An American family is choosing between four holiday destinations in Europe, each at the same price. The table shows the family’s order of preference for these holiday destinations.

holiday destination - order of preference

Barcelona 1st

London = 3rd

Paris 2nd

Venice = 3rd

If the family goes to Barcelona, what is the opportunity cost of this choice?

• Barcelona

• London and Venice

• Paris

• London, Paris and Venice

The diagram shows two production possibility curves for an economy. Which combination of movements correctly illustrates these changes in production?

• A

• B

• C

• D

What distinguishes the very long run from the long run?

• the ability to change resource allocation

• the ability to change the state of technology

• the absence of government market intervention

• the existence of variable factors of production

Which statement is a positive statement?

• The distribution of income and wealth in most western European countries is unequal.

• The government ought to increase income tax on high earners.

• There should be more legal rights given to workers to protect their status in the workplace.

• Wages of those on low incomes should be increased.

What could not cause a shift in an individual’s demand curve for good Z?

• a change in advertising expenditure on Z

• a change in the individual’s income

• a change in the individual’s tastes

• a change in the price of Z

The diagram shows the market for sugar which is initially in equilibrium at a price of OP. A government then fixes a maximum price of OP1. What will happen as a result?

• a reduction in farmers’ revenue equal to PRSP1

• expenditure on sugar will be equal to PRMO

• farmers’ revenue would be P1UNO

• producer surplus will be P1SP2

The table shows a competitive market in equilibrium in two periods. What could explain the change from period 1 to period 2?

• an increase in the price of a complement

• an increase in the price of a substitute

• the imposition of a minimum price of 60 cents by a government

• the imposition of an indirect tax on suppliers

Which example of consumer behaviour would create consumer surplus?

• when a consumer does not spend all of her income each month

• when a consumer pays less than they are willing to pay for a good

• when a consumer throws away vegetables because they bought too much

• when a good is purchased in order to resell it at a higher price

A manufacturer reduces the price of its goods after developing a more efficient manufacturing process. It makes leather belts that compete against belts made of artificial material. What are the likely outcomes of the change in the manufacturing process?

• A

• B

• C

• D

What is the likely price elasticity of supply of highly perishable goods and goods that have low stocks?

• A

• B

• C

• D