May/June 2010

In a command economy, what determines how factors of production are allocated?

Resource allocation in different economic systems

A disease in 2008 caused a significant number of sheep used to produce wool to die. How would the short-run effect be shown on a demand and supply diagram for wool?

Demand and supply curves

The government sets a maximum price of P2 for a product. What would the situation be after this action?

Demand and supply curves

The diagram illustrates a demand curve for trips along a toll road. If the toll falls from $5 to $3, what increase in the daily consumer surplus results?

Demand and supply curves

What is not the case when price operates as a way of allocating resources?

Demand and supply curves

James cultivates fruit trees in his garden. They draw butterflies and bees. Which of the following is not an externality of this?

Income elasticity of demand

The table lists some of the costs involved when a firm makes a good. What is the extra cost to the firm of making the 24th unit?

Income elasticity of demand

Why is it especially hard to make decisions by using cost-benefit analysis?

Income elasticity of demand

Which good can be made excludable even though it is non-rival?

Income elasticity of demand

The diagram illustrates the demand and supply curves for a good. The government imposes a maximum price of OJ for the good. What effect will this have on the consumers and producers of the good?

Demand and supply curves

The diagram illustrates production possibility curves for two countries, X and Y. What can be inferred from it?

Scarcity, choice and opportunity cost

The diagrams illustrate how a country’s production possibility curve changes from Year 1 to Year 2. What can be deduced from the diagrams?

Scarcity, choice and opportunity cost

The statements below concern possible benefits of an increase in free trade. Which benefit is the least certain to occur?

International trade and free trade

A group of countries chooses to move from a customs union to an economic union. What extra feature would this provide for the group?

Income elasticity of demand

The table presents the balance, in $ million, for four items in a country’s current account across two years. What conclusion can be drawn about the changes from Year 1 to Year 2?

Income elasticity of demand

The diagram illustrates how the number of people employed in four different industries in a city changed between 2002 and 2007. What can be concluded from the diagram?

Income elasticity of demand

The typical consumer allocates expenditure to food, accommodation and clothing in the ratio 5 : 3 : 2. Over one year, the price of food increases by 10 %, the price of accommodation stays the same and the price of clothing decreases by 5 %. By how much does the Consumer Price Index increase over the year?

Income elasticity of demand

Which of the following statements about inflation is correct?

Demand and supply curves

The table gives a country’s inflation rate over four years. What decreased between 2005 and 2008?

Income elasticity of demand

At what time is a deficit in the current account of the balance of payments likely to deteriorate?

Demand and supply curves

What would indicate that a country has a balance of payments disequilibrium?

6.3

The table gives the number of Jamaican dollars that could be exchanged for one unit of other currencies in June and July 2001. What conclusion might be drawn from the table?

Demand and supply curves

Which statement concerning trade unions is normative?

Economic methodology

After a prolonged fall in the value of the US$, the monetary authorities in both the US and the UK increased their domestic interest rate. What is likely to happen to the exchange rate value of the US$ measured in UK£?

6.4

A worker is able to produce 10 hats or 5 pairs of shoes in a day. In the market, the selling price of three hats is the same as that of two pairs of shoes. The worker ought to make

Income elasticity of demand

The table gives the market supply of a raw material and the separate demand of the three firms, X, Y and Z, who are the only purchasers. What is the equilibrium market price of the raw material?

Demand and supply curves

In 2008, the demand curve for new cars in the European Union moved leftwards. Which change might have led to this shift?

Demand and supply curves

Across the world, the film industry now spends more than $1 billion each year on effective anti-piracy measures, and it funds this by levies on DVD products. How would this be represented on a demand and supply diagram for the market in legally produced DVDs?

Demand and supply curves

The demand for a commodity has unitary price elasticity. Which diagram illustrates how total expenditure on the commodity varies with its price?

Demand and supply curves

The table shows data on the market for two car models. If the prices of the cars stay the same, but the price of petrol rises by 100 %, what effect will this have on the number of cars sold each week?

Income elasticity of demand

The diagrams illustrate how a country’s production possibility curve changes from Year 1 to Year 2. What may be inferred from the diagrams?

Production possibility curves

The government sets a maximum price of P2 on a product. What would the position be after this measure?

Maximum and minimum prices

The diagram illustrates a demand curve for trips on a toll road. If the toll falls from $5 to $3, what increase in daily consumer surplus results?

Cross elasticity of demand

What does not occur when price is used as the method for allocating resources?

Resource allocation in different economic systems

James has fruit trees in his garden. These attract butterflies and bees. Which of these is not an externality of this?

7.4

The table gives some of the costs involved when a firm makes a product. What is the extra cost to the firm of producing the 24th unit?

7.5

Why is it especially hard to make decisions by using cost-benefit analysis?

Economic methodology

Which good is excludable yet non-rival?

1.6

The diagram illustrates the demand and supply curves for a good. The government imposes a maximum price of OJ for the good. What effect will this have on the consumers and producers of the good?

Maximum and minimum prices

The diagram presents production possibility curves for two countries, X and Y. What can be inferred from the diagram?

Production possibility curves

The statements below concern potential benefits arising from an increase in free trade. Which benefit is the least likely to occur?

International trade and free trade

Which statement concerning trade unions is normative?

Economic methodology

A group of countries chooses to move from a customs union to an economic union. What extra feature would this provide for the group?

11.6

The table gives the balance in $ million for four items in a country’s current account across two years. What conclusion can be drawn about the changes from Year 1 to Year 2?

6.3

The diagram illustrates how the numbers of people employed in four different industries in a city changed between 2002 and 2007. What conclusions can be drawn from the diagram?

Monopolistic competition

An average consumer allocates expenditure among food, accommodation and clothing in the ratio 5 : 3 : 2. Over one year, the price of food increases by 10 %, the price of accommodation stays unchanged and the price of clothing decreases by 5 %. By how much does the Consumer Price Index rise over the year?

Balance of payments

Which statement about inflation is right?

Balance of payments

The table gives a country’s inflation rate over four years. What decreased between 2005 and 2008?

Balance of payments

Under what circumstances is a deficit on the current account of the balance of payments likely to become worse?

6.3

Which features would indicate that a country has a balance of payments disequilibrium?

6.3

The table gives the number of Jamaican dollars exchanged for one unit of the other currencies in June and July 2001. What conclusion might be drawn from the table?

6.4

After the US$ had been depreciating for a long period, the monetary authorities in both the US and the UK increased their domestic interest rates. What would happen to the exchange rate value of the US$ in terms of UK£?

6.4

A worker is able to produce 10 hats or 5 pairs of shoes each day. In the market, the selling price of 3 hats is the same as that of 2 pairs of shoes. The worker should make

Scarcity, choice and opportunity cost

In a command economy, what determines how the factors of production are allocated?

Resource allocation in different economic systems

The table gives the market supply of a raw material and the separate demand of the three firms, X, Y and Z, which are the only buyers of it. What is the equilibrium market price of the raw material?

Income elasticity of demand

In 2008, the demand curve for new cars in the European Union moved leftwards. Which change might have led to this shift?

Demand and supply curves

Across the world, the film industry has raised its spending to more than $1 billion each year on successful anti-piracy measures, and it funds this through charges on DVD products. In a demand and supply diagram for the market for legally produced DVDs, how would this be represented?

Income elasticity of demand

The demand for a commodity has unitary price elasticity. Which diagram shows how total expenditure on the commodity changes with its price?

Price elasticity of demand

The table provides data on the market for two car models. If the prices of the cars stay the same, but the price of petrol rises by 100 %, what effect will this have on the number of cars sold each week?

Price elasticity of demand

In 2008, a disease caused a large number of sheep that were kept for wool production to die. How would the short-run impact be illustrated on a demand and supply diagram for wool?

Income elasticity of demand

Which statement concerning trade unions is normative in nature?

Economic methodology

The diagram illustrates a demand curve for trips along a toll road. If the toll is cut from $5 to $3, by how much does daily consumer surplus increase?

Cross elasticity of demand

What is not happening when price serves as the mechanism for allocating resources?

Resource allocation in different economic systems

James cultivates fruit trees in his garden. They draw butterflies and bees. Which of the following is not an externality of this?

7.4

The table gives some of the costs involved when a firm makes a product. What is the extra cost to the firm of making the 24th unit?

7.5

Why is it especially hard to make decisions by using cost-benefit analysis?

7.4

Which good is excludable yet non-rival?

1.6

The diagram illustrates the demand curve and supply curve for a good. The government imposes a maximum price of OJ for this good. What impact will this have on the consumers and producers of the good?

Maximum and minimum prices

The diagram illustrates production possibility curves for the two countries, X and Y. What may be deduced from the diagram?

Production possibility curves

The statements below concern possible benefits of an increase in free trade. Which benefit is the least likely to occur?

International trade and free trade

If a group of countries moves from being a customs union to becoming an economic union, what extra feature will this provide for the group?

11.6

A worker is able to produce 10 hats or 5 pairs of shoes in one day. In the market, the selling price of three hats is the same as that of two pairs of shoes. The worker should make

Scarcity, choice and opportunity cost

The table presents balances in $ million for four items in a country’s current account across two years. What conclusion can be drawn about the changes from Year 1 to Year 2?

6.3

The diagram illustrates how the numbers of people employed in four different industries in a city changed from 2002 to 2007. What conclusion can be drawn from the diagram?

Monopolistic competition

A typical consumer allocates spending among food, accommodation and clothing in the ratio 5 : 3 : 2. Over one year, the price of food increases by 10%, the price of accommodation stays unchanged and the price of clothing decreases by 5%. By how much does the Consumer Price Index rise during the year?

Balance of payments

Which statement concerning inflation is accurate?

Balance of payments

The table displays a country’s inflation rate over four years. What decreased between 2005 and 2008?

Balance of payments

In what circumstances is a deficit on the current account of the balance of payments likely to become larger?

6.3

What would be evidence that a country is experiencing a balance of payments disequilibrium?

6.3

The table lists how many Jamaican dollars were exchanged for one unit of other currencies in June and July 2001. What conclusion can be drawn from the table?

6.4

After a prolonged fall in the US$, the monetary authorities in both the US and the UK increased their domestic interest rates. What is likely to happen to the exchange rate value of the US$ measured in UK£?

6.4

In a command economy, what is used as the basis for deciding how factors of production are allocated?

Resource allocation in different economic systems

The table gives the market supply of a raw material and the separate demand from the three firms, X, Y and Z, which are its only buyers. What is the equilibrium market price of the raw material?

Income elasticity of demand

The diagrams illustrate the change in a country’s production possibility curve from Year 1 to Year 2. What can be deduced from the diagrams?

Production possibility curves

In 2008, the demand curve for new cars in the European Union moved leftward. Which change might have brought about this shift?

Demand and supply curves

Across the world, the film industry has raised its spending to more than $1 billion per year on effective anti-piracy measures, and it funds this through charges on DVD products. How would this be represented in a demand and supply diagram for the market for DVDs produced legally?

Demand and supply curves

The demand for a commodity is price elastic with unitary price elasticity. Which diagram illustrates the link between total expenditure on the commodity and its price?

Price elasticity of demand

The table provides information on the market for two car models. If the prices of the cars stay the same, but the price of petrol rises by 100%, what effect will this have on the number of cars sold per week?

Price elasticity of demand

In 2008, a disease led to the death of a large number of sheep that were used for wool production. How would the short-run impact be represented on a demand and supply diagram for wool?

Demand and supply curves

The government sets a maximum price of P2 for a product. What will the situation be after this action?

Maximum and minimum prices

How far does the data in Fig. 1 support the normal demand curve relationship between the price and the quantity demanded of cigarettes?

Price elasticity of demand

Explain how division of labour can influence labour productivity.

Factors of production

‘A free market price functions as a rationing and allocating mechanism.’ Explain how it does this.

Income elasticity of demand

Using a diagram, explain why an economy's floating exchange rate might depreciate.

6.4

Discuss whether all countries ought to set annual inflation targets of around 3%.

Balance of payments

Explain how a country’s production possibility curve is determined by its factors of production.

Production possibility curves

Using a diagram, explain why some goods are produced in quantities that are greater than is socially desirable.

7.4

Using a normal demand curve, explain how consumer surplus is created.

Cross elasticity of demand

Explain the likely effects for Chinese bicycle manufacturers of the anti-dumping import duty introduced by the EU.

Protectionism

Using examples, explain why different economic decision makers encounter the problem of scarcity.

Scarcity, choice and opportunity cost

Explain why unanticipated inflation is often seen as a bigger issue than anticipated inflation.

Balance of payments

Explain how the Marshall-Lerner condition and the J-curve effect are relevant to whether a currency devaluation succeeds.

6.4

Which statement about efficiency is correct?

Behavioural economics

Without regulation, why would the market for air travel on the Singapore-Sydney route be likely to be highly contestable?

7.6

The table gives details about a profit-maximising firm. What action should the firm take?

7.5

The diagram illustrates a firm’s marginal and average cost curves. The firm joins a collusive agreement ... A production quota, Oq, is then assigned to the firm. To maximise the profits, the firm chooses to cheat. What is the resulting short-run increase in profits?

7.6

A market with competition turns into a monopoly. What is likely to occur?

7.6

A government makes all of its young citizens do community service for 6 months. The wages given to those doing the community service are lower than the pay they would otherwise have received. What impact will this have on recorded GDP and on national welfare?

National income statistics

From 2008 to 2009, a country’s national income measured at current prices rose by 15 %. Over the same period, inflation in the country was 5 %. Which index number most nearly shows the country’s national income in 2009 at 2008 prices (2008 = 100)?

National income statistics

The diagram illustrates how broad and narrow measures of the money supply changed between 2004 and 2006. Which is the only region to have seen a fall in one of its money supply measures?

Oligopoly

What is one main claim of monetarist economics?

Monetary policy

The diagram illustrates the link between household income and household consumption. What would be likely to make the household consumption curve move from C1 to C2?

Aggregate demand and aggregate supply

The diagram illustrates a consumption function for a closed economy with no government. What conclusion can be drawn from the diagram?

Economic growth

The diagram illustrates the marginal utility (MU) gained by an individual from a good at various consumption levels. The utility obtained from the final $ he spends on each good is 3 units. If the marginal utility of money is assumed to stay constant, which quantity will he buy when the price of the good is $10?

Utility and rational consumer behaviour

An economy is below full employment equilibrium when national income is $40 000 million and government spending is $15 000 million. For each extra $100 added to national income, $15 goes in taxes, $30 is spent on imports and $5 is saved. If national income is to be increased to the full employment level of $50 000 million, to what level must the government increase its own spending?

Fiscal policy

In the diagram, AS1 represents an economy’s long-run aggregate supply curve. What would make the aggregate supply curve move from AS1 to AS2?

Economic growth

The diagram displays the demand curves and supply curves for loanable funds. Which changes might cause the equilibrium in the loanable funds market to shift from E1 to E2?

Oligopoly

If the money supply remains unchanged, a fall in economic activity

Oligopoly

What factors might account for the tendency of the terms of trade of most developing economies to deteriorate over time?

Trade unions

An economy is functioning at its natural rate of unemployment. In monetarist theory, what effect would an unexpected rise in the money supply have on unemployment in the short run and in the long run?

Monetary policy