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Question: Which statement about factors of production is correct? A Capital is the money people keep in the bank. B Enterprise is found more in service industries than in manufacturing industries. C Labour includes only those who work using their hands. D Land includes resources found in or under the sea. Answer: D

Question: China earns enough income to purchase large quantities of natural resources from developing countries. Which statement explains this situation? A China does not experience the economic problem of scarcity. B Supplies of natural resources in China are limited relative to demand. C There are unlimited supplies of natural resources in developing countries. D There is an excess stock of land in China. Answer: B

Question: Although some economists believe that resources should be allocated through market forces, markets often fail. What might be an example of market failure? A access to subsidised health care B monopoly pricing of electricity supplies C prohibiting cigarette smoking in public places D regulation of interest rates charged by banks Answer: B

Question: A group of shops sells all its products at the same price of $1. It is still able to make a profit, although in other shops the products are sold at a higher price. Which statement about this group of shops must be correct? A Consumers recognise that the group’s products are better value. B Costs will be lower than in the other shops. C Revenue will be less than in the other shops. D The group does not advertise nor use any form of marketing. Answer: A

Question: In 2011, the Bank of England released into circulation a new design for the £50 note to replace the old design £50 note. What might have been the reason for issuing these notes? A to ease the use of the barter system B to enable a means of exchange C to lower the external value of the £ sterling D to reduce inflationary pressures in the economy Answer: B

Question: A security company wishes to recruit an experienced person for a senior position to answer customers’ emergency calls, some of which would be during the night. It is offering a good salary and a small apartment next to the company premises. Which person would be most likely to apply and be offered the position? A a confident person currently employed in installing security systems for the company B a person who has experience of answering customers’ queries in a travel company C a recently qualified engineering graduate in security systems D a reliable person who says that he needs to live with his young family of five children Answer: A

Question: Why do female workers in many countries have a lower income than male workers? A Female workers are more experienced. B Female workers are more likely to be employed part-time. C Female workers are more likely to be in trade unions. D Female workers have more qualifications. Answer: B

Question: India is experiencing rapid growth in air travel. The number and size of airlines is increasing every year. Which effect arising from this growth is an external economy of scale? A Banks are more prepared to lend to large airlines rather than small airlines. B Colleges are established to train flight crew. C Fuel suppliers charge less to airlines that buy in bulk. D Larger airlines operate aircraft which can carry more passengers. Answer: B

Question: The financial director of a company adds up the cost for the firm of rent, insurance, new machinery and the chief executive’s basic salary. The director then divides that total by the firm’s output. What has the director calculated? A average fixed cost B average revenue C average total cost D average variable cost Answer: A

Question: If a perfectly competitive market becomes a monopoly, what will be likely to increase and what will be likely to decrease? increase decrease A barriers to entry economies of scale B consumer choice prices C long-run profits competition D output market share Answer: C

Question: 10 5 0 costs ($000) output 100 What is the firm’s total variable cost at an output of 100 units? A $250 B $5000 C $25 000 D $30 000 15 A government achieves a high rate of economic growth. What may result from this that might cause a conflict with other government aims? A it may increase government income B it may increase incomes for the lower paid C it may increase the supply of exports D it may increase the volume of imports Answer: D

Question: What type of tax is a tax of 10% on the price of petrol? A a direct tax B a progressive tax C an income tax D an indirect tax Answer: D

Question: What could a government in a developed economy do to decrease demand? A create a budget deficit B increase government spending C increase taxes D reduce interest rates Answer: C

Question: A country closed its oil wells because it had used up most of its supplies of oil. What type of unemployment would this cause? A cyclical B frictional C seasonal D structural Answer: D

Question: In a country, in one year, average transport prices rose by 15% and the price of electrical products fell by 15%. The two products had equal weights in the retail price index. If no other prices changed, what happened to the index? A It fell by less than 15%. B It fell by over 15%. C It remained unchanged. D It rose by less than 15%. Answer: C

Question: There is a decrease in a country’s birth rate. What must occur at the same time to lead to an increase in the country’s population? A positive net migration and a fall in the death rate B positive net migration and a fall in the fertility rate C zero net migration and a fall in infant mortality D zero net migration and a fall in the fertility rate Answer: A

Question: In 2008, the Peruvian Government set itself the target of reducing the number of its people in poverty to 30% of the population. What change does not indicate that the Peruvian Government had made progress towards this objective? A a rise in employment B a rise in infant mortality C a rise in life expectancy D a rise in the level of adult literacy Answer: B

Question: Which would cause a favourable change in the Kenyan trade in services (invisible) account? A A Kenyan company wins a contract to transport exports from Uganda. B A Kenyan tea company increases its exports. C A Kenyan trade delegation visits India. D A Zambian company increases its exports to Kenya. Answer: A

Question: What is most likely to result from an extension of specialisation in manufacturing? A for the consumer some prices will be reduced B for the country there will be less dependency on international trade C for the employee the work will become more varied D for the producer there will be less efficiency Answer: A

Question: What would reduce the volume of international trade in the world economy? A a German bank making a loan to a Nigerian company B a Japanese car manufacturer establishing a factory in the Czech Republic C the Canadian Government introducing quotas on Malaysian electronics products D the Swedish Government granting aid to Somalia Answer: C

Question: An economy with few resources is encouraged to improve the quality of its human resources. Which policy will lead to such an improvement? A conserving and protecting more of its natural resources B limiting the immigration of skilled labour C providing more opportunities for education and training D reducing the use of machines in production Answer: C

Question: A country raises the school leaving age from 15 to 17 years. What is the opportunity cost of this increased period of school education to the young people affected? A costs of training and employing more teachers B financial help necessary for school leavers who go to university C government expenditure on building extra classrooms D lost income from paid employment because of school attendance Answer: D

Question: In a market there is a shortage of a good. What change would cause the market to come to an equilibrium? A a decrease in supply B a fall in price C an increase in demand D a rise in price Answer: D

Question: A product has a totally inelastic price elasticity of demand. What will happen to total revenue if the price of the product falls by 25%? A It will fall by 25%. B It will fall to zero. C It will remain unchanged. D It will rise by 25%. Answer: A

Question: In 2014, a plan for a major new rail link funded by central and regional government was announced. It would involve the redevelopment of a city area, generate 14 000 jobs and allow the development of 2000 homes and offices for private businesses. What economic concepts are indicated directly in the above statement? A budget surplus and inflation B factors of production and multinational companies C fiscal policy and mixed economy D regional unemployment and average wage rates Answer: C

Question: How are social costs calculated? A fixed costs plus variable costs B private benefits less private costs C private costs plus external costs D social benefits less external costs Answer: C

Question: What is a disadvantage for a trade union representing workers in a company that has increased specialisation? A Capital equipment can be substituted for labour. B Different abilities can be used fully. C Production levels are decreased. D Workers are able to gain a higher level of skill. Answer: A

Question: A government finance minister said that the purchasing power of most people’s incomes had risen in the last year. What must have increased for the purchasing power to rise? A money wages B net income after tax C real wages D wage rates Answer: C

Question: What is most likely to increase a firm’s profits? A government controls on its prices B grants for the purchase of new machines C an increase in the wages paid to its workers D rising costs of its raw materials Answer: B

Question: Sohrab bought shares in a French telecommunications company operating in many countries. Joel owns and runs a mobile telephone accessories and repair shop. What is not identified above? A multinational company B partnership C public company D sole proprietor Answer: B

Question: A firm’s average revenue is $20. It sells 1000 units. What is the firm’s total revenue and the price of the product? total revenue ($) price ($) A 20 20 B 1 000 500 C 20 000 20 D 20 000 500 Answer: C

Question: 0 D 15 120 330 16 Other things being equal, what is likely to decrease public spending? A an increase in the age of retirement B an increase in the birth rate C an increase in the school-leaving age D an increase in unemployment Answer: A

Question: When is a tax regressive? A when some goods have a lower tax than others B when the tax as a proportion of income decreases as income increases C when the tax is linked to the rate of inflation D when the tax is on incomes rather than on goods or services Answer: B

Question: The Government of India wishes to help the very poorest people. Which policy would be most likely to achieve this? A lowering capital gains tax B lowering housing subsidies C lowering indirect taxation D lowering inheritance tax Answer: C

Question: Suppose the Indian Government raises the rate of interest. What is likely to be the direct effect on the economy? A It will raise any deficit on the current account. B It will raise the economic growth rate. C It will raise the foreign exchange rate. D It will raise the inflation rate. Answer: C

Question: What is involved in the construction of a retail price index? A a basket of goods B average incomes C economic growth rate D income tax rate Answer: A

Question: What identifies a recession? A a fall in the general price level B a fall in the level of national output C a fall in the real value of money D a fall in the stock market index Answer: B

Question: In the US Consumer Price Index (CPI), food has a weighting of 13.7%. In India food has a weighting of 46.2% in the CPI. What can be concluded from this? A Consumers in India spend more on food than US consumers. B Food is a bigger proportion of consumer spending in India than in the US. C The farming sector’s output of food is higher in India than in the US. D The price of food is rising more rapidly in India than in the US. Answer: B

Question: In many developing economies there is a high rate of population growth. What is a cause of this? A Jobseekers migrate from rural to urban centres. B Poor people have many children to provide labour on family farms. C There is increased resistance to life saving drugs. D There is not enough clean water. Answer: B

Question: A country has a birth rate of 30 per 1000 and a death rate of 35 per 1000 and no migration. What is most likely to cause the population to fall? A The birth rate decreases and the death rate increases. B The birth rate increases and the death rate remains the same. C The birth rate remains constant and the death rate decreases. D The increase in the birth rate is greater than the increase in the death rate. Answer: A

Question: What is likely to cause a rise in a country’s foreign exchange rate? A a fall in its exports of goods and services B a fall in its imports of goods and services C a fall in its inflow of income D a rise in its outflow of transfers Answer: B

Question: Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that a reduction in tariffs would destroy the emerging drinks industry with large-scale imports of cheap drinks. Which argument for protectionism are they putting forward? A the declining industry argument B the infant industry argument C the strategic industry argument D the sunset industry argument Answer: B

Question: Who is most likely to benefit if India bans all steel imports? A buyers of steel in India B foreign steel producers C Indian firms buying steel D Indian firms selling steel at home Answer: D

Question: What is certain to encourage a higher level of international trade? A conservation of resources and unstable exchange rates B exploitation of resources and wider use of quotas C increased support for home industries and increased tariffs D more specialisation and falling transport costs BLANK PAGE Answer: D

Question: A person bought a shop and stocked it with fresh fruit. He employed one member of his family to help in the shop. Which factors of production have been used? A labour and capital only B labour, capital and enterprise only C land and labour only D land, labour, capital and enterprise Answer: D

Question: What is an example of market failure? A a growth of competition B a spread of pollution C a surplus of production in the short term D an existence of scarcity Answer: B

Question: What will be the impact on the market for oil of the closure of the world’s largest oil field for maintenance work? A a movement down the supply curve B a movement up the demand curve C a shift of the demand curve to the left D a shift of the supply curve to the right Answer: B

Question: A product has a price elasticity of demand that is greater than one. What will happen to total revenue if the price of the product is reduced by 3%? A It will fall by more than 3%. B It will fall to zero. C It will be unchanged. D It will rise. Answer: D

Question: Why are some assembly workers poorly paid? A because their work is exhausting B because their work is repetitive C because their work is unskilled D because they work long hours Answer: C

Question: What is usually a function of a trade union? A It advertises the products that the members make. B It conducts negotiations with employers for increased wages. C It hires company employees. D It negotiates with suppliers for reduced costs of materials. Answer: B

Question: A firm’s aim is to become a monopoly supplier. Which policy is it most likely to use to eliminate competition? A adopt price reductions and advertising B avoid diseconomies of scale C maximise output and profit D reduce financial barriers to entry Answer: A

Question: When is a firm most likely to reduce its demand for labour? A when the demand for the final good increases B when the firm’s profitability increases C when the price of labour decreases D when the productivity of labour decreases Answer: D

Question: The high volume of goods sold by large supermarkets enables them to reduce prices, but the most important advantage that these businesses have is that they can sell non-food items as well as food. Which economic results does the statement suggest are available to large supermarkets? A economies of scale and diversification B external benefits and specialisation C horizontal integration and optimum output D increased sales and diminishing returns Answer: A

Question: A firm produces five units of output at an average cost of $20 per unit. The cost of the sixth unit is $26. What is the average cost of six units? A $4.33 B $6 C $8.33 D $21 Answer: D

Question: What is not a public sector expenditure? A claims paid on travel insurance for cancelled flights B collections of rubbish by a local council to meet regulations on recycling waste C grants from central funds to compensate people whose property has been damaged by storms D the establishment of a national database to assist the police in finding criminals Answer: A

Question: The Indian government uses direct and indirect taxation. Which is a direct tax? A corporate (profits) tax B customs duty C goods and services tax D petrol tax Answer: A

Question: A worker earns $60 000 a year and pays 25% income tax. He spent $2000 on furniture and $5000 on a computer and paid 20% sales tax on each. How much indirect tax did he pay? A $1000 B $1400 C $15 000 D $16 400 Answer: B

Question: 25 30 20 15 10 5 0 S3 S1 D1 S2 quantity supplied (’000 kilos) price ($ per kilo) X 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 20 What may cause an immediate decrease in the working population? A a falling death rate B a falling infant mortality rate C a rising birth rate D a rising rate of net emigration Answer: D

Question: Which combination of changes in national output and population would cause an increase in GDP per head? national output population A decrease by 4% unchanged B decrease by 5% decrease by 6% C increase by 3% increase by 5% D unchanged increase by 2% Answer: B

Question: In a year the rate of inflation in a country was 3%. During that year company managers’ salaries rose by 6% and office workers’ wages rose by 2%. What happened to real income (purchasing power)? company managers office workers A fell fell B fell rose C rose fell D rose rose Answer: C

Question: Developing countries often wish to prevent the population in rural areas moving to the towns. Investment grants are given to companies if they set up their businesses in rural areas. What is this policy intended to achieve? A decreased government expenditure B decreased transport costs C increased economies of scale D increased use of labour Answer: D

Question: The population structure of many developed countries is changing. Birth rates are low, those over 65 are living longer and the working population (16-65 years) is a smaller proportion of the total population. What is the most likely consequence of this changing structure? A Economic migrants make up shortages in the working population. B Overall the standard of living is gradually falling. C The population is healthier and needs less medical care. D The ratio of those under 16 dependent on the working population is rising. Answer: A

Question: 24.2 India 64.8 1.5 60 23.0 Pakistan 65.6 1.6 42 27.2 On the basis of the information given, what is the likely ranking order of the four countries in terms of development, starting from the most developed to the least developed? A Bangladesh → India → Pakistan → Egypt B Egypt → Pakistan → India → Bangladesh C India → Egypt → Bangladesh → Pakistan D Pakistan → Bangladesh → Egypt → India 27 The table shows details of India’s current account of the balance of payments in the 1st quarter of 2014. $ billion trade in goods (visible) balance –34 trade in services (invisible) balance ? primary income (income) balance –7 secondary income (current transfers) balance 16 current account balance –8 What is the trade in services (invisible) balance? A surplus of $9bn B surplus of $17bn C surplus of $27bn D surplus of $33bn Answer: B

Question: Which policy is a form of protectionism? A a tax on emissions B a tax on imports C a tax on income D a tax on property Answer: B

Question: When does free trade occur? A when goods are exported with government subsidies B when goods are given as part of an aid programme C when goods are traded using barter D when goods face no import barriers Answer: D

Question: What best describes the problem of scarcity? A All consumer wants must be satisfied. B All resources are free at the point of use. C There are limited resources and unlimited wants. D There are unlimited resources and limited wants. Answer: C

Question: What is an example of the purchase of a capital good? A a farm owner purchasing additional land B a farm owner purchasing a television C a farm owner purchasing a tractor D a farm worker purchasing some seeds Answer: C

Question: A student decides to buy a ticket for a concert instead of buying a new shirt. What is the opportunity cost of buying the ticket? A the concert B the price of the ticket to the concert C the shirt D the time spent purchasing the ticket Answer: C

Question: In a market system who has the most important role in influencing the allocation of resources? A consumers B entrepreneurs C government officials D producers Answer: A

Question: What is an external cost of mining coal? A the cost of purchasing mining equipment B the extra cleaning costs of local residents’ houses because of coal dust C the extra cleaning costs of the mine buildings because of coal dust D the cost to the mine owners to remove waste Answer: B

Question: What is a function of a stock exchange? A It allows company shares to be traded. B It enables tourists to purchase foreign currency. C It provides a market for firms to sell their products. D It sets the rate of interest in an economy. Answer: A

Question: What is a direct benefit to a worker of specialisation? A the higher output that may lead to higher earnings B the higher output that may lead to higher profits C the higher output that may lead to lower costs per unit produced D the longer training period that is required before starting work Answer: A

Question: A trade union succeeds in raising the wages in an industry above the equilibrium wage. How would the demand and supply of labour change? change in quantity of labour demanded change in quantity of labour supplied A fall fall B fall rise C rise fall D rise rise Answer: B

Question: What is most likely to result from an increase in income tax? A a fall in consumer spending B a fall in government spending C a rise in business investment D a rise in the level of imports Answer: A

Question: Which statement explains why firms in perfect competition are not able to exploit consumers? A The firms can restrict output. B The products are differentiated. C There are barriers to entry. D There is perfect information. Answer: D

Question: A company with a chain of restaurants bought another chain of restaurants. How is this purchase most likely to be classified? A conglomerate merger B diversification C horizontal integration D vertical integration Answer: C

Question: A company’s annual report suggested that it had benefited from some changes. Which change is an internal economy of scale for this company? A an improvement in road and rail facilities that has reduced its distribution costs B an increase in the number of local specialist workers that it could recruit C the introduction of new training at a local college for which staff have enrolled D the reduction in the company’s costs by the purchase of a factory supplying components Answer: D

Question: A government believes that consumption of a certain good will be of benefit to society. Which policy is most likely to encourage producers to increase their output of that good? A an increase in the period required for training the industry’s workers B an increase in the regulations affecting businesses C an increase in the subsidies for that good D an increase in the taxation of that good Answer: C

Question: Which statement describes a progressive tax? A a tax that has a higher percentage rate as income rises B a tax that increases government income over time C a tax that places an increasing burden on the poor D a tax that rises in line with the rate of inflation Answer: A

Question: Which combination of government policies is most likely to reduce unemployment? income tax rate government spending rate of interest A decrease decrease increase B decrease increase decrease C increase decrease decrease D increase increase increase Answer: B

Question: Which pair of government actions combines a fiscal policy with a supply-side policy? A changing government spending with changing interest rates B cutting tax rates with providing information on job vacancies C limiting bank lending with the privatisation of industry D restricting credit with less control over labour markets Answer: B

Question: What is a recession? A a period when incomes rise by less than inflation B a period when prices are falling continuously for twelve months C a period when real GDP is declining for two consecutive quarters D a period when unemployment is rising Answer: C

Question: An economy is suffering from a period of deflation. What does this mean for the economy? A Consumers may delay purchase of some products. B Purchasing power of consumers falls. C Tax revenues for the government will rise. D The real value of personal savings falls. Answer: A

Question: Official statistics in 2010 showed South Africa had a very high unemployment rate at around 25%, although wages were double those in Brazil. What might be a reason for South Africa’s high wages in a time of high unemployment compared with Brazil? A a skilled workforce in Brazil B high levels of savings in South Africa C more labour-intensive production in Brazil D strong trade unions in South Africa Answer: D

Question: What is a common feature of developed countries? A a high fertility rate B a low population C high net emigration D low birth rates Answer: D

Question: Which combination of changes in a government’s budget will lead to greater income inequality? direct taxes indirect taxes health and education spending A decrease decrease increase B decrease increase decrease C increase decrease decrease D increase increase increase Answer: B

Question: What would cause a favourable change in the Indian trade in services (invisible) account? A A Japanese company invests in a subsidiary in India. B A large Indian company increases its exports of goods. C A Malaysian company increases its exports to India. D An Indian company wins a contract to transport South African exports. Answer: D

Question: In October 2015, one UK pound could be exchanged for 100 Indian rupees. By October 2016, one UK pound could be exchanged for 80 Indian rupees. What would be a short-term consequence of this change? A Economic growth in India would increase. B Indian manufacturers would earn higher profits from exports to the UK. C Inflationary pressure in the UK would reduce. D UK manufacturers would find it easier to export to India. Answer: D

Question: A country imports oil which is used in the production and distribution of goods. The country has also experienced a rise in incomes which has resulted in a large increase in the demand for goods, some of which it imports. What is likely to happen to the country’s balance of trade in goods (visible) and to the price of oil? balance of trade in goods price of oil A improves falls B improves rises C worsens falls D worsens rises BLANK PAGE BLANK PAGE Answer: D

Question: All countries need to produce food. Which type of agriculture would make the best use of the resources of developing and developed economies? developing developed A capital-intensive capital-intensive B capital-intensive labour-intensive C labour-intensive capital-intensive D labour-intensive labour-intensive Answer: C

Question: A farmer reduces the land used to grow wheat from 80 hectares to 60 hectares and increases the use of the land for growing potatoes from 80 to 100 hectares. What is the opportunity cost of this change? A The output from 20 hectares used for growing potatoes. B The output from 20 hectares used for growing wheat. C The output from 60 hectares used for growing wheat. D The output from 80 hectares used for growing potatoes. Answer: B

Question: What can be found in a market economy? A externalities and monopolies B interest rates and public goods C public corporations and market prices D tax rates and commercial banks Answer: A

Question: A private sector firm is given a contract by the government to supply a country’s water. Which government directive will minimise the risk of market failure? A allow the firm to ration water rather than meet demand B ensure the firm’s supply includes all areas which are expensive to service C insist that the firm aims to maximise profits D instruct the firm to provide water only to those who can pay for it Answer: B

Question: What is meant by the equilibrium price in the market for a good? A the average price paid by consumers B the price at which maximum profit is made C the price at which the producer breaks even D the price at which the supply and demand curves intersect Answer: D

Question: What could discourage women from seeking employment? A More education and training are provided. B More flexible and part-time jobs are available. C There are fewer promotion opportunities for women. D There is a shift in employment to the services sector. Answer: C

Question: What would be least likely to act as a store of value during a period of rapid inflation? A cash B gold C property D shares Answer: A

Question: Which type of business is always in the public sector? A monopoly B multinational corporation C public corporation D public limited company Answer: C

Question: When will a firm maximise its profits? A when it excludes a rival supplier from the market B when it produces where average cost and average revenue are equal C when it sells as many products in as many different markets as it can D when the difference between total cost and total revenue is greatest Answer: D

Question: A firm’s average revenue is $10. It sells 2000 units. What is the firm’s total revenue and the price of the product? total revenue ($) price ($) A 10 10 B 2 000 200 C 20 000 10 D 20 000 200 Answer: C

Question: Which measure would a government take to reduce a current account deficit? A increase tariffs B increase value added tax C reduce income tax D reduce domestic subsidies Answer: A