Economics 9708 · AS & A Level
Short-run costs
100 practice questions on Short-run costs, with worked solutions and instant marking.
During 2009, the Australian government paid $900 to people earning under $100 000 each year. What would be the effect of this transfer payment called?
Feb/March 2016
Which government policy has increased equality as one of its consequences?
Feb/March 2016
Which government policy used to reduce the effects of income inequality is paired correctly with one of its benefits and one of its drawbacks?
Feb/March 2016
A government may use personal disposable income per head as an indicator of the standard of living. What does this measure fail to include?
Feb/March 2016
What is the most likely reason for a government to make transfer payments, such as social security benefits, to workers who are unemployed?
Feb/March 2017
A country’s real national income per head rises. What might account for this being accompanied by a decrease in households’ standard of living?
Feb/March 2017
Which of the following statements about transfer payments is correct?
Feb/March 2018
What is meant by a regressive tax?
Feb/March 2019
A country operates a negative income tax. In the diagram, curve NT represents the country’s original tax schedule. A change in the tax rate shifts the schedule to NT1. What effect will this have on work incentives and the after-tax distribution of income?
Feb/March 2019
Which pairing of policy changes would be most likely to shift income away from the richest households and towards the poorest households in an economy?
Feb/March 2020
What does the term transfer payment mean?
Feb/March 2021
The government redistributes income by increasing the highest rate of income tax and then using the revenue collected to pay for extra benefits for students and unemployed people. Under which conditions will total spending in the economy rise by the greatest amount?
Feb/March 2021
The diagram presents Lorenz curves for a developed economy. Which combination of supply-side policies would move the Lorenz curve from X to Y?
Feb/March 2021
Explain what is meant by ‘a free market organises economic resources for the benefit of everyone’.
Feb/March 2021
At what point is a policy that transfers income from wealthy people to poorer people most appropriate?
Feb/March 2022
What is the same as social benefits?
Feb/March 2022
Which alterations in direct and indirect tax are likely to widen inequality in the distribution of income in a developed economy?
Feb/March 2023
In one country, the highest-earning 20% pay 45% in income tax and 25% in sales taxes, and they receive 5% in cash benefits. What percentage of disposable income does this group have?
Feb/March 2023
A cost-benefit analysis of a proposed government road-building project shows a positive net social benefit of $50 million. Why could the government still decide not to carry out the project?
Feb/March 2023
A policy intended to lessen the extent of income inequality will also lower the level of employment in a country. Which policy is most likely to do this?
Feb/March 2024
In a country, an income tax is applied so that the first $10 000 of earnings is tax-free, the following $20 000 is taxed at 20% and any earnings above $30 000 is taxed at a maximum rate of 40%. In addition, a sales tax of 10% is charged on most goods. Which mix of tax changes would be most likely to produce a more equal income distribution in the country?
Feb/March 2024
The Lorenz curves shown in the diagram illustrate different distributions of income and wealth. Initially, income in a country is distributed more evenly than wealth. Over a period, the income distribution becomes less equal, while the wealth distribution becomes more equal. Which movement would represent the effects of these changes on the country's distribution of income and wealth?
Feb/March 2024
Identify what caused the rise in the electricity prices and explain whether the article shows that the price rise was an example of market failure.
Feb/March 2024
The table gives the Gini coefficient for income in three countries. What conclusion can be drawn from this data?
Feb/March 2025
How is a progressive tax defined?
Feb/March 2025
The graph shows the Gini coefficient alongside GDP per head for three countries, X, Y and Z. What conclusion can be drawn from the graph?
Feb/March 2025
At what point does income become more evenly distributed?
Feb/March 2025
Explain what is meant by the Law of Diminishing Marginal Utility and judge whether the statement above applies it correctly.
May/June 2006
Explain how the rate of inflation is measured.
May/June 2007
Which tax is most likely to have a regressive effect?
May/June 2011
Which tax is most likely to have a regressive effect?
May/June 2011
Which tax is most likely to have a regressive effect?
May/June 2011
When deciding whether to invest in a new project, which consideration would government cost-benefit analysis include but a private company would not?
May/June 2012
When deciding whether to invest in a new project, what would be considered in government cost-benefit analysis but not by a private company?
May/June 2012
A government uses real personal disposable income per head to measure the standard of living. What does this measure not consider?
May/June 2012
In some non-essential occupations, such as entertainment, wage rates are extremely high, whereas in essential occupations, such as public sector hospital nurses, wage rates are much lower. This is unfair. Analyse how economic theory may account for these differences in wage rates and judge whether you agree with this view.
May/June 2012
A country operates a negative income tax. In the diagram, the curve NT represents the country’s original tax schedule. If a change in the tax rate shifts the schedule to NT1, what is the most likely effect on incentives and on equity?
May/June 2013
The table presents the marginal tax rates paid by a country’s taxpayers at various income levels. Which description correctly applies to this tax?
May/June 2013
The introduction of equal pay legislation in a country raises the wages of female workers. What is the most likely result of this rise?
May/June 2013
One country operates a negative income tax. In the diagram, curve NT represents the country’s original tax schedule. When the tax rate changes, the schedule moves to NT1. What effect is most likely on incentives and on equity?
May/June 2013
Explain how a consumer distributes expenditure according to the principle of equi-marginal utility and analyse how a change in income could affect that distribution.
May/June 2013
What is one advantage of means-tested benefits compared with universal benefits?
May/June 2014
What impact will an increase in marginal tax rates have?
May/June 2014
Income inequality may be assessed using the Gini coefficient. Using a scale from 0 to 100, a larger figure indicates a higher level of inequality. The table below presents three Gini coefficient figures for four OECD countries. The first is based on wages, the second includes government welfare payments, and the third includes welfare payments plus government health and education spending. In which country did welfare payments contribute most to income redistribution?
May/June 2014
What is one advantage of means-tested benefits compared with universal benefits?
May/June 2014
At what point will a society have reached an equitable distribution of income?
May/June 2015
Which option gives the best description of a transfer payment?
May/June 2016
A country has an income tax in which the first $10 000 of earnings is not taxed, the following $20 000 is charged at 20% and any income above $30 000 is taxed at a maximum rate of 40%. In addition, it imposes a sales tax of 10% on most goods, while certain essential items are free from the tax. Which set of tax changes would be most likely to produce a more equal spread of income in the country?
May/June 2016
In a country, the normal sales tax rate is 10%, although food is exempt from tax and luxury goods are taxed at 20%. The table gives the spending patterns of three family types. Which option correctly describes the sales taxes in this country?
May/June 2016
Which policy would be most effective in bringing about a more even distribution of disposable incomes among households?
May/June 2016
Discuss whether economic theory can be used to support this statement.
May/June 2016
Which one counts as a transfer payment?
May/June 2017
Which government transaction counts as a transfer payment?
May/June 2017
The table gives the Gini coefficient values for several countries in 2007. Based on the information above, which statement is correct?
May/June 2017
Which statement is most likely to explain why a government chooses to raise the highest rates of tax on personal income?
May/June 2017
A country's government aims to create a more even distribution of income. Which mix of measures is most likely to be effective in achieving this objective?
May/June 2017
Explain why pensions paid to retired citizens count as a transfer payment.
May/June 2018
Which feature of a tax and benefits system is regressive?
May/June 2018
Which tax would enable a government to create a more even distribution of income after tax?
May/June 2018
When deciding whether to invest in a new project, what would be included in government cost-benefit analysis but not considered by a private company?
May/June 2018
Distinguish clearly between income and wealth.
May/June 2018
What is meant by a regressive tax?
May/June 2019
Public authorities aim to cut the financial pressure created by transfer payments in economies facing an ageing population. Which policy would support this goal?
May/June 2019
Distinguish between regressive and progressive taxes and explain whether an income tax or a specific indirect tax would be used to make post-tax incomes more equal.
May/June 2019
Which policy is most likely to be the least effective way of creating a more equal income distribution among households?
May/June 2019
The table gives figures for the average incomes of the richest 20% of households and the poorest 20% of households in the UK (2015–2016), as well as the impact of government taxation and benefits on average income. What can be concluded from the table’s information?
May/June 2019
Which policy is likely to be the least effective way of creating a more equal distribution of income among households?
May/June 2019
Explain the meaning of and whether there is a connection
May/June 2019
Explain the meaning of and whether a link exists
May/June 2019
The amount of benefit paid to someone receiving a means-tested benefit is determined by that person’s
May/June 2020
The diagram displays two Lorenz curves. If the Lorenz curve moves from L1 to L2, which of the following is least likely to have brought this about?
May/June 2020
At what point will a society have reached an equitable distribution of income?
May/June 2020
The amount of benefit paid to a person receiving a means-tested benefit depends on that person’s
May/June 2020
The diagram illustrates two Lorenz curves. If the Lorenz curve moves from L1 to L2, which is least likely to have caused this change?
May/June 2020
A government wants to reduce the Gini coefficient. Which policy is most likely not to achieve that policy objective?
May/June 2021
A country has a Gini coefficient of 0.40. The lowest-income earners in this country do not pay income tax. The government raises the tax rate for the highest-income earners, and this leads to income being shared more equally. What can be concluded from this?
May/June 2021
'Wage differentials may be explained by economic theory. They show that a firm has the power to exploit its workforce and are unfair.' Do you agree with this statement?
May/June 2021
‘Wage differentials can be explained by economic theory. They are a sign of the power of a firm to exploit its workforce and are unjust.’ Do you agree with this opinion?
May/June 2021
State one example of a transfer payment.
May/June 2022
Which combination of tax reforms is most likely to be regressive in a developed economy?
May/June 2022
In different countries, which kind of tax is classified as a direct tax?
May/June 2022
The table presents the amount of direct taxes paid by different households in the UK in 2017–2018. Which positive economic statement could be drawn from the table?
May/June 2022
A government wants to redistribute income from wealthier citizens to poorer citizens. Which policy would it be least likely to adopt?
May/June 2022
A government has a policy objective of reducing income inequality. It is considering three policies. Which combination of policies would be the most effective? (raise marginal tax rate 40%→50%, raise minimum wage, provide a subsidy for battery-powered cars costing over $40 000)
May/June 2023
The diagram presents the Lorenz curves for Norway (N) and India (I). What conclusions can be drawn by comparing the Lorenz curves?
May/June 2023
To show how income distribution changes, the Kuznets curve graphs gross domestic product per capita against an economic variable X. What is variable X?
May/June 2023
Which factor is most likely to result in a more even distribution of income over the long term?
May/June 2023
The diagram presents the Lorenz curves for Norway (N) and India (I). What conclusion can be drawn by comparing the Lorenz curves?
May/June 2023
Explain how the Gini coefficient is used to measure income inequality and consider the relative strength of two economic reasons that could account for this in a low-income country.
May/June 2024
The table presents the Gini coefficient values for several countries in a particular year. On the basis of this information, which statement is correct?
May/June 2024
The table gives the values of the Gini coefficient for several countries in a particular year. Based on this information, which statement is correct?
May/June 2024
Describe what the Gini coefficient means and the range of values it can take.
May/June 2024
Describe what the Gini coefficient means and the range of values it can take.
May/June 2024
What would be an example of wealth?
May/June 2025
State one example of a transfer payment.
May/June 2025
The table gives the tax paid at three different income levels. Which combination indicates a proportional income tax system?
May/June 2025
What would be excluded from the calculation of a person’s wealth?
May/June 2025
For what reasons might governments offer free education to children aged 4 to 16 years old?
May/June 2025
What might lead an individual to be caught in the poverty trap when their income goes up?
May/June 2025
Which policy would help to lessen income inequality?
May/June 2025