Cambridge IGCSE And O Level Economics Coursebook 2nd Edition Susan Grant - Solutions

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A move from a planned economy to a market economy is most likely to reduce:A Employment in the agricultural sector B Employment in the public sector C Flexible employment D Self-employment
A government decides to limit the wage increase of state employees. What is it most likely trying to achieve?A A reduction in employment B A reduction in inflationary pressure C An increase in the wages paid to private sector employees D An increase in the attractiveness of public sector employment
In what type of economy are most workers employed by the government?A Free enterprise B Market C Mixed D Planned
What is the name of an industry in which the most efficient number of firms is one?A A national champion B A natural monopoly C A primary sector industry D A strategic industry
Recent years have seen a number of mergers in food processing firms throughout the world.In 2015 two large US food processing firms, Kraft Foods and H.J.Heinz, merged to form the Kraft Heinz Company. It was hoped that the merger would reduce average fixed cost. The food processing industry is
In April 2016 teachers in Hungary took industrial action. In that year, a teacher with five years’ experience was paid $800 a month, compared to the national average of $995. Of course, some Hungarian workers were paid less than teachers. For example, some farm workers were paid just the
Referring to the source material in your responses, complete all parts of Question 2.a Identify an example of a fixed cost. (1)b Calculate how much Cainiao charged, on average, for a delivery in 2016. (2)c Explain one type of economy of scale that Cainiao is able to enjoy. (2)d Explain two
Referring to the source material in your responses, complete all parts of Question 1.a Identify an example of a horizontal merger. (1)b Calculate, in percentage terms, how much more on average corporate lawyers earned in the USA than in India in 2016. (2)c Explain one function of a commercial bank.
Which of the following will benefit a small firm?A bulk buying B easy access to finance C flexibility D specialist managers
A firm’s long run average cost curve shifts upwards. Which of the following could have caused this?A internal economies of scale B internal diseconomies of scale C external economies of scale D external diseconomies of scale
A firm sells 200 units at $9 each. Its average fixed cost is $2 and its average variable cost is$4. How much profit does the firm make?A $400 B $600 C $800 D $1800
The diagram shows the fixed costs, variable costs and the total cost of a firm.A WX B XY C WY D YZ
The following information shows the cost and revenue of a firm producing coats.At what output does the firm maximise profits?A 100 B 200 C 300 D 400
Which combination of events would increase a trade union’s ability to negotiate a wage rise for its members?Labour productivity Unemployment A decreases decreases B decreases increases C increases increases D increases decreases
More people throughout the world visit the cinema. What impact is this likely to have on the demand for actors and their wages?Demand for actors Wages of actors A decreases decrease B decreases increase C increases increase D increases decrease
Which statement about different income groups is true?A Low income groups save more, in percentage terms, than high income groups B Low income groups find it easier to borrow than high income groups C High income groups spend less, in percentage terms, than low income groups D High income groups do
What is a function of a commercial bank?A to control the money supply B to decide on the amount spent by the government C to lend to individuals and firms D to manage the national debt
‘Money enables people to borrow and lend’. Which function of money does this describe?A measure of value B medium of exchange C standard for deferred payment D store of value
Which of the following is a barrier to entry?A Brand loyalty B Lack of advertising C Low set-up costs D Perfect information
In which type of market structure can supernormal profits be earned in the short run?A Monopoly B Competitive market C Monopoly and competitive market D Neither monopoly nor competitive market
Indian Railways is a monopoly firm. What does this mean?A The firm is a price taker B The firm has no competitors C The firm has a small share of the market D The firm is not protected by barriers to entry
Which of the following is a feature of a competitive market?A Easy entry and exit B Firms with a high market share C Small number of buyers D Small number of sellers
A firm achieves profit maximisation. What does this mean?A It cannot increase its profit by changing its output B It makes more profit than the other firms in the industry C It maximises its total revenue D It produces at the lowest possible cost
25
4 D
25 C
4 B
units at a price of $4 per product. From this information, calculate the firm’s total revenue (TR) and average revenue (AR).Total revenue ($) Average revenue ($)A
A firm sells
units of output. The total variable cost of this output is $200 and the total fixed cost is $300. What is the average total cost of production?A $2 B $4 C $6 D $10
A firm produces
Which of the following is a fixed cost to a manufacturing firm?A Insurance on buildings B Overtime payments to workers C The cost of energy D The cost of raw materials
Twenty-five workers produce a total output of 300. What is the average product per worker?A 12 B 25 C 300 D 7500
Which of the following would cause an increase in demand for capital goods?A A decrease in corporation tax B A fall in disposable income C A rise in interest rates D A rise in pessimism
A doctor and an operating theatre are:A Complementary factors of production B Substitute factors of production C An example of labour and land D An example of enterprise and capital
The table shows the distribution of the labour force of a country between two years.
Why might the growth of an industry reduce a firm’s costs of production?A It may cause a decrease in subsidiary industries B It may create greater competition for resources C It may lead to the development of specialist markets D It may reduce the supply of infrastructure
What is meant by financial economies of scale?A Lower average costs experienced by large banks and other financial institutions B Lower average costs arising from a large firm operating its finance department more efficiently C Lower average costs due to the ability of large firms to borrow more
A toy manufacturer merges with a chemical company. What type of merger is this?A Conglomerate B Horizontal C Vertical merger backwards D Vertical merger forwards
What is most likely to be supplied by small firms?A Banking B Film production C Shoe repair D Steel
A trade union is pressing for a wage rise for its members. Which of the following would increase its chances of being successful?A An increase in productivity B An increase in unemployment C A decrease in profitability D A decrease in union membership
Which of the following is not a function of a trade union?A Improving working conditions B Increasing shareholders’ dividends C Raising members’ wages D Representing members’ interests
Which measure of strike activity indicates workers’ sentiment about the strike?A The number of strikes B The number of workers involved C The amount of working time lost D The amount of revenue lost by firms
In which circumstance is a trade union most likely to be able to raise the wages of its members?A It is easy to replace workers with machines B It is easy to replace unionised labour with non-unionised labour C The profits of the firms in the industry are low D The share of labour costs in total
Point X in the diagram shows the market for electricians in a country. There is an increase in the number of people who train as electricians. What is the new equilibrium point?
What would increase a woman’s choice of occupation?A An increase in her qualifications B An increase in transport costs C An increase in gender discrimination D An increase in housing costs
Piece rates are a method of payment to workers based on:A How many hours they work B When they work C The output they produce D The output they sell
What is a non-wage factor that may influence a person’s choice of occupation?A Bonuses B Fringe benefits C Overtime payments D Salary
What must be occurring, if consumption is less than disposable income?A Borrowing B Income levels are falling C Income is being redistributed to the poor D Saving
What can cause a fall in saving?A A rise in the range of financial institutions B A fall in the rate of interest C A rise in disposable income D A fall in the rate of tax imposed on earnings from saving
What is most likely to cause a rise in expenditure in an economy?A A rise in confidence B A rise in income tax C A reduction in wealth D A more uneven distribution of income
Interest rates rise. How is this likely to affect household savings and expenditure?Saving Expenditure A rise rise B rise fall C fall fall D fall rise
What is the main aim of a commercial bank?A To act as banker to the government B To issue bank notes C To make a profit D To manage the national debt
What is a function of a central bank?A Controlling the money supply B Deciding on the amount of government expenditure C Issuing shares D Raising taxes
What would make an item unsuitable to act as money?A It is easy to carry B It is generally acceptable C It is perishable D It is recognizable
Money enables people to save. Which function of money does this describe?A Medium of exchange B Store of value C Unit of account D Standard for deferred payments
Which government measure is designed to increase external benefits?A A decision to reduce spending on education B A subsidy given to bus companies C A reduction in the tax on alcohol D The removal of fines on companies that pollute
Which profit-making enterprise will not harm the environment?A intensive farming using chemical fertilisers B recycling waste paper into newspapers C steel manufacturing, which generates the emission of carbon dioxide D deforestation in tropical rainforests to obtain timber for furniture production
What is meant by inelastic supply?A when a fall in price causes a greater percentage fall in supply B when a fall in price causes a smaller percentage fall in supply C when a rise in price causes a fall in supply D when a rise in price causes no change in supply
What could make demand for a product become more elastic?A a fall in its price B a fall in the proportion of income spent on the product C a decrease in the time period under consideration D an increase in the number of close substitutes
The table shows the demand and supply of a book published by a Japanese firm.When the price rises from $10 to $15 per book, what is the price elasticity of demand for the book?A –0.4 B –0.8 C –1.0 D –2.5
What effect is an increase in advertising expenditure likely to have, on the demand and supply curves of a product in the short term?Demand Supply A decreases decreases B decreases increases C increases increases D increases decreases
Which of the following is likely to cause the price of the lamb to decrease?A an decrease in the number of sheep farmers B an increase in the price of beef C a subsidy given to sheep farmers D a successful advertising campaign for lamb
Price is initially set above equilibrium. Market forces then move it towards equilibrium. As price falls, what will happen to demand and supply?Demand Supply A contracts contracts B contracts extends C extends extends D extends contracts
The table shows demand and supply schedules for bread What will be the equilibrium price for a loaf of bread?A $0.80 B $1.00 C $1.20 D $1.40
Who decides what is produced in a market economy?A consumers B managers C shareholders D the government
What is a cause of market failure?A Competition between firms B Consumers lacking information about where the lowest prices can be found C Diff erences in pay between skilled and unskilled workers D Resources being both geographically and occupationally mobile
Which type of goods would be over-produced if left to market forces?A Basic necessities B Capital goods C Demerit goods D Public goods
A merit good is one which:A has an absence of external benefits B has higher private benefits than consumers realise C imposes costs on those who are not involved in its production directly D is both non-excludable and non-rival
In which case is market failure occurring?A Consumers determining what is produced B Firms producing above the lowest possible cost C Price falling as a result of a decrease in demand D Price rising as a result of an increase in costs of production
In the diagram below, which movement shows an increase in productive efficiency?A A to B B B to C C C to D D A to D
In a market system, what encourages firms to keep their costs low?A Competition B Government regulations C Subsidies D Taxation
The diagram below shows the current position in a market. How will market forces move the situation towards allocative efficiency?Price Demand Supply A fall fall rise B fall rise fall C rise fall rise D rise rise fall
What encourages firms to produce what consumers demand?A The chance to earn a high profit B The chance to experience high unit costs of production C The desire to attract new firms into the industry D The desire to keep revenue as low as possible
What is an advantage of a market economy?A An absence of poverty B Consumer sovereignty C Firms having considerable market power D Full employment
Which diagram illustrates elastic supply?
In what circumstance would supply of a product be elastic?A It is costly to produce B It takes time to produce C It can be stored D It uses resources which are in short supply
What does a PES of 0.8 indicate?A Supply is elastic B Supply is perfectly elastic C Supply is perfectly inelastic D Supply is inelastic
What is the formula for PES? A B Change in quantity supplied Change in price Percentage change in quantity supplied Percentage change in price Change in quantity supplied C Change in quantity demanded Percentage change in quantity supplied D Percentage change in quantity demanded
to 600. What type of price elasticity of demand does this product have over this price range?A Perfectly inelastic B Inelastic C Unity D Elastic
The price of a product rises from $60 to $90. This causes demand to contract from
What characteristic is likely to make the demand for a product elastic?A It is a necessity B It is habit-forming C It is relatively cheap D It has close substitutes
Demand for a product is inelastic. What effect will a fall in price have?A Demand will not change B Demand will change by a greater percentage C Total revenue will fall D Total revenue will rise
What is price elasticity of demand?A A measure of the extent to which price changes when the quantity demanded changes B A measure of the extent to which the quantity demanded changes when price changes C A measure of the extent to which total revenue changes when price changes D A measure of the
What effect would a decrease in supply of a product have on its price and demand?Price Demand A decreases contracts B decreases extends C increases contracts D increases extends
Which diagram best illustrates the effect of an increase in income on the market for an inferior good?
The diagram shows the demand for and supply of a product. The initial equilibrium is at point x. The cost of raw materials used to produce the product falls. Which point represents the new equilibrium?
The diagram shows a change in the market for coffee. What could explain this change?A A rise in the price of coffee B A rise in the price of tea C A successful advertising campaign for tea D A health report indicating that drinking coffee can cause headaches
A market is operating with a disequilibrium price. What must this mean?A Demand and supply are not equal B Shortages do not exist C The price mechanism is not working D There is no opportunity cost involved
If there is excess demand in a market, what is the relationship between price and equilibrium price, and sales and equilibrium sales?Price Sales A above equilibrium above equilibrium B above equilibrium below equilibrium C below equilibrium below equilibrium D below equilibrium above equilibrium
A market is experiencing a shortage. What will happen to price and sales as the market moves back to equilibrium?Price Sales A Decrease Fall B Decrease Rise C Increase Fall D Increase Rise
Equilibrium price is the price at which:A Everything that is produced is sold B The amount consumers demand is equal to the amount sellers supply C The number of buyers equals the number of sellers D Supply exceeds demand
What would cause an increase in the supply of milk?A An increase in the price of cattle feed B An increase in wages paid to farm workers C The introduction of a subsidy to cattle farmers D The outbreak of a disease affecting cows
How would an increase in supply be illustrated?A A movement up the supply curve B A movement down the supply curve C A shift to the left of the supply curve D A shift to the right of the supply curve
What does a market supply curve show?A The proportion of total output produced by different firms in the industry B Proportion of total output sold C The relationship between the total quantity supplied and demand for the product D The relationship between the total quantity supplied and the price
What is the relationship between demand and price and the relationship between supply and price?Demand and price Supply and price A directly related directly related B directly related inversely related C inversely related directly related D inversely related inversely related
The price of a product rises. What will happen to the demand for its complement?A It will contract B It will extend C It will decrease D It will increase
An increase in demand is represented by:A A movement down the demand curve B A movement up the demand curve C A shift to the left of the demand curve D A shift to the right of the demand curve
What happens to people’s willingness and ability to buy a product when its price falls?Willingness Ability A increases increases B increases decreases C decreases decreases D decreases increases
What is measured on the vertical axis of a demand diagram?A Cost B Price C Quantity demanded D Wants

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Cambridge IGCSE And O Level Economics Coursebook 2nd Edition Susan Grant - Solutions

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