ECONOMICS (0455)
Year 10
Revision Worksheets
2
Multiple choice questions. Choose the correct option.
1 What is the cause of scarcity in an economy?
A high employment levels
B high investment levels
C unlimited resources
D unlimited wants
2 What does a point on a production possibility curve for an economy represent?
A economic growth is falling
B inefficient use of resources available
C maximum output possible with current technology
D total demand for goods and services
3 What is most likely to increase enterprise as a factor of production in an economy?
A a decrease in government spending on education
B a decrease in regulation on firms
C an increase in emigration
D an increase in taxation on firms
4 Which economic activity would be classified as macroeconomics?
A households spend less on holidays abroad
B income tax is increased by the government
C wages rise for construction workers
D world coffee price rises due to poor weather
5 What is the correct formula to calculate price elasticity of supply?
A the percentage change in price divided by the change in quantity supplied
B the percentage change in price divided by the percentage change in quantity supplied
C the percentage change in quantity supplied divided by the change in price
D the percentage change in quantity supplied divided by the percentage change in price
3
6 The diagram shows the effect of a decrease in price on the demand for a product.
D
price
P1
P2
O Q1 Q2
quantity
demanded
What does the arrow on the diagram illustrate?
A contraction in demand
B decrease in demand
C extension in demand
D increase in demand
7 What is the most likely cause of a product having a price elasticity of demand greater than one?
A The product has a close substitute.
B The product is a habit-forming good.
C The product is a necessity.
D The product requires only a small proportion of consumer income.
4
8 For some illnesses, wearing a face mask has a benefit as it could prevent people from getting
infected. Not all people are willing to wear face masks.
Based on the statement above, why would there be an inefficient allocation of face masks in the
free market?
A Consumers in the free market only consider private costs and benefits.
B Face masks are non-rival and non-excludable.
C There is abuse of monopoly power by the producer of face masks.
D There is perfect information in the free market.
9 What would bring about a movement upwards along the supply curve for rice?
A a decrease in the productivity of farmworkers
B a decrease in the profitability of rice production
C an increase in consumers’ incomes
D an increase in farmworkers’ wages
10 A government decides to reduce air pollution in city centres by giving financial assistance to bus
companies, reducing their costs of production and prices for passengers.
Which type of policy measure is this?
A a maximum price
B a minimum price
C a subsidy
D regulation
11 What would be least likely to act as a store of value during a period of rapid inflation?
A cash
B gold
C property
D shares
5
12 A country’s central bank raised the rate of interest from 1% to 4% per year.
How would this change have affected the amount saved and the cost of borrowing by individuals?
amount cost of
saved borrowing
A decreased decreased
B decreased increased
C increased decreased
D increased increased
13 Which factor would not increase the bargaining strength of a trade union to raise wages?
A a rapidly growing economy
B high union membership in the industry
C legislation limiting strike action
D workers are in short supply
14 Which conditions are most likely to attract small firms to enter a market?
fixed costs of
the market for
entering the
the product
industry
A local high
B local low
C national high
D national low
6
15 The diagram shows a firm’s total cost (TC) curve.
TC
50
cost
$
10
0
10
units of output
What is the average variable cost if the firm produces 10 units of output?
A $4 B $5 C $40 D $50
16 The table shows the units of factors of production that a firm needs to employ for two different levels of
output.
land labour capital output
5 2 4 100
10 4 8 150
What is the firm experiencing?
A constant returns to scale
B diseconomies of scale
C external diseconomies of scale
D external economies of scale
17 What is an example of a government macroeconomic aim?
A a minimum of 10 years of schooling
B a sales tax of 10% on consumer goods
C a target rate of 2% inflation
D increasing pay for nurses
7
18 A country’s production possibility curve (PPC) moves from PPC 1 to PPC 2 .
consumer
goods
PPC1 PPC2
O capital goods
What could cause this movement in the PPC?
better higher lower
education investment unemployment
A false false true
B false true false
C true false true
D true true false
19 A government spends $100m on subsidising wind farm construction instead of spending it on an
increase in healthcare.
Which economic concept does this spending decision illustrate?
A external cost
B free goods
C market disequilibrium
D opportunity cost
20. Savers suffer as inflation rises to 4.4%.
Which function of money is most involved in this statement?
A means of deferred payments
B medium of exchange
C store of value
D unit of account
8
21 What is not a variable cost of production?
A cost of fuel
B cost of raw materials
C extra pay for working additional hours
D rent of offices
22 What is a definition of a firm’s revenue?
A money received from sales
B sales volume
C surplus over costs
D tax payments
23 What could cause internal diseconomies of scale for a firm?
A a fall in demand for the products produced by the firm
B a merger with another firm that results in slower decision-making
C spending more on research and development to create new products
D the lack of skilled labour in the geographical area where the firm is based
24. Good X is demanded in two areas, Y and Z. The table shows the amount of X demanded in these
areas at different prices.
price of quantity demanded
good X per month
(US$) area Y area Z
5 1000 200
10 800 150
15 600 100
20 400 50
25 200 0
What can be concluded from the table?
A Consumers in area Y are more willing and able than consumers in area Z to buy good X.
B Consumers in area Y are richer than consumers in area Z.
C Consumers in area Y want the good more than consumers in area Z.
D There are more consumers living in area Y than in area Z.
9
25 GDP per capita in Switzerland is high.
What is the reason why Swiss citizens still face the basic economic problem?
A. Income in Switzerland is unevenly distributed.
B. Inflation in Switzerland is high.
C. Swiss citizens expect high living standards.
D. Swiss citizens have to make choices in consumption.
26 The diagram shows the supply curve for a good.
price $ S
Y
O quantity
What is the name and cause of the movement from X to Y?
A. a contraction of supply caused by a decrease in demand
B. a contraction of supply caused by an increase in demand
C. an extension of supply caused by a decrease in demand
D. an extension of supply caused by an increase in demand
27 In the diagram, which supply curve has the perfectly inelastic supply?
A B
C
price $
O quantity
10
28 What is a reason why firms making similar products sometimes locate near each other?
A. Competition is decreased.
B. There are external economies of scale.
C. There are internal economies of scale.
D. Transport costs may be eliminated.
29 The table shows the activities of four firms.
firm 1 firm 2 firm 3 firm 4
shoe website shoe shoe
manufacture design manufacture retailer
Which combination of firms would be an example of horizontal integration?
A. 1 and 2
B. 1 and 3
C. 2 and 4
D. 3 and 4
30 What is likely to increase the bargaining power of a trade union?
A. when the economy is experiencing rising cyclical unemployment
B. when the labour market moves from long-term to short-term contracts of employment
C. when the price elasticity of demand for the product is price-elastic
D. when the trade union supplies all the labour required by the employer
11
Section B
Read the source material carefully before answering Question 1.
Air India is owned by the Indian government. The entry of new firms into India’s air travel market has
reduced Air India’s ability to set price. The state-owned firm faces competition not only from other
airlines but also from other forms of transport including trains and ships.
In 2017 the Indian government tried, unsuccessfully, to sell Air India to the private sector. A successful
sale would have raised money for the Indian government and might have increased the airline’s
efficiency. It is predicted that India will have the third largest airline industry by 2025.
A rise in both the number of routes flown and the quality of the passenger experience may increase the
number of tourists visiting India. A larger Indian airline industry is likely to increase the ease of
movement of people and goods into and out of India. This might attract more multinational companies
(MNCs) and reduce firms’ costs of production.
India’s air travel market faces a number of challenges. India has Asia’s highest airline fuel tax. Some
economists suggest that this should be increased further to increase tax revenue and to reduce market
failure. The airlines’ other costs are rising but it is difficult for them to raise prices. This is because
India’s air passengers are among the most price-sensitive in the world. Some airlines stop their costs
rising any further by improving their staff training, introducing new technology and improving their
pilots’ working conditions. The airlines’ ability to hire pilots is influenced by, among other factors, the
quality of education and other job opportunities.
Answer all parts of Question 1. Refer to the source material in your answers.
a) Calculate, in $, Air India’s loss in 2018. [1]
b) Identify two substitutes for air travel. [2]
c) Explain one characteristic that suggests that Air India was a monopoly in 1994. [2]
d) Explain two reasons why a government may privatise an industry. [4]
e) Analyse how a successful airline industry can promote economic growth. [5]
f) Discuss whether the Indian government should increase the tax on airline fuel. [6]
g) Discuss whether more people will apply to be pilots for Indian airlines in the future. [6]
12
Read the source material carefully before answering Question 2.
Source material: How will oil change Guyana?
Guyana was the fastest growing economy in the world in 2020. Sugar, gold and timber have accounted
for a relatively high proportion of the country’s output and exports for some time. In 2020, the sugar
industry was hit by bad weather and falling global demand. In contrast, the output of gold and timber
increased.
The main reason why Guyana’s real GDP increased so rapidly was the increase in oil production. Oil was
discovered offshore by a foreign multinational company (MNC) in 2015 and the MNC started
production in 2019. It is predicted that Guyana will become the world’s largest oil producer per head by
2025.
The Guyanese government is planning to use some of the tax revenue it will raise from oil to spend on
education and improvements to the country’s infrastructure. Planned projects include new railway lines
and stations. A more extensive and cheaper rail service may enable more people to work further from
home and may influence the market for substitutes, such as car transport. The Guyanese government is
also planning to spend some of the tax revenue on improving the country’s access to the internet. Table
1.1 shows GDP per head and internet access in seven countries in 2020.
Guyana has experienced a slow growth in its population size in recent years. In 2020, its birth rate was
16.5, its death rate was 6.8 and its net migration rate was –7.7. With increases in oil production,
emigration may decline and the country may start to experience net immigration. A higher population
may affect Guyana in a number of ways including changing the size of its labour force and affecting the
environment.
13
Answer all parts of Question 2. Refer to the source material in your answers.
a) Identify two causes of the decrease in the output of sugar in 2020. [2]
b) Explain how economic growth is measured. [2]
c) Explain two reasons why labour mobility may increase in Guyana in the future. [4]
d) Draw a demand and supply diagram to show the effect of a decrease in the price of rail
transport on the market for car transport. [4]
e) Analyse the relationship between GDP per head and internet access. [5]
Section C
Structured questions
1. A number of countries, including Morocco, capture water from fog. Water is used in the
primary, secondary and tertiary sectors. In recent years, Morocco has increased the quantity
and quality of its resources and has moved more of them into the tertiary sector. The quantity,
quality and composition of a country’s resources are influenced by a number of factors.
a) Define a free good. [2]
b) Explain, with examples, the difference between the secondary sector and the
tertiary sector. [4]
c) Analyse, using a production possibility curve (PPC), the effect of an increase in
the quality of its resources on an economy. [6]
2. The population of Hungary is the most obese in Europe. Hungarians eat fewer vegetables than
most Europeans and more food types that may be considered to be demerit goods. In 2017, the
Hungarian government introduced a tax on unhealthy food, known as the chips tax. The tax has
had some success in moving demand to healthier foods. Some economists suggest that
governments should use price controls as well as taxes to influence the food market.
a) Define demerit good. [2]
b) Explain the difference between an extension in demand and an increase in
demand. [4]
c) Discuss whether or not a government should impose a maximum price on food. [8]
3. Nicaragua experienced a 4% decrease in GDP in 2019, although household spending rose. One
Nicaraguan product that increased in supply was bananas, which are a merit good. The
Nicaraguan government encouraged its banana farmers and its other producers to increase their
output. Increases in output can affect a firm’s average costs of production.
a) Define supply. [2]
b) Explain two ways a government could increase the consumption of merit
goods. [4]
c) Analyse how the level and pattern of household spending may change
when GDP decreases. [6]
d) Discuss whether or not a firm will benefit from an increase in its output. [8]
14
4. In 2017, the Brazilian paper industry was booming. Its total revenue increased and it employed
both more, and better quality, factors of production. Brazil’s largest paper producer merged
with an Indonesian paper-producing firm at the end of 2017. The performance of Brazil’s coffee
industry differed from its paper industry. Brazilian coffee experienced a fall in demand and a fall
in total revenue.
a) Define Total revenue. [2]
b) Explain two differences between capital and labour. [4]
c) Analyse the possible effects on consumers of a merger between two
paper-producing firms. [6]
d) Discuss whether or not demand for coffee is likely to rise in the future. [8]
5. The mobile (cell) phone industry is growing in Asia with more workers being employed. In March
2017, there was a merger between two mobile phone producers, both of which had relatively
high fixed costs. This merger created one of the largest mobile phone firms and moved the Asian
market further from perfect competition and closer to monopoly. It was expected that profits in
the industry would increase as a result of the merger.
a) Identify two fixed costs. [2]
b) Explain two ways monopoly differs from the competitive market. [4]
c) Analyse what determines a firm’s demand for labour. [6]
d) Discuss whether or not a merger will increase profits. [8]
