AS Econ practice paper 1

Which factor of production is needed first in order to set up a new business?

• capital

• enterprise

• labour

• land

Assuming nothing else changes, which change in an economy’s labour market will cause the production possibility curve to shift to the left?

• an increase in worker immigration

• an increase in the retirement age

• an increase in labour productivity

• an increase in the school leaving age

What is not a characteristic of a mixed economy?

• The government has no role in setting prices.

• The government manages taxation rights.

• The government prevents firms from earning excessive profits.

• The government provides services not provided by the private sector.

What is not likely to result from the use of division of labour?

• a decrease in average costs

• an increase in motivation

• an increase in productivity

• an improvement in quality of the final product

Price plays a number of functions in the allocation of resources. Which statement best illustrates the function that relies upon consumer choice (sometimes known as the incentivising function)?

• A price fall can show consumers that a good is becoming less popular.

• A price fall tends to persuade some producers not to stay in the market for the good.

• A price rise means consumers cannot afford to buy so much of a good.

• A price rise tends to reduce competitiveness in the market for a good.

Which pair of products are substitutes both in consumption and production?

• barley and cotton

• gold and silver

• soap and toothpaste

• spinach and cabbage

There is a worldwide shortage of oil. What can be concluded from the diagram?

• In Britain, oil has zero opportunity cost.

• In Japan, there is self-sufficiency in oil.

• In Russia, there is no shortage of oil.

• In the United States, rationing is the only solution to oil shortage.

The cross elasticity of demand between bus travel and rail travel is +2. Which change in bus fares would have caused this?

• 20 to 21 cents

• 30 to 33 cents

• 40 to 45 cents

• 50 to 60 cents

A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direction of price change for this to be certain to happen?

• A. inferior, fall

• B. inferior, rise

• C. normal, fall

• D. normal, rise

A specific tax is placed upon each bottle of perfume sold. In the diagram, S is the supply curve before tax, St is the supply curve after tax. Which area represents that part of the tax revenue paid by producers?

• A. ORWY

• B. PQUT

• C. PRWT

• D. QRWU