidaying in the USA would be shown in the current account as

A a deficit
B a surplus
C an export
D an import

Your answer [1]

10 Which one of the following is a benefit of globalisation to a producer?

A Currency conversion will not be required

B Higher taxes
C Increased competition
D Larger market size

Your answer [1]

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Mark scheme
Component 1
Question Key Rationale
1 B A Incorrect. The factors of production are land, labour, capital and enterprise. Elasticity is not a factor of production.
B Correct
C Incorrect. The factors of production are land, labour, capital and enterprise. Environmental sustainability is not a
factor of production.
D Incorrect. The factors of production are land, labour, capital and enterprise. Equilibrium is not a factor of production.
2 B A Incorrect. Opportunity cost is not a financial expense.
B Correct
C Incorrect. Opportunity cost is not a way of allocating resources.
D Incorrect. All market decisions involve choices, therefore even in equilibrium there is an opportunity cost.
3 D A Incorrect. An assembler of components is said to operate in the secondary sector.
B Incorrect. An extractor of raw materials is said to operate in the primary sector.
C Incorrect. A manufacturer is said to operate in the secondary sector/
D Correct
4 D A Incorrect. An national increase in wage rates is likely cause a general increase in demand and reduce supply.
B Incorrect. Bad weather would increase the demand for hats, causing an outward shift of the demand curve.
C Incorrect. More hats being made creates an increase in supply.
D Correct
5 A A Correct
B Incorrect. Consumers do prefer low prices, but this is not shown on the supply curve.
C Incorrect. The supply curve indicates price elasticity of supply rather than price elasticity of demand.
D Incorrect. Increasing the quantity supplied would cause prices to fall, both a supply and demand curve would be
needed to demonstrate this graphically.

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6 C A Incorrect. £5 is calculate as the answer if the correct price point of £30 is identified but then this is divided into 150
since equilibrium output is 150,000
B Incorrect. This is the lowest price, and therefore the one preferred by consumers.
C Correct
D Incorrect. This is the highest price, and therefore the one preferred by producers.
7 C A Incorrect. No market is always in equilibrium because of the interaction of market forces.
B Incorrect. An oligopoly has a few dominant firms, rather than only one producer.
C Correct
D Incorrect. A monopoly is at the opposite end of the continuum to a competitive market.
8 C A Incorrect. An increase in productivity is likely to increase economies of scale.
B Incorrect. An increase in productivity will lead to lower average costs (ceteris paribus)
C Correct
D Incorrect. Improved productive efficiency is likely to increase profits.
9 A A Correct
B Incorrect. This is an attempt to calculate net pay by deducting the £180 from gross pay.
C Incorrect. £1680 is gross pay plus the national insurance contribution.
D Incorrect. Inverted formula i.e. £1500 x 100/12
10 D A Incorrect. A maker of jewellery is not part of the financial sector.
B Incorrect. A travel agent may sell foreign holidays, but this is not part of the financial sector.
C Incorrect. An auction price uses a bidding system to reach a market price, but it is not part of the financial sector.
D Correct

Component 2
Question Key Rationale
1 A A Correct
B Incorrect. Advances in technology will increase output and economic growth.
C Incorrect. Improvements in education and training should cause economic growth.
D Incorrect. The discovery of a new natural fuel resources should cause economic growth.

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2 B A Incorrect. Cyclical unemployment is caused by the peaks and troughs of the economic trading cycle.
B Correct
C Incorrect. Seasonal unemployment occurs when there is limited need for a type of employment during a particular
part of the year.
D Incorrect. Structural unemployment is caused when a particular industry is in decline.
3 B A Incorrect. £32,000 correctly includes Doza’s wages but fails to add the income from savings.
B Correct
C Incorrect. £33,000 is the value of Doza’s car and savings. This is wealth, rather than income.
D Incorrect. £33,080 adds the interest earned from savings to Doza’s wealth.
4 D A Incorrect. The inflation adjustment would be £9.60, but this should be an addition to the cost rather than a
subtraction.
B Incorrect. £319.20 is reached if the inflation adjustment is divided by 12 (to give a monthly figure) and subtracted as
in response A.
C Incorrect. £320.80 is reach if the inflation adjustment is divided by 12 (to give a monthly figure) and added to the
cost.
D Correct
5 B A Incorrect. Council tax is a tax on spending on housing.
B Correct
C Incorrect. This is a tax on spending. A direct tax is a tax on income.
D Incorrect. VAT is a tax on spending, rather than a tax on income.
6 B A Incorrect. British consumers have no power to set UK interest rates
B Correct
C Incorrect. The European Union has no power to alter UK interest rates.
D Incorrect. The government no longer set UK interest rates, instead these are set by the Monetary Policy Committee
at the Bank of England.
7 A A Correct
B Incorrect. Adjusting corporation tax is a fiscal policy.
C Incorrect. Adjusting unemployment benefits is a supply side policy (labour market) but the benefits would need to be
cut rather than increased.
D Incorrect. Quantitative easing is a monetary policy.

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8 B A Incorrect. This may or may not be a good thing, but it is not a positive externality.
B Correct
C Incorrect. This is a balance of payments surplus, not a positive externality.
D Incorrect. This is an externality. However, is a negative rather than positive, externality.
9 D A Incorrect. The example has a negative effect on the balance of payments, but it is not of itself a deficit. This
depends on the overall balance of flows.
B Incorrect. For a surplus to occur the overall balance of flows must be in favour of inward transactions, the example
is merely one such transaction.
C Incorrect. An export involves a flow of money into the country. This example is a flow of money out of the country.
D Correct
10 D A Incorrect. More international trade with more countries is likely to require more, rather than less, currency
conversion.
B Incorrect. There is no direct link between globalisation and taxes. Moreover, higher taxes are not a benefit to a
producer.
C Incorrect. Increased competition does result from globalisation, but it is a benefit to the customer rather than the
producer.
D Correct

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