AS Economics P1-2023 JUNE 11

What is 'a produced means of further production'?

• capital

• enterprise

• labour

• land

Answer explanation

Capital is 'a produced means of further production' as it includes tools, machinery, and equipment used in the production process.

A hospital management board decides to reallocate $800,000 from its $1.2m new buildings budget to spend on cancer care. What is the opportunity cost of this decision?

• a cost of $400,000

• a cost of $800,000

• the cost of healthcare for cancer patients

• the loss of some new buildings

Answer explanation

the loss of some new buildings

The diagram shows the change in a country's production possibility curve from XX to YY. What would explain this change?

• Consumers chose to consume more food and less drink

• Government taxed food production and subsidised drink production

• Productivity rose in food production and fell in drink production

• There were more imports of food and more exports of drink

Answer explanation

Productivity rose in food production and fell in drink production

A factory manufactures chairs. The manufacturing process is divided into a number of tasks. What is a likely disadvantage of this division of labour?

• decrease in motivation

• decrease in output

• decrease in productivity

• decrease in quality of the final product

Answer explanation

The likely disadvantage of dividing labour in the manufacturing process is a decrease in motivation among workers.

Which row correctly describes the relationship between two goods implied by the value of the cross elasticity of demand?

• weak complements

• weak substitutes

• weak substitutes

• strong complements

Answer explanation

The correct row for the relationship between two goods implied by the cross elasticity of demand is 'weak substitutes'.

What does consumer surplus measure?

• the excess profit earned by the producer of a good

• the opportunity cost to the consumer of not buying a good

• the price the marginal consumer is willing to pay for a good

• the consumer's gain from purchasing a good at a price below what they are willing to pay

Answer explanation

Consumer surplus measures the consumer's gain from purchasing a good at a price below what they are willing to pay.

When the price of good X is $2.00, the quantity supplied is 100,000. The price elasticity of supply of good X is 0.8 in the short run and 1.4 in the long run. The price of good X increases to $2.20. What is the increase in the quantity supplied of good X between the short run and the long run?

• 6000

• 60,000

• 114,000

• 140,000

Answer explanation

The increase in quantity supplied between the short run and the long run is 6,000 units, as calculated by the difference in price elasticities (1.4 - 0.8) multiplied by the initial quantity supplied (100,000).

The diagram shows the European market for diesel fuel and the original equilibrium is at M. Europeans want low-emission cars and therefore the demand for diesel fuel has decreased from D1 to D2. Which area represents the new producer surplus for companies supplying diesel fuel?

• A) GMNH

• B) JGM

• C) JHN

• D) JNR

Answer explanation

The correct choice is C) JHN because it represents the new producer surplus for companies supplying diesel fuel after the decrease in demand from D1 to D2.

In which situation is the demand for a product said to be price elastic?

• A) The quantity demanded responds to a change in price.

• B) An increase in price brings about a decrease in the quantity demanded.

• C) An increase in price induces consumers to spend more on the product.

• D) A decrease in price brings about an increase in revenue.

Answer explanation

In a price elastic situation, a decrease in price leads to an increase in revenue as the quantity demanded rises more than proportionally to the price drop.

Golf club membership fees in Singapore have risen as a result of restrictions on travel to cheaper golf courses in neighbouring countries and the closure of some local courses. The supply of golf club memberships is determined by the current number of courses. If the original equilibrium was at X, which point shows the result of these changes?

• A

• B

• C

• D

Answer explanation

The closure of local courses and travel restrictions led to a decrease in supply, shifting the equilibrium point to B where the new equilibrium is established at a higher price.