1 Which statement is correct?

A Private goods are both non-rival and non-excludable.

B Private goods are only provided by the private sector.

C Public goods are both non-rival and non-excludable.

D Public goods do not incur opportunity costs.

2 What is the main characteristic of a planned economy?

A All goods and services are produced by privately-owned firms.

B All goods and services are produced by state-owned firms.

C Privately-owned firms produce private goods and state-owned firms produce public goods.

D The price mechanism allocates scarce resources through the actions of buyers and sellers.

3 An economy produces combinations of computers and food as shown on the diagram of a production

production possibility curve (PPC

If all available resources were used, which two points on the PPC diagram show the maximum

combinations of computers and food that the economy can produce?

A W and X B X and Y C Y and Z

D Z and W

4 When stating the law of demand for a good, economists use the phrase ‘all other things being equal’.

What is not one of these ‘all other things’?

A the income of the consumer

B the price of other goods

C the price of the good

D the tastes of the consumer

5 Which statement is correct?

A Normative economics concerns the description of economic models.

B Normative economics is objective and factual.

C Positive economics can be tested by data and evidence.

D Positive economics is subjective and offers a value judgment

6 What is meant by the division of labour?

A Each worker specialises in a different task in production.

B Some workers work part-time and others work full-time.

C The same amount of output per hour is produced by each worker.

D Workers divide their time between different jobs.

8 Following the introduction of a 10% increase in charges for car parking in a city centre, the

demand for bus journeys per day into the city rose from 800 to 1000.

What was the cross elasticity of demand for bus journeys with respect to car parking charges?

A –0.4 B +0.4 C +2.0

D +2.5

9 The diagram shows the demand for, and supply of, carrots.

What is true at price P1?

A There will be a shortage of carrots.

B There will be a surplus of carrots.

C There will be an increase in the sale of carrots.

D There will be market clearing of carrots.

10 The diagram shows the market for hand-made furniture.

Which area of the diagram represents the producer surplus?

A area X

B area X + Y

C area Y

D area Y + Z

11 How is the market supply of a product in a competitive market obtained?

A by aggregating the supply of all firms producing the product

B by averaging the supply of all firms producing the product

C by calculating the supply of the typical firm producing the product

D by estimating the supply of the largest firm producing the product

12 The diagram shows the demand curve for luxury cars.

The shift in the demand curve D1 to D2 can be explained by

A a decrease in air travel.

B an increase in advertising by luxury car manufacturers.

 C an increase in income.

D an increase in the price of petrol.

13 What is cross elasticity of demand?

A the responsiveness of price of good X due to a change in demand of good Y

B the responsiveness of quantity demanded of a good due to a change in its price

C the responsiveness of quantity demanded of good X due to a change in quantity of good Y

D the responsiveness of quantity demanded of good X due to a change in the price of good Y

14 What justifies government intervention in the provision of a merit good such as education?

A People who pay for education value it more than those who cannot pay.

B Private Schools have more merit than state schools.

C Social costs of providing education outweigh social benefits of education.

D Some consumers do not fully recognize the value of education.

15 Which statement about maximum and minimum prices is correct?

A With an effective maximum price for a product, a shortage will develop.

B With an effective maximum price for a product, the market price will rise.

C With an effective minimum price for a product, rationing will be necessary.

D With an effective minimum price for a product, the market price will fall.

16 Governments provide public goods.

What is an example of a public good?

A the services provided by a defense force

B the services provided by a hospital

C the services provided by a leisure Centre

D the services provided by a toll road

17 India is one of the largest producers of tractors in the world. S1 and D1 are the original supply and
demand curves for Indian tractors.

What would cause the supply curve to move to S2?

A a rise in the incomes of Indian farmers

B a rise in the price of electricity paid by Indian tractor manufacturers

C a rise in the price of tractors produced in the US

D a rise in the productivity of workers in Indian tractor factories

18 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.

19 What must follow when scarcity exists?

A Consumers have to make choices.

B Governments are unable to supply public goods.

C Producers must be misallocating resources.

D Workers must be earning low wages.

20 An individual buys a ticket to visit a government-owned art gallery.

How would this visit be classified by an economist?

A private and demerit good

B private and merit good

 C public and demerit good

D public and merit good

21 A government fixes a minimum price for a service.

What will be the outcome of such a policy?

A Demand will fall if the minimum price is below the equilibrium price.

B Demand will rise if the minimum price is above the equilibrium price.

C Production will fall if the minimum price is above the equilibrium price.

D Production will stay the same if the minimum price is below the equilibrium price.

22 There are two main types of coffee grown, arabica and robusta. The table gives details of the four
largest coffee producers for 2013-2014. Production is measured in thousand 60 kilogram bags.

What can be concluded from the table about production in the four countries?

A Brazil has the highest level of specialisation.

B Brazil produces more coffee than the other three named producers together.

C Robusta coffee production is greater than arabica coffee production.

D Vietnam has a comparative advantage in robusta and Colombia in arabica.

23 A manufacturer progressively reduces the price of his product in an attempt to increase totalrevenue.
The table shows the outcome of this policy.

What is the price elasticity of demand for the product?

A perfectly inelastic
 B relatively inelastic

C perfectly elastic

D unitary

24 Public transport has an income elasticity of demand of –0.36.

What does this mean about public transport?

A It has close substitutes.

B It is a necessity.

C It is a normal good.

D It is an inferior good.

25 Recently, thousands of ancient Roman coins were discovered buried in a field in the UK. Funds were
raised by a museum to buy them.

What function of money did the coins retain?

A a medium of exchange

B a standard for deferred payments

C a store of value

D a unit of account

26 It has been estimated that bread has an income elasticity of –0.04.

What can be concluded about bread from this information?

A It is a normal good.

B It is an inferior good.

C It has many complements.

D It has many substitutes.

27 What must be true if an economy is experiencing inflation?

A Aggregate demand is increasing.

B Aggregate supply is decreasing.

C The interest rate is increasing.

D The real value of money is decreasing.

28 The provision of which service by governments could be explained by the concept of public goods?

A education

B health services

C law enforcement

D public libraries

29 Which statement is the most valid reason for government intervention in a free market economy?

A Consumers are well informed, making it difficult for producers to make profits.

B Health and education are not available in sufficient quantities.

C Producers are motivated by profit maximisation.

D There are many competitive firms and not enough sole suppliers.

30 Which change does not have an immediate effect on the position of the demand curve for a product?

A a fall in the price of a complementary product

B a range of new products entering the market

C a rise in the labour costs of its production

D an increase in the price of a substitute product