May/June 2011 P12

1. Each of the factors of production earns an income.

What are the incomes for land and capital?

Land Capital
A rent interest
B rent profit
C wages interest
D wages profit

2. A firm decides to stop manufacturing ovens and to produce washing machines instead.

What is the opportunity cost to the firm?


3. The table shows how employment in selected industries changed in a country between 2000 and

Which statement about these industries during this period is correct?


4. What is an advantage of the market economic system?


5. What is meant by the economic problem?


6. The table shows the changes in two influences on the demand for and supply of televisions.

If these two changes occurred at the same time, in which case is it impossible for the price of
televisions to rise?

consumers’ income costs of production
A fall fall
B fall rise
C rise fall
D rise rise

7. In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in
petrol tax will be mainly on


8. What is an example of market failure?


9. Which action by the operators of an airport directly reduces external costs?


10. Due to changes in the costs of production, an industry’s supply curve shifted at various times
from S1 to either S2 or S3.

If a shift in supply was due to a seasonal increase in the cost of raw materials, what would have
been the effect on demand?


11. Which pair of economic institutions can be found in a market economy?


12. A person wishes to buy shares in order to make a long-term profit, but wants as little risk of
short-term loss as possible.
Which type of share is MOST likely to meet these wishes?


13. Which statement about a country’s banks is correct?


14. Why might factory workers have higher wage rates than agricultural workers?


15. What is the main purpose of a trade union?


16. A musician has a choice of playing for an orchestra in either England or Germany.
Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?


17. What may cause an individual to save a higher proportion of their income?


18. A firm raised the price of its product from $10 to $15 and as a result its sales fell from 200 units to
150 units.

What happened to its average revenue and total revenue?


19. Which change must occur when a firm starts to experience diseconomies of scale?


20. If a firm increases its output in the short run, what will happen to its average fixed cost (AFC)?


21. Cathay Pacific, Hong Kong’s largest airline, flies to a number of countries.
Shares in the firm are owned by both individuals and other firms in a number of countries. The
shares are traded on the Hong Kong Stock Exchange.
Which type of business organisation is Cathay Pacific?


22. A major computer company announced that its profits had fallen below the level predicted.
What might have caused this?


23. What is an advantage of small-scale production?


24. When is a direct tax described as progressive?


25. In 2008, the government of Argentina imposed a tax on exports of wheat and soya beans.
What was the most likely aim of this tax?


26. A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X
is the equilibrium position.

The effect is illustrated in the diagram below.

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

equilibrium price
($ per kilo)
quantity supplied
(’000 kilos)
A 10 20
B 13 25
C 15 20
D 20 10

27. During 2009 some governments adopted policies to try to end the recession in their country and
increase economic growth.
Which combination of policies is most likely to achieve this?


28. The central bank of Mexico set its rate of interest to try to keep the rise in the price level to
only 3 %.
Which government aim was it directly trying to achieve?


29. Which statement is most likely to be correct?


30. Which type of unemployment is generally regarded by economists as the least serious for the


31. Which people are most likely to gain at a time of inflation?


32. Why may GDP not be a good measure to compare the standard of living of two countries?


33. The table shows the percentage change in employment over a period for a country with three
economic sectors.

economic sector Percentage(%) change in employment
Agriculture -6
Manufacturing +2
Services +4

Which statement must be correct?


34. Many developed countries are faced with an ageing population.
What is the likely result of this?


35. The table shows statistics for four countries in southern Africa.
From the information given, which country has the lowest standard of living?


36. Net migration is the difference in a particular year between


37. What is likely to happen as a developing country becomes more developed?


38. A government may use customs barriers to restrict free trade.
What is an economic reason for doing this?


39. Which item would appear as a credit item in Pakistan’s current account of the balance of


40. The diagrams show the composition of exports and imports of a country.

What is true for this country?


Question 1 of 40


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