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AS ECONOMICS
Most Challenging Questions 2017
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Which is a transfer payment?
1 point
an annual allowance paid by an individual to a grandchild
a one-off bonus paid to an employee for a special contribution to a firm’s profits
a payment made by a parent to a regular child-minder
the monthly salary of an employee of a local authority
Clear selection
There is a fall in the world price of tea traded on wholesale international markets. How will this most likely affect the supply curve of a major tea retailer?
1 point
It will cause a contraction along the supply curve.
It will cause an extension along the supply curve.
It will cause the supply curve to shift to the left.
It will cause the supply curve to shift to the right.
Clear selection
In the diagram D1 and S1 are the initial supply and demand curves of the pound sterling (£) on the foreign exchange markets. What will cause the demand curve to shift to D2 and the supply curve to S2? CHECK THIS Q's
1 point
a fall in incomes worldwide
a fall in the cost of producing Ethiopian coffee
a rise in output from Ethiopian coffee harvests
a rise in the price of coffee produced in Kenya
Clear selection
In the UK in July 2014, £1 = US $
1.71.By
the end of August 2014, £1 = US $1.65.What is most likely to explain this?
1 point
an increase in UK exports
an increase in UK interest rates
increasing profitability of UK companies
increasing size of UK national debt
Clear selection
Since 2000 a country’s export prices have increased on average by 50% and its import prices by25%. What is the current figure for the country’s terms of trade (2000 = 100)?
1 point
75
83
120
125
Clear selection
The table shows a country’s consumer price index for March and April 2015. Which statement correctly describes what happened between these two months?
1 point
There was a decrease in the annual rate of inflation.
There was a decrease in real interest rates.
There was an increase in the purchasing power of money.
There was an increase in the standard of living.
Clear selection
What would supporters of a nationalised public transport service expect to be the most likely outcome from the privatisation of train and bus services?
1 point
fewer destinations served by trains and buses
lower fares
more frequent services to all destinations
more people employed in public transport services
Clear selection
The diagram shows the market for heating oil. If the government introduces a production subsidy, how will the financial benefit be shared between consumers and producers?
1 point
It will be shared equally between producer and consumer.
It will go entirely to the producer.
The majority will go to the consumer.
The majority will go to the producer.
Clear selection
What is least likely to happen if a firm decides to increase automation and division of labour in its production process?
1 point
an increase in cost per unit
an increase in productivity
an increase in the firm’s profits
an increase in the number of workers employed
Clear selection
A country with a fixed exchange rate has a current account surplus on its balance of payments. What is most likely to reduce this surplus?
1 point
higher interest rates
higher investment spending
higher tariffs
higher taxes
Clear selection
Each diagram shows the production possibility curves of two economies, X and Y, which produce food and clothes. In which diagram would both economies benefit by specialising in the good in which they have comparative advantage and trading at an exchange rate of 1 unit of clothes to 1.5 units of food?
1 point
A
B
C
D
Clear selection
Which combination is most likely to result in the demand for a product being highly price elastic?
1 point
A
B
C
D
Clear selection
Policies to correct a balance of payments deficit fall into two categories: expenditure-dampening policies and expenditure-switching policies. Which pair of policies are classified correctly?
1 point
A
B
C
D
Clear selection
A firm establishes that the price elasticity of supply of its product has a value of 0.3. What is likely to be true about the firm?
1 point
It has unused productive capacity.
It has unsold stock of its product.
It uses a high proportion of perishable raw materials.
It uses factors of production that are easily substituted.
Clear selection
The table shows the price of a good and total expenditure on the goods during specific periods when the market is in equilibrium. What can be deduced from this data?
1 point
The good has constant opportunity cost.
The good is an inferior good.
The price elasticity of demand is equal to one.
The price elasticity of supply is equal to zero.
Clear selection
A government imposes a specific indirect tax on a product. When will the tax cause the greatest reduction in consumer surplus for the buyers of the product?
1 point
The product has price elastic demand and price elastic supply.
The product has price elastic demand and price inelastic supply.
The product has price inelastic demand and price elastic supply.
The product has price inelastic demand and price inelastic supply.
Clear selection
What could cause a shift in the supply curve of good X and a movement along its supply curve?
1 point
A
B
C
D
Clear selection
What is an example of the use of ceteris paribus?
1 point
The rate of increase in wage rates equals the rate of increase in price levels.
There is a constant rise in both wage rates and price levels.
Wage rates and the price level remain constant at their original levels.
Wage rates rise when the only change is a rise in prices.
Clear selection
Assume the Chinese monetary authorities are committed to maintaining the exchange rate ofChina’s currency, the Yuan, against the US$ between P1 and P2 on the diagram. What might they do if supply changed from S1 to S2?
1 point
introduce controls on Chinese investment overseas
lower interest rates
remove tariffs on imports from USA
sell Yuan on the foreign exchange markets
Clear selection
Scarcity means that goods need to be rationed between competing consumers. Which basis for rationing is the most likely to result in the most equal distribution of goods?
1 point
consumer preference
market price
political decision
seller preference
Clear selection
A local government is deciding whether to increase parking charges and provide more lanes for bus use only. One official said that the increase in parking charges should cause more bus travel. A second official said that an increase in the frequency of bus services will not cause demand for bus travel to rise. Are these official statements correct or incorrect?
1 point
A
B
C
D
Clear selection
R1S1, R2S2, R3S3 and R4S4 are production possibility curves (PPC) for four different countries 1, 2,3 and 4. Which statement about the opportunity cost of good R in terms of good S is not correct? PLEASE CHECK Q
1 point
It is greater at all points on R4S4 than on R3S3.
It is greater in country 3 than country 2.
It is lower in country 2 than country 1.
It is the same at each point on R3S3.
Clear selection
In which situation is the demand for a product said to be price elastic?
1 point
The quantity demanded responds to a change in price.
An increase in price brings about a decrease in the quantity demanded.
An increase in price induces consumers to spend more on the product.
A decrease in price brings about an increase in revenue.
Clear selection
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