Economics

A European airline opens a new route to Dubai. It purchases additional aeroplanes, rents

additional landing slots, hires pilots and buys back some of its shares to raise the value of the firm on the stock market.

What is an example of the factor of production capital?

• aeroplanes

• landing slots

• pilots

• shares

Which statement about the behaviour of firms in a planned economy is correct?

• Firms are sent signals to produce through the price mechanism.

• Firms will operate in competitive markets.

• Firms will attempt to make profits for the benefit of shareholders.

• Firms are more likely to consider the private and external costs of production.

The table provides information on entrepreneurship among males in three countries in 2013.

What can be concluded from the table?

• In Sweden, it is easier for male entrepreneurs to get training than finance.

• It is always more difficult for male entrepreneurs to get finance than training.

• Italy provides less money for male entrepreneurs than Japan or Sweden.

• Sweden has more male entrepreneurs than Italy or Japan.

The diagram shows the production possibility curves of two economies, Northland (Y1–X1) and

Southland (Y2–X2).

Both economies specialise based on the theory of comparative advantage and trade with one

another.

What can be concluded from the diagram?

• Both economies face increasing opportunity costs.

• Point P represents the final equilibrium outcome.

• Point R shows the total possible combined production of food and drink.

• All points on Y1–X2 are only attainable through trade.

The supply curve for fresh fish shifts from S1 to S2 as shown.

What is a possible reason for this change in the supply of fresh fish?

• Demand for fresh fish increases due to promotion of the health benefits.

• Favourable weather increases the quantity of fish being caught.

• Price of fresh fish falls due to a new substitute product becoming popular.

• Regulations limit the number of fish being caught to prevent over-fishing.

When the supply of a good decreases, equilibrium price stays the same.

What is the price elasticity of demand of the good?

• –1

• zero

• +1

• infinite

What can be measured by cross-elasticity of demand?

• a change in real income as a result of a change in the price of consumer goods

• a change in the demand for a good in response to a change in the price of a complement

• a change in the price of a good in response to a change in the demand for a substitute

• a change in the price of a good when the demand for it changes

The table shows the maximum price a consumer would be willing to pay for successive cans of

fruit juice.

The price of a can of fruit juice is $4 and, having bought three cans, the consumer decides to buy

a fourth.

How does buying the fourth can affect his consumer surplus?

• It leaves it unchanged.

• It lowers it by $2.

• It raises it by $4.

• It raises it by $34.

The diagram shows four supply curves.

Which statement about the price elasticities of the curves is correct?

• Curve 1 has constant infinite elasticity.

• Curve 2 has elasticity greater than curve 4 over its whole length.

• Curve 3 has increasing elasticity as price rises.

• Curve 4 has decreasing elasticity as price rises.

The diagram shows the demand and supply curves for a good in a free market.

What can definitely be deduced from the diagram?

• All the costs and benefits of consumption are reflected in OP1.

• At OP1 consumer expenditure is greater than the firm’s revenue.

• At OP1 the price elasticity of supply is equal to one.

• The market will not clear at a price of OP1.