Multiple Choice Questions for AQA AS Economics

Name: Multiple Choice Questions for AQA AS Economics
Uploaded: 2017-07-11T18:40:16+00:00
Duration: PTM20S9
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Description: Multiple Choice Questions for AQA AS Economics

Multiple Choice Questions for AQA AS Economics
UNIT 1 Markets & Market Failure Click here to Commence quiz 1.2 The Allocation of Resources in Competitive Markets Test 1 © APT Initiatives Ltd

Question 1 AQA AS Economics Unit 1 – Markets & Market Failure
When the price of a product increases… demand will shift to the left Incorrect A rise in price brings about a fall in the quantity demanded, otherwise known as a contraction of demand. A contraction of demand (illustrated by an upward movement along the demand curve) should be distinguished from a decrease in demand (an inward shift of the demand curve). more will be demanded at each price Incorrect quantity demanded will fall Correct quantity demanded will rise Incorrect Next question APT Initiatives Ltd

A shift in a demand curve occurs when… there is a change in price Incorrect The first response results in a movement along the demand curve. The middle two responses relate to changes in supply. Only D causes a shift of the whole demand curve. there is an increase in business costs Incorrect businesses become more efficient Incorrect there is a change in income Correct Next question APT Initiatives Ltd

Which of the following statements is incorrect? A rightward shift of the demand curve can be caused by… a reduction in the price of the product Correct A reduction in price will lead to a downward movement along the demand curve, rather than a shift of the demand curve. a rise in population Incorrect a rise in income Incorrect a rise in the price of a substitute product Incorrect Next question APT Initiatives Ltd

A pen manufacturer reduces the price of its latest model by 6% and, as a result, sales volume increases by 4%. Therefore, the price elasticity of demand, to two decimal places must be… +1.57 Incorrect 4% / -6% = -0.67 Correct -1.52 Incorrect -2.54 Incorrect Next question APT Initiatives Ltd

The price elasticity of demand for a firm’s products will change when a business … is faced with a new competitor Correct The entry of new competitors will increase the price elasticity of demand for the products of existing firms, because buyers will have more products to choose from and will, therefore, respond more readily to price changes. manages to reduce its costs Incorrect benefits from a general increase in incomes Incorrect experiences a rise in production costs Incorrect Next question APT Initiatives Ltd

When incomes rise by 2%, demand for UK holidays rise by 4%. The income elasticity of demand is… +2 Correct 4% / 2% = 2. Because quantity and income move in the same direction, the income elasticity is positive; hence the answer is +2. +20 Incorrect +0.8 Incorrect +0.5 Incorrect Next question APT Initiatives Ltd

A greengrocer has obtained some market research data which indicates that the income elasticity of demand for potatoes is This means that… demand is income inelastic, and the potatoes are a normal good Incorrect Negative income elasticity means that the product is an inferior good. As the coefficient of elasticity is it means that demand is income elastic, ie a 10% fall in income leads to a 15.6% rise in demand. demand is price elastic, and potatoes are a necessity Incorrect potatoes are a normal good, and demand is income elastic Incorrect potatoes are an inferior good, and demand is income elastic Correct Next question APT Initiatives Ltd

Petrol retailers have noticed that when cars increase in price by 5%, demand for petrol falls by 2%. The cross elasticity of demand for petrol is… -2.5 Incorrect -2% / +5% = -0.4. he fact that the figure is negative proves that the relationship is one of complements. -1.0 Incorrect -0.5 Incorrect -0.4 Correct Next question APT Initiatives Ltd

Movement up a supply curve arises because of… improvements in business efficiency Incorrect A change in price (brought about by a rightward shift of the demand curve) leads to an upward movement along the supply curve. A change in anything else causes a shift in the whole curve. an increase in price Correct an increase in tax Incorrect a reduction in price Incorrect Next question APT Initiatives Ltd

A supply curve for a product would shift to the right if there was… an increase in tax Incorrect A shift to the right means more is supplied at each price (an increase in supply). This could be the result of an improvement in technology which will lead to lower business costs. a decrease in price Incorrect an improvement in production technology Correct an increase in business costs Incorrect Next question APT Initiatives Ltd

A rightward parallel shift in a supply curve would occur when business costs … rise by 3% Incorrect A rightward shift is the result of a fall in the cost of production. The correct answer hinges on the word ‘parallel’ which is why D is right and B is wrong. fall by 10% Incorrect rise by £3 a unit Incorrect fall by £3 a unit Correct Next question APT Initiatives Ltd

A decrease in price elasticity of supply can arise when… business costs rise Incorrect Government regulation acts as a constraint, thus reducing the possibilities for expansion of output and the entry of new firms into the market. business costs fall Incorrect government intervenes with more market regulation Correct a business produces various goods for different markets Incorrect Next question APT Initiatives Ltd

A rise in price from £21 to £22 leads to a 5% rise in the quantity supplied. To two decimal places price elasticity of supply is… +1.05 Correct Even without any calculation we can rule out the first two responses. PES is usually positive and it certainly is in this case. PES = 5% / = +1.05 -1.52 Incorrect -1.05 Incorrect +2.52 Incorrect Next question APT Initiatives Ltd

Movement up a demand curve to a new equilibrium position could have been caused by… an increase in price of a substitute product Incorrect What happens here is that the tax shifts the supply curve to the left and, as a result, there is a movement along the demand curve to a higher price. A would cause a shift of the demand curve, whereas C is a shift in the supply, which causes a slide down the demand curve. D is concerned with slope of the demand curve, rather than a shift of the demand curve. a tax imposed on a good Correct a shift to the right in the supply curve Incorrect an increase in the price elasticity of demand Incorrect Next question APT Initiatives Ltd

The conditions of demand and supply of a luxury car brand are shown in the diagram below. The supply curve could have shifted to the left because… Supply has decreased and this can only be explained by a rise in producer’s costs. A tax on cars is seen in the same light as a rise in costs; to protect profits, both changes would require a corresponding rise in price. Hence, B is the correct answer. A concerns the demand for cars. C is illustrated by a movement along the supply curve. D would cause a rightward shift of the supply curve. there was a decrease in the price of petrol Quantity O S1 S2 D 1 Price Incorrect the government has imposed a special tax on luxury cars Correct the price has risen Incorrect the costs of manufacture have fallen Incorrect Next question APT Initiatives Ltd

The table below shows the demand and supply schedules for pizzas sold by a local takeaway. Following a rise in production costs, supply falls by 80 pizzas at all prices. The new equilibrium price would be… £2.25 Incorrect Price per Pizza Quantity demanded per week Quantity supplied £3.00 350 510 £2.75 400 480 £2.50 450 £2.25 500 420 Construct a new supply schedule with 80 fewer pizzas supplied at each price. At price £2.75, 400 pizzas are demanded and 400 are supplied. £2.50 Incorrect £2.75 Correct £3.00 Incorrect Next question APT Initiatives Ltd

Supply in agriculture is typically price inelastic because… farmers cannot alter output at short notice Correct Supply is inelastic because agricultural output is subject to the growing cycle and seasons of the year. farmers rely on the weather Incorrect there are few substitutes for food Incorrect farmers can use stocks in response to changes in price Incorrect Next question APT Initiatives Ltd

The price elasticity of supply of houses is estimated to be less than 1. This means that… supply is price elastic Incorrect By definition inelasticity of supply means that it is difficult to respond to changes in the market. builders cannot easily build more houses in a booming economy Correct producer revenue will remain unchanged Incorrect builders benefit from increased revenue when prices rise Incorrect Next question APT Initiatives Ltd

Which one of the following products or services is not complementary to owner occupied houses? Mortgages Incorrect Rented accommodation is a substitute for owner occupation. Home improvements Incorrect Rented accommodation Correct Furniture Incorrect Next question APT Initiatives Ltd

The introduction of high definition television can be expected to result in the following with the exception of… increased demand for new TV sets Incorrect HD will increase the demand for new sets and, at the same time, increase the supply of second hand sets as people upgrade. The new HD television increases the attractiveness of digital satellite services which should be seen as a complementary service. The one thing it will not lead to is a rise in the price of used sets. If anything, it will put downward pressure on the price of used sets. increased supply of second hand TV sets Incorrect increased price of second hand TV sets Correct increased demand for satellite television services Incorrect Next question APT Initiatives Ltd

Coffee and tea are substitute products. A rise in the price of coffee will lead to… As the two products are substitutes for each other it is to be expected that a rise in the price of coffee will mean people switch to tea. The only issue in dispute is whether it is an increase in demand, or an increase in the quantity demanded. By custom, we use the term “an increase in quantity demanded” (alternatively an extension of demand) to mean a change brought about by a reduction in the price of the product. The phrase “increase in demand” is reserved for an increase brought about by something other than a change in the price of the product. an increase in demand for tea Correct an increase in the quantity demanded of tea Incorrect a contraction in the demand for tea Incorrect no change in the demand for tea Incorrect Next question APT Initiatives Ltd

The motor industry uses steel to make cars. This relationship is an example of products in … joint supply Incorrect As the car industry is a major user of steel we can conclude that the demand for steel is, in part, derived from the demand for cars. derived demand Correct substitute demand Incorrect competitive demand Incorrect Next question APT Initiatives Ltd

Which of the following is not a feature of price? It rations available resources Incorrect The price mechanism allocates resources, but not necessarily fairly. However, it does definitely ration, signal and incentivise. Therefore, D is the correct answer to the question. It signals market conditions Incorrect It incentivises buyers and sellers Incorrect It allocates resources fairly Correct Next question APT Initiatives Ltd

When resources are allocated through the price mechanism… prices must fall Incorrect Competition will force firms to keep down costs and, therefore, D is correct. prices are typically determined by central government Incorrect production costs will determine prices Incorrect business costs are more likely to be competitive Correct Next question APT Initiatives Ltd

Quiz Completed Question 25
AQA AS Economics Unit 1 – Markets & Market Failure Quiz Completed Question 25 Which of the following statements is true about a market economy? Economic decision makers act in ways which will maximise social welfare Incorrect Economic theory is based on the assumption that consumers and others make rational decisions. A is certainly not true since economic agents act in their own self interest. B is not true since governments play a minimal role in a market economy. D is not true since producers respond to consumer demand. The government has a crucial role to play in ensuring that economic outcomes are fair Incorrect Prices help buyers make rational judgements about the value of what they buy Correct Producers determine what is produced, and for whom it is produced Incorrect Exit APT Initiatives Ltd

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