AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
MICROECONOMICS
MULTIPLE CHOICE PAPER 1
1
In economic methodology if a hypothesis fails the tests to which it is exposed then
A
the hypothesis may be revised.
m
B
the hypothesis may be rejected.
m
C
the hypothesis may be made less demanding.
m
D
all of the above are possible.
m
2
Marginal utility can best be defined as
A
the satisfaction an individual gains from consuming a good or service.
m
B
the additional revenue gained as an extra worker is employed.
m
C
marginal physical product multiplied by marginal revenue.
m
D
the additional welfare gained from consuming one extra unit of a good or
service.
m
AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
3
The diagram below shows a firm that has chosen to produce at output Q and price P.
What is the firm’s business objective?
A
Profit maximising
m
B
Revenue maximising
m
C
Sales volume maximising
m
D
Profit satisficing
m
4
Firms in perfect competition are likely to be productively efficient in the long run because
A
information is assumed to be perfect.
m
B
in the long run firms are earning normal profit and any productively inefficient
firms would therefore leave the market.
m
C
firms can sell as much as they wish at the prevailing market price.
m
D
products are homogenous.
m
AQA A LEVEL ECONOMICS
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5
The diagram below shows a firm’s demand and supply curves. This market is initially in
equilibrium.
Suppose that the firm now chooses to behave like a monopoly supplier, and restricts
output to 4000 units. Calculate the value of the decrease in consumer surplus that occurs
as a result of this change.
A
£21 000
m
B
£16 500
m
C
£16 000
m
D
£9 000
m
AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
6
The diagram below represents a monopsony employer operating in an otherwise
competitive market.
What is the combination of wage rates and employment in this industry?
A
Wage rate W and employment level E1
m
B
Wage rate W1 and employment level E
m
C
Wage rate W2 and employment level E1
m
D
Wage rate W2 and employment level E
m
7
Which one of the following is not a likely cause of people living in poverty?
A
Benefits in kind
m
B
Employed but on a low wage
m
C
Old age with no private pension
m
D
Unemployment
m
AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
8
Which one of the following is most likely to result in government failure?
A
A ban on an activity where the socially optimal level is negative
m
B
A subsidy on a demerit good equal to the information failure
m
C
A nudge when economic agents are purely rational
m
D
A maximum price on a demerit good equal to the equilibrium price
m
9
Which one of the following is not an example of market failure?
A
Creative destruction
m
B
Income inequality
m
C
Positive production externalities
m
D
Factor immobility
m
10
The diagram below represents a market in which there is market failure. The free-market
outcome is shown at PQ.
AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
Which of the following would be the most appropriate policy response to this market
failure?
A
An information campaign to close the gap between MPB and MSB
m
B
A tax equal to the vertical distance between MPB and MSB
m
C
A subsidy equal to the vertical distance between MPB and MSB
m
D
A nudge
m
11
Price discrimination is most likely to
A
reduce consumer surplus for all groups.
m
B
lead to lower prices in market segments where PED is inelastic.
m
C
be effective if resale between market segments can be avoided.
m
D
lead to lower revenue for the firms concerned.
m
12
The price of a good increases from £8 to £10 and the PES is 2. What is the new quantity
supplied when the original quantity supplied was 100 units?
A
130 units
m
B
140 units
m
C
150 units
m
D
160 units
m
AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
13
A movement from a point inside a PPF to a point on the boundary suggests that
A
allocative efficiency has improved.
m
B
productive efficiency has improved.
m
C
both allocative and productive efficiency have improved.
m
D
neither allocative nor productive efficiency has improved.
m
14
Which one of the following is an incorrect statement about behavioural economics?
A
When faced with large amounts of unfamiliar information economic agents may
experience bounded rationality.
m
B
Heuristics may lead to biased decisions.
m
C
Default choice can be a powerful nudge.
m
D
Nudges are always cheaper than traditional policies.
m
15
Which one of the following would lead to an increase in demand for a good, all other
things equal?
A
An increase in the rate of VAT
m
B
A fall in the price of a substitute
m
C
A fall in income if the good is inferior
m
D
An increase in the price of a complement
m
AQA A LEVEL ECONOMICS
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16
Goods A and B are in competing supply. Good A is a normal good. When income increases,
which combination of elasticities will lead to the highest price rise for good B?
YED for good A
PES for good A
PED for good B
A
high
low
high
m
B
low
high
low
m
C
high
high
low
m
D
low
low
high
m
17
When an increase in demand in market A leads to an increase in supply in market B the
goods are likely to be
A
substitutes.
m
B
in composite demand.
m
C
in derived demand.
m
D
in joint supply.
m
18
Which one of the following is not true of monopolistic competition?
A
The output of the market is supplied by a single firm
m
B
Firms face a downward sloping demand curve
m
C
The MR curve lies below the AR curve
m
D
There are no barriers to entry in the long run
m
AQA A LEVEL ECONOMICS
ADVANCE INFORMATION SHORT
19
Which one of the following is not an example of a market imperfection?
A
Concentrated markets
m
B
Imperfect and asymmetric information
m
C
Factor immobility
m
D
Homogenous goods
m
20
Abnormal profits provide an incentive for firms to enter the market and innovate to
overcome existing barriers to entry. This is an example of:
A
market failure.
m
B
the price mechanism.
m
C
the competitive market process.
m
D
static efficiency.
m