May/June 2021

Which statement concerning the factors of production is correct?

The factors of production

In low-income countries, a smaller number of girls than boys go on to become skilled design engineers. What could account for this situation?

Workers

The diagram illustrates the demand for labour and the supply of labour in an industry. The original equilibrium is X. A trade union then negotiates a wage rate of W. Which option shows the change in employment?

Workers

A cobalt-mining company puts money into machinery so that some workers can be replaced. Over time, diseconomies of scale develop. What might bring about this situation?

Firms' costs, revenue and objectives

Why can many hairdressers run as small businesses?

Firms and production

Dimitry runs a business that makes and sells bottles of lemonade. He sells only one bottle size. How would Dimitry work out the firm’s total revenue?

Firms' costs, revenue and objectives

Which market is likely to be the most competitive one?

Market structure

An economy is experiencing a high inflation rate. In response, its government raises income tax. What is the most likely reason for this rise?

Fiscal policy

Interest rates are sometimes increased to help control inflation. Why could this policy be effective?

Monetary policy

A government’s revenue increased by $8\%$ to $\$3.25$ trillion, while its expenditure fell to $\$3.69$ trillion. What conclusion can be drawn from this?

Fiscal policy

A country’s inflation rate, as measured using the Consumer Prices Index (CPI), stood at $3\%$ in year 1. By the end of three years, it had fallen to $0.8\%$. What conclusion can be drawn from this data?

Inflation and deflation

A builder takes one hour in total to travel to and from his job. He works $40$ hours each week for $\$200$. He is offered the option of working $50$ hours a week for an additional $\$75$. What is the opportunity cost to the builder of doing the extra hours?

Opportunity cost

What is deflation most likely to cause?

Inflation and deflation

Economic growth may be described as

Economic growth

The table shows how employment was distributed across selected industries in two years. In what way did the employment distribution differ between year 1 and year 2?

Workers

Within one year, a company experienced two alterations. Company directors’ salaries went up by $15\%$. Office workers’ wages rose by $5\%$. The inflation rate was $3.4\%$. What was the effect on real income?

Inflation and deflation

The diagrams illustrate birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in two years, 1 and 2. No migration occurred. In which country was population increasing in year 1 and decreasing in year 2?

Population

In a high-income economy, the wealthiest 60% of the population experienced a rise in income, while the income of the remaining population stayed unchanged. What happened to absolute poverty and relative poverty?

Poverty

Gross Domestic Product (GDP) is a more suitable indicator for comparing living standards once it has been adjusted to allow for the effects of

Living standards

What is one disadvantage of greater international specialisation?

International specialisation

Which form of protection always cuts the supply of an imported good to zero?

Globalisation, free trade and protection

A US car dealer agrees to an import price of US$25 000 for a Japanese car at the prevailing exchange rate. The US dollar then rises by 10% against the Japanese yen. What is the new import price that will be paid for the Japanese car?

Foreign exchange rates

A natural disaster damaged a country’s infrastructure. Before the disaster, the country was producing at point Y on the production possibility curve (PPC). Which point shows the country’s output straight after the disaster?

Production possibility curve (PPC) diagrams

A country is running a deficit on the current account of its balance of payments. What could cause the deficit to rise?

Current account of balance of payments

What does microeconomics cover?

Microeconomics and macroeconomics

How does an economist define a market?

The role of markets in allocating resources

Give one example of an external benefit that arises when an individual cycles to work rather than drives.

Market failure

A tailor sells suits to four customers. The table gives the annual demand for the suits she produces. At which price should the suits be sold to achieve the tailor’s highest yearly revenue?

Firms' costs, revenue and objectives

When the price rose from $\$5$ per kilo to $\$6$ per kilo, a farmer increased supply from $400$ kilos to $500$ kilos each week. What value of the price elasticity of supply is shown?

Price elasticity of supply (PES)

It is anticipated that consumers will rely less on paper money. What is the most likely explanation for this?

Money and banking

What is one benefit of competitive markets?

Market structure

What is one drawback of specialisation for a worker?

Workers

The diagram represents a labour market. X marks the initial equilibrium. A trade union secures a minimum wage at $W$, and the government limits the supply of immigrant labour. What is the resulting equilibrium?

Workers

Which cost of production decreases continuously when output rises?

Firms' costs, revenue and objectives

A Swedish furniture manufacturer acquired a Romanian company that possessed 8300 hectares of woodland. What type of merger is this most likely to be?

Market structure

What does multiplying price by the quantity demanded of a product give?

Firms' costs, revenue and objectives

A private sector firm is the sole provider of rail services between two cities. What would prevent the firm from setting very high ticket prices?

Market structure

What does the term fiscal policy measure mean?

Fiscal policy

A government applies expansionary monetary policy. What does the government lower?

Monetary policy

An economy is facing unemployment. It applies a progressive income tax policy and provides benefits for the poor. The government wants to raise employment and narrow income inequality. Which fiscal policy measures are most likely to meet these aims?

Fiscal policy

The table presents the Consumer Prices Index (CPI) for the base year, 1, and the following three years. Which statement is correct?

Inflation and deflation

A multinational company (MNC) wants to invest in a low-income country in order to increase its palm oil production. What is the factor most likely to make this investment feasible?

Globalisation, free trade and protection

What is likely to occur when a country is in a period of deflation?

Inflation and deflation

Economic growth may be defined as

Economic growth

The table shows how employment was distributed across selected industries in two different years. In what ways did the employment distribution alter from year 1 to year 2?

Workers

During one year, a company experienced two changes. Company directors’ salaries went up by $15\%$. Office workers’ wages went up by $5\%$. The inflation rate was $3.4\%$. What happened to real income?

Inflation and deflation

The diagrams illustrate birth rate (BR) and death rate (DR) for three countries, X, Y and Z, in two years, 1 and 2. No migration took place. In which country did the population increase in year 1 and decrease in year 2?

Population

The top $60\%$ of the population in a high-income economy experienced a rise in income. The income of the remaining people stayed unchanged. What effect did this have on absolute and relative poverty?

Poverty

Gross Domestic Product (GDP) becomes a more accurate way of comparing living standards when it is adjusted to take account of the effects of

Living standards

Which benefit is most likely for a low-income economy if it abolishes tariffs on imported goods and services?

Globalisation, free trade and protection

Economies have become more and more interconnected as a result of globalisation. What could reduce this?

Globalisation, free trade and protection

What can be caused by a balance of payments trade surplus?

Current account of balance of payments

A farmer transfers land previously used for crops to a company that intends to use that land for wind turbines to generate electric power. What is the opportunity cost of this choice made by the farmer?

Opportunity cost

A country is running a deficit on the current account of its balance of payments. What might make its deficit larger?

Current account of balance of payments

Which area is not covered by microeconomics?

Microeconomics and macroeconomics

Which factors determine a consumer’s demand for a product?

Demand

Which problem would be eased by a government subsidy to a firm?

Market failure

The diagram illustrates the market for information technology (IT) graduates. At first, the equilibrium was X. Afterwards, an increase in the number of IT students graduating from university and wider use of artificial intelligence (AI) raised the demand for IT staff. What is the new equilibrium?

Price determination

As the price rose from $5 per kilo to $6 per kilo, a farmer raised supply from 400 kilos to 500 kilos each week. What is the price elasticity of supply?

Price elasticity of supply (PES)

What could lead consumers in a high-income economy to increase both saving and spending?

Households

Nigeria makes a variety of goods, such as delivery vehicles, footwear, machines, maize and office equipment. Nevertheless, oil still dominates its exports. The government attempts to promote growth in the output and export of other goods. It does this through several policy tools, including tax changes and public spending, for example by subsidising construction-worker training. Effective training can create more jobs and lead to higher wages. The government aims to strengthen Nigeria’s macroeconomic performance and improve living standards. Investment in Nigeria has been rising only gradually. Some firms are put off buying capital goods because interest rates are relatively high, the corporation tax rate is high and the economy is uncertain. Nigeria’s population is growing quickly. The birth rate is high and the death rate is falling, although there is net emigration. Nigeria’s population stood at 191 million in 2017 and is predicted to reach 402 million by 2050. A larger population will bring both benefits and problems. It will influence the level of demand in the economy, could damage the environment and will require more food. In 2016, the Nigerian government raised the tariff on imported rice in order to push up domestic rice production. Nigeria is Africa’s biggest producer of rice but also its largest importer. In 2018, Nigeria brought in almost $50\%$ of the rice it consumed. Nigerian farmers produce less rice per unit of land than Asian farmers, and their production costs are high.

Supply-side policy

A patch of litter in the Pacific Ocean, known as the Great Pacific Garbage Patch, is around three times the size of France. It is composed of waste such as discarded fishing nets, though most of it is plastic rubbish. By 2050, it is predicted that there will be more plastic than fish in the Pacific Ocean. Several islands in the Pacific Ocean depend on fishing as a specialist activity. More pollution will raise the fishing industry’s social cost.

Market failure

In 2018, the US recorded its lowest unemployment rate in 18 years. Cyclical unemployment was extremely low, and inflation was also low. The US additionally experienced an increase in labour productivity. Even so, it was less successful at cutting poverty. In 2018, around $12\%$ of Americans were living in poverty.

Employment and unemployment

The Canadian government has put in place several policy measures aimed at encouraging more women to join the labour force. Canada’s labour force has shrunk because its population has become older. The number of workers and the amount they produce are affected by changes in the country’s foreign exchange rate and by consumer expenditure. In 2018, the Canadian dollar lost value while Canadian consumer expenditure rose.

Current account of balance of payments

Australia went through a drought in 2018, which reduced its agricultural output. In 2018, Australia’s secondary and tertiary sectors did better than the primary sector. All three sectors were influenced by the steps the central bank used to prevent deflation. A number of firms gained from these measures and raised their output.

Monetary policy

Study the source material carefully before you answer Question 1. Source material: Chilean cherries Content removed because of copyright restrictions. Relying on only a few products can be hazardous for a country. Content removed because of copyright restrictions. However, there is evidence of market failure and of inequality in the way resources are allocated.

International specialisation

In Cairo, the capital of Egypt, almost one million residents are living in cramped and unhealthy homes. One cause of people lacking basic necessities, such as suitable housing, is unemployment. In 2019, almost 10% of Cairo’s workers had no job. By contrast, some other Cairo residents live in luxury, in homes worth more than $1 million. Many wealthy adults in Cairo were raised in wealthy families.

Living standards

Consumers in Uruguay are consuming more processed foods. Factors of production, including enterprise, have adjusted to this shift. Businesses in the processed food industry have become more capital-intensive. Every industry in Uruguay was affected when the inflation rate rose from 6.2% in 2017 to 7.7% in 2018.

The factors of production

Turkey's birth rate is declining, so its labour supply is likely to shrink. Even so, improvements in labour quality and the growing number of foreign multinational companies (MNCs) operating in Turkey (the host country to the MNCs) may help the economy avoid a recession. Economists are concerned that a recession could happen because the interest rate is expected to rise.

Population

The money supply in Bangladesh rose each year from 2010 to 2018. Shifts in the money supply and the foreign exchange rate can influence a government’s macroeconomic policy aims, including full employment. There have been few mergers among commercial banks in Bangladesh, even though its banks are larger than many of its other firms.

Money and banking