IGCSE ECONOMICS UNIT 2 FROM 2010-2017

1. The diagram shows the market for fresh fish in the Caribbean with equilibrium point X. New, more efficient boats with lower running costs are then used. Which point represents the new equilibrium?

2. The diagram shows the demand for and the supply of bread.

A maximum price P1 is fixed by the government. What is likely to be the

immediate result of this? A a movement of the demand curve to the right B a movement of the supply curve to the right C a shortage of bread D a surplus of bread

3. The diagram shows a market for wheat that is in equilibrium.

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Which area represents the total revenue for wheat farmers? A OTXY B OVXZ C OVXY D OWXY4. The diagram shows the supply curve for a good.

What is the price elasticity of supply when the price rises from $2 to $4? A 0.2 B 0.5 C 1 D 25. Due to changes in the costs of production, an industry’s supply curve shifted at

various times from S1 to either S2 or S3.

If a shift in supply was due to a seasonal increase in the cost of raw materials, what would have been the effect on demand?

A The demand curve would move from D1 to D2. B The quantity demanded would move from x to w. C The quantity demanded would move from x to y. D The quantity demanded would remain the same at x.

6. The table shows the changes in two influences on the demand for and supply of televisions.

If these two changes occurred at the same time, in which case is it impossible for the price of televisions to rise?

7. In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in petrol tax will be mainly on

A the company that refines the oil. B the motorist who buys the petrol.

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C the petrol station that sells the petrol. D the wholesale company that stores the petrol.8. What is not held constant in constructing a demand schedule? A the incomes of consumers B the prices of complementary goods C the price of the good itself D the tastes of consumers9. A shop sells chocolate birthday cakes. When the price was $15 it sold 40 cakes. It

reduced the price to $10 and sold 60 cakes. What can be concluded from this? A The firm will make less profit because the price has fallen. B The firm will make more profit because sales have increased. C The price elasticity is inelastic because demand only increased by 50 %. D There is unit price elasticity because the firm’s revenue remained the same after

the price change.10. What changes would move the equilibrium in the diagram from point X to a new

point within area Z?

A a decrease in demand with a decrease in supply B a decrease in demand with an increase in supply C an increase in demand with a decrease in supply D an increase in demand with an increase in supply

11. There are a fixed number of seats at a concert. Most of the audience would continue to attend even if the seat prices were increased. Which demand and supply diagram represents this situation?

12. When the price of shirts rises from $8 to $10, the demand for shirts falls from 1000 to 500. What is the price elasticity of demand for shirts?

A greater than 1 B unitary C less than 1 D zero13. When the price of a good doubles the demand falls by less than half, and the

revenue received by the seller increases. What does this suggest about the good? A it has substitutes B it is a necessity C it is in fixed supply D it is perfectly elastic in demand14. What is most likely to reduce the supply of factors of production in an economy?

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A increasing the age of retirement B introducing new methods of irrigation C lowering the cost of borrowing from banks D raising the rate of tax on profits15. What would cause a movement down the demand curve for cars? A a fall in the price of cars B a fall in the price of petrol C a rise in the price of car insurance D a rise in the price of public transport

16. Russia is the world’s third largest exporter of grain but much of the country’s farmland was damaged by fire in 2010. How would this be represented on demand and supply diagrams for the Russian grain market and for a country importing Russian grain?

17. Newspapers recently reported there had been a decrease in the demand for beef and that its price per kilogram had increased. From the initial equilibrium point X, which point in the diagram illustrates the new market equilibrium?

18. The diagram shows the market for fresh fish in the Caribbean with equilibrium point X. A new type of fishing boat increases production, which reduces costs. Which point represents the new equilibrium?

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19. The government reduces the rate of income tax and increases the rate of tax on producers. From the initial equilibrium point X, which letter indicates the new equilibrium point in the market?

20. A government taxes the production of cars. What is likely to decrease? A the cost of supplying cars B the price of cars C the revenue for the government D the supply of cars at every price21. The diagram shows the market for rice.

What would have caused the equilibrium price to rise from OP1 to OP2? A a government subsidy to rice farmers B a successful advertising campaign for rice C improved rice farming methods D poor weather conditions

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22. In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a legal minimum wage. An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.

How many people will be employed if the minimum wage legislation is then

abolished? A 4 million B 5 million C 6 million D 7 million23. The diagram shows the demand and supply of places in independent (private)

schools which charge fees. The equilibrium position is X. The costs of independent (private) schools rise. Also a report is issued which states that Government schools achieve very good examination results. What is likely to be the new equilibrium position?

24. The diagram shows the market for a product.

Which statement about the points marked on the diagram is correct? A The distance from W to X shows a shortage of the product. B The distance from Z to Y shows a surplus of the product. C The movement from W to Y shows a fall in the quantity demanded of the product. D The movement from X to Z shows a fall in the quantity supplied of the product.

25. The diagram shows the demand for chocolate.

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What could cause the movement from point X to point Y? A a change in tastes B a fall in the price of chocolate C an increase in income D a successful advertising campaign for chocolate26. A football club raises all stadium seat prices by 5%. The stadium is divided into

four zones. The demand for seats falls by 1% in zone W, by 3% in zone X, by 5% in zone Y and by 6% in zone Z. In which zone is the responsiveness of demand for seats to the price change elastic?

A zone W B zone X C zone Y D zone Z27. Tea is a very popular drink in Turkey and Morocco but coffee is an alternative

drink preferred by many people. Many cafés provide a small biscuit with either a cup of tea or coffee. Some people put sugar in the drinks to sweeten them. How would the relation between these goods be classified?

28. What is an example of market failure? A a growth of competition B an existence of scarcity C a spread of pollution D a surplus of production in the short-term29. Which action by the operators of an airport directly reduces external costs? A the stopping of night flights B the building of a new runway C the payment of a productivity bonus D the reduction of charges for landing aircraft

30. A large shop selling clothes opened in a town. Its prices were much cheaper than other shops selling similar items. As a result many more customers came to the area. They also visited restaurants near the shop. The restaurants reported a 10 % increase in sales. What economic concept does the above statement best illustrate?

A external benefit B inelastic demand C market failure D perfect competition31. In 2010, a major oil leak from an oil rig affected many people living around the

Gulf of Mexico. What type of market failure did they experience? A monopoly exploitation

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B negative externality C price discrimination D rising tax burden32. Why are schools sometimes built and run with government money? A The private sector could not afford the cost of investment to build schools. B The private sector would have lower standards than government schools. C The provision of schools by the government ensures the widest choice for students. D There are external benefits from the provision of education.33. What is a likely reason why many countries’ governments subsidise scientific

research? A Private sector firms may overestimate the external benefits and ignore the

private benefits of scientific research. B Private sector firms may overestimate the external costs and ignore the private

costs of scientific research. C Private sector firms may underestimate the private benefits and ignore the

external benefits of scientific research. D Private sector firms may underestimate the private costs and ignore the

external costs of scientific research.34. An area attracts tourists to see rare animals but the tourists have few hotels in

which to stay. The local government has given permission for a developer to build a hotel. Conservationists say that the area will be ruined as the animals will move away and the nature of the area will be changed. What is likely to happen as a result of this decision to the private benefit of the tourists and the external cost?

35. A large supermarket applied to build on land which was in an area of natural

beauty. The local government allowed the building, even though the natural beauty of the area would be lost, because many jobs would be created and much needed income would be brought to the local community. Which economic ideas cannot be found in the above statement?

A external cost and private enterprise B free market and the conservation of resources C opportunity cost and improved standards of living D public sector and external benefit36. Cigarettes have been used as money in exceptional circumstances. What is the

most likely reason that they are not acceptable as money in normal circumstances?

A cigarettes lack durability B cigarettes lack intrinsic value C cigarettes lack portability D cigarettes lack uniformity37. Developers want to increase the size of a major retail shopping area in a city. It

is thought that the proposal would create hundreds of jobs, be profitable for the 8

shops but cause major traffic congestion. What economic concepts are directly involved in this statement?

A external cost and private benefit B income distribution and inelastic demand C private investment and a decrease in supply D social benefit and perfect competition38. A project to build one of the world’s biggest coal mines was planned in Australia.

The project was estimated to cost $US12.5 million. It would create employment but threaten endangered species as large coal ships would damage the Great Barrier Reef. What effects would this project have on the following costs and benefits?

39. What is an advantage of the market economic system? A It aims for equality of income. B It ensures the provision of defence and law and order. C It gives an incentive to produce. D It reduces pollution and congestion.40. What is found in a mixed economy but not a free market economy? A banks B division of labour C price controls D profit motive41. In a pure market economy, which secondary factor determines the distribution

of goods and services? A fairness to the consumer B needs of the consumer C price of the product D quality of the product42. What is most likely to be the responsibility of a central government? A the provision of immigration officials at an airport B the provision of security cameras in a shopping centre C the provision of security staff at a bank D the provision of ticket inspectors on a train43. The government of a developed country subsidises local private businesses,

and encourages large foreign companies to locate in the country. Which type of economic system is this?

A free market B mixed C planned D subsistence44. What can be found in a mixed economy but not in a market economy? A a national economic development plan B an unequal distribution of income and wealth C the operation of the price mechanism D the private ownership of factors of production

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45. Which pair of economic institutions can be found in a market economy? A charities and public corporations B multinationals and commercial banks C public corporations and private companies D stock exchange and government hospitals

ANSWERS1. D 41. C2. C 42. A3. C 43. B4. B 44. A5. B 45. B6. A7. B8. C9. D10. C11. C12. A13. B14. D15. A16. C17. A18. D19. B20. D21. D22. D23. A24. D25. B26. D27. C28. C29. A30. A

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31. B32. D33. C34. C35. B36. A37. A38. C39. C40. C

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