Economics May/June 2023 (11/10/22)

What are involved in the allocation of resources in a market economy?

• factors of production and subsidies for essential goods
• prices and choices
• production possibilities and trade restrictions
• unlimited wants and public goods

The curve JK in the diagram is an economy’s production possibility curve. What could cause the economy to move from point M to point N?

• a decrease in the dependency ratio
• a decrease in the population of working age
• an increase in the participation rate
• an increase in the unemployment rate

In the twentieth century the nature of a typical car assembly plant changed. The industry had fewer firms, they operated on larger sites and they had more automated machinery. How is this change most likely to have affected the relative use of factors of production in the industry?

• A
• B
• C
• D

What is meant by ‘the value of money’?

• the amount of goods that can be purchased with a given sum of money
• the amount of wealth stored in the form of money
• the cost of production of money
• the opportunity cost of holding wealth in the form of money

What might shift an individual’s demand curve for petrol to the right?

• a fall in the price of cars
• a fall in the price of public transport
• a rise in the price of parking
• a rise in the price of petrol

The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q at price P. If the price of coconuts increases from P, the consumer’s short-run response is greater than his long-run response. If the price decreases from P his short-run response is smaller than his longrun response. What is the consumer’s short-run demand curve?

• VYW
• VYZ
• XYW
• XYZ

The diagram shows the demand curve for a product. If the rectangle OLMN is equal in area to the rectangle OPQR, which statement is correct?

• A rise in price from OR to ON results in the same proportionate fall in quantity demanded.
• Consumer surplus falls by RSMN if the price rises from OR to ON.
• The price elasticity of demand is unitary for all changes in price.
• Total revenue falls by MSQ if the price rises from OR to ON.

Which elasticity values indicate that cars are normal goods and that petrol is a complement to car use?

• A
• B
• C
• D

A specific tax is placed upon each bottle of perfume sold. In the diagram, SS is the supply curve before tax and StSt is the supply curve after tax. Which area represents the revenue received by the government from the tax?

• ORWY
• PQUT
• PRWT
• QRWU

When demand for a good increases, equilibrium price stays the same. What is the good’s elasticity of supply?

• –1
• zero
• +1

• infinite