1. Which type of business is always in the public sector?

A monopoly
B multinational corporation
C public corporation
D public limited company
2. When will a firm maximise its profits?
A when it excludes a rival supplier from the market
B when it produces where average cost and average revenue are equal
C when it sells as many products in as many different markets as it can
D when the difference between total cost and total revenue is greatest
3. What could discourage women from seeking employment?
A More education and training are provided.
B More flexible and part-time jobs are available.
C There are fewer promotion opportunities for women.
D There is a shift in employment to the services sector
4. A farmer reduces the land used to grow wheat from 80 hectares to 60 hectares and
increases the use of the land for growing potatoes from 80 to 100 hectares. What is the
opportunity cost of this change?
A The output from 20 hectares used for growing potatoes.
B The output from 20 hectares used for growing wheat.
C The output from 60 hectares used for growing wheat.
D. The output from 80 hectares used for growing wheat
5. What can be found in a market economy?
A externalities and monopolies
B interest rates and public goods
C public corporations and market prices
D tax rates and commercial banks
6. A private sector firm is given a contract by the government to supply a country’s water.
Which government directive will minimise the risk of market failure?
A allow the firm to ration water rather than meet demand
B ensure the firm’s supply includes all areas which are expensive to service
C insist that the firm aims to maximise profits
D instruct the firm to provide water only to those who can pay for it
7. What is meant by the equilibrium price in the market for a good?
A the average price paid by consumers
B the price at which maximum profit is made
C the price at which the producer breaks even
D the price at which the supply and demand curves intersect.
8. The table shows the effect of a change in the market price from $5 to $6 on the supply of
mobile (cell) phones.

Price in $ Supply in quantity

5 10000
6 15,000

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 9. Which statement about the price elasticity of supply of mobile phones is correct?
A Price elasticity of supply is 0.4.
B Price elasticity of supply is 2.5.
C Supply is perfectly elastic.
D There is unit elasticity.
10. The table shows how three people (X, Y and Z) spend their income.

Person x Person y Person z

Food, cloth and 30% 25% 50%
housing
Entertainment 35% 35% 25%
and leisure
Luxury goods 35% 405 25%

For these three people, what is the most likely order of income, from lowest income to
highest income?
A. Y X  Z
B. Y Z  X
C. Z X Y
D. Z Y  X

11. The table shows the weekly values of certain items for the average person in each
group. In which group does the average person save the most?

Income Spending Borrowing

A Employed workers 500 400 50
B Retired people 150 140 0
C School students 25 30 5
D Unemployed 200 300 100

12. The table shows the costs of a firm

Units of Variable cost in $ Total cost in $

output
10 20 80
20 50 110
30 80 140
40 110 150

What is the value of the firm’s fixed costs?

A. $20 B. $30 C. $60 D. $80

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 13. A firm’s average revenue is $10. It sells 2000 units. What is the firm’s total revenue and
the price of the product?

Total revenue in $ Price in $

A 10 10
B 2000 200
C 20000 10
D 20000 200

What is not a factor of production?

A. a $20 banknote B. an officen C. a photocopier D. a secretary

14. A deposit of shale oil is discovered in an area of farming. The following estimates are
made for a ten-year period.
● If the land is used only for farming it would yield income after tax of $10 billion.
● If the land is used only for shale oil extraction it would yield income after tax of $40
billion.
● The government would receive $5 billion in taxes from farming and $10 billion in taxes
from shale oil extraction.

What is the opportunity cost of using the land only for farming?
A. $25 billion B. $30 billion C. $35 billion D. $45 billion

15. A country experiences a long strike by railway workers. What would be the
macroeconomic impact of such a strike?
A National output would fall.
B Railway workers would lose income.
C The demand for taxi services would rise.
D The profits of railway operators would fall.
16. What necessarily describes the market system?
A an economy with both a private and public sector
B limited resources but unlimited wants
C resources are allocated through demand and supply
D when all resources are used to produce consumer goods
17. What is not held constant when constructing the supply curve of a firm?
A indirect taxes and subsidies on the firm’s products
B the level of technology used by the firm in production
C the price of the factors of production paid for by the firm
D the market price of the good produced by the firm
18. What is a trade union?
A a business organisation in which all workers share ownership
B an area where there are no barriers to trade
C an organisation of employers from an industry
D an organisation that represents the interests of workers

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 19. What is the most important characteristic of money?
A It has intrinsic value.
B It is generally acceptable.
C It is portable.
D It is readily available
20. When is profit maximisation achieved?
A when average fixed cost is at a minimum
B when average revenue is at a maximum
C when the firm produces the largest output it can with the resources it has available
D when there is the greatest possible difference between total revenue and total cost
21. In some industries, a monopoly controls output and prices. What is the most likely
impact of this on consumers?
A higher prices
B higher profits
C higher taxes
D more choice
22. A mining company bought another mining company. How may this integration be
described?
A diversification
B horizontal merger
C specialisation
D vertical merger
23. What is most likely to cause a more even distribution of income?
A an increase in indirect taxation
B an increase in inflation
C an increase in managers’ salaries
D an increase in progressive taxation
24. Why does more emphasis on education and training lead to an increase in national
output?
A It improves the productivity of the labour force.
B It lowers the inputs of capital investment.
C It reduces demands for higher pay.
D It reduces the power of trade unions.
25. A country has a declining population. It also has a changing population structure in
which the size of the 15–64 age group is becoming smaller. How could it immediately
reduce labour supply shortages?
A Allow immigration of skilled labour.
B Encourage increases in family size.
C Invest more in technological research.
D Lower taxes and increase basic wage rates.
26. What is the function of the factors of production in an economy?
A to make goods and services to fulfil wants and needs
B to provide an even distribution of income

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 C to provide tax income for the government
D to reduce the existence of external costs
27. Which topic is included in microeconomics?
A economic growth
B elasticity of demand
C inflation
D the balance of payments
28. What aspect of demerit goods means they are overproduced?
A clear product information
B high external costs
C high product taxes
D low customer demand
29. Lithium is an essential metal for the production of electric cars. Following a 10%
increase in the price of lithium, supplies increase by 15%. This led to a 5% increase in
the price of electric cars. What is the price elasticity of supply (PES) for lithium?
A. 0.33 B. 0.66 C. 1.50 D. 2.0
30. What would not cause a shift in the supply curve?
A. changes in costs of production
B .changes in direct taxes
C .changes in indirect taxes
D .changes in a subsidy from the government
31. What is a likely benefit of a country moving from a mixed economy to a market economy.
A .less inequality
B .more nationalisation
C .more public goods
D .reduced costs of production
32. A firm is considering doubling the price of its product.
Which price elasticity of demand (PED) for its product would give it the greatest increase in
revenue?
A. 0.0 B. -0.5 C. -1.0 D. -2.0
33. What shows a forwards vertical merger?
A. A smartphone producer buys a computer chip producer.
B. A steel producer buys a car producer.
C. A tractor producer buys a wheat producer.
D. An oven producer buys a washing machine producer
34. Which service is most likely to be supplied by a small business?
A. banking
B. dental treatment
C. energy distribution
D. rail travel

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 35. When a firm produces 100 units, its total variable cost is $1000 and its total fixed cost is $4000.
What is the firm’s average total cost?
A. $10 B. $30 C. $40 D. $50
36. A monopoly firm can often earn greater profits than a firm in a competitive market. Which
characteristic of monopoly is most likely to cause this?
A. It can restrict the entry of new firms.
B. It is a price-taker.
C. It is protected by the government.
D. Its total costs are usually low.
37. What is a free good?
A. free samples of a new product
B. health services provided by the state
C. second-hand clothing
D. sunlight
38. A firm is deciding whether to produce good X or good Y for the next five years. The predicted
revenue for good X is $20000 per year and for good Y is $18000 per year. What is the
opportunity cost of producing good X?
A. $18000 B. $20000 C. $90000 D. $100000
39. What is not held constant when drawing a demand curve for a good or service?
A. consumers’ incomes
B. tastes and preferences
C. the price of substitutes
D. the price of the good or service
40. What could cause the price of tea to increase?
A. decrease in the demand for tea
B. decrease in the price of a substitute good
C. increase in the price of a substitute good
D. increase in the supply of tea
41. What could not occur in a market economic system?
A. a monopolist supplying specialist goods to the market
B. excessive pollution created by power stations
C. governments setting minimum wages to relieve poverty
D. private ownership of firms making defence equipment
42. What is a correct definition of a demerit good?
A. a good which generates external benefits
B. a good with higher private costs than social costs
C. a good which is more harmful to consumers than they realise
D. a good which provides no costs to third parties

43. Within the same firm, one employee is paid a higher wage than another employee.
Which reason for the difference in their wage could be considered discrimination?
A. They are of different ages.
B. They have different levels of education.
C. They have different levels of productivity.
D. They have different levels of work experience.

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 44. A farmer introduces machinery to help workers at harvest time. The farmer also reduces the
number of workers by 50%. As a result, the total harvest increases by 25%. What has happened?
A. Labour productivity has decreased and production has decreased.
B. Labour productivity has decreased and production has increased.
C. Labour productivity has increased and production has decreased.
D. Labour productivity has increased and production has increased.
45. A clothing manufacturer expands by taking over a clothing retailer. Which type of merger is this?
A. backward vertical
B. conglomerat
C. forward vertical
D. horizontal
46. Which macroeconomic aim, if achieved, is most likely to increase a government budget
surplus?
A. full employment
B. income redistribution
C. low inflation
D. balance of payments stability
47. What is an advantage to a firm of specialisation at a national level?
A. dependency on supplies from other countries
B. greater competition from overseas firms
C. greater depletion of the country’s natural resources
D. lower average costs due to economies of scale
48. How can the economic problem be described?
A. as insufficient capital to satisfy our wants
B. as insufficient income to satisfy all our needs
C. as insufficient resources to satisfy our unlimited wants
D. as insufficient wealth to satisfy all our needs
49. What would be included in the factor of production land?
A. bread
B. factory building
C. sports arena
D. wheat
50. A deposit of shale oil is discovered in an area of farming. The following estimates are made for a
ten-year period. If the land is used only for farming, it would yield income after tax of $10
billion. If the land is used only for shale oil extraction, it would yield income after tax of
$40 billion. The government would receive $5 billion in taxes from farming and $10 billion in
taxes from shale oil extraction. What is the opportunity cost of using the land only for farming?
A. $25 billion B. $30 billion C. $35 billion D. $45 billion
51. What three key questions determine resource allocation?
A. what, how, for whom
B. what, when, for whom
C. where, what, how
D. where, how, for whom
52. An explosion in an important oil pipeline causes the world price of a barrel of oil to increase from
$50 to $100. Before the explosion, the world demand for oil was 100 million barrels per day. The
world price elasticity of demand for oil is -0.2. What is the new global demand for oil (barrels per
day) as a result of the explosion?
A. 20 million
B. 80 million

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 C. 90 million
D. 120 million
53. The price elasticity of supply (PES) of a product is 1.0. The price of this product is $10 and the
quantity supplied is 200 units. If the price of the product increases to $11, by how many units will
the quantity supplied increase?
A. 1 units B. 10 units C. 20 units D. 200 units
54. The government wishes to reduce the harmful emissions from road transport. Which measure
would be effective in helping to achieve this aim?
A. increased expenditure on oil exploration
B. introducing a subsidy on public transport
C. reduced taxation on the production of private vehicles
D. reducing incentives to purchase electric vehicles
55. What function does a central bank provide for an economy?
A. It issues bank notes to encourage spending.
B. It manages the debt of private sector firms.
C. It offers high interest rate accounts to encourage savings.
D. It provides mortgages to encourage home ownership
56. What is most likely to be a disadvantage when operating a small firm?
A. a lack of external economies of scale
B. a lack of external diseconomies of scale
C. a lack of internal economies of scale
D. a lack of internal diseconomies of scale
57. A busy restaurant employs a large number of highly skilled chefs to individually prepare high
quality [Link] is an advantage to the restaurant of this type of production?
A. A highly skilled chef is paid more than an unskilled cook.
B. It is easier to prepare a wide variety of meals.
C. It takes time to train a highly skilled chef.
D. The quality of a meal varies according to which chef prepares it.
58. How is the average cost of a product calculated?
A. by adding total variable and total fixed costs
B. by dividing total cost by output
C. by multiplying total variable cost by output
D. by subtracting fixed cost from total cost
59. What is most likely to increase the geographical mobility of labour?
A. an increase in the amount of credit available to firms
B. an increase in the quantity of low-cost housing
C. an increase in spending by firms on research and development
D. an increase in spending by government on apprenticeships and training
60. What is not a microeconomic decision?
A. A firm decides to increase the price of its product.
B. A government decides to increase interest rates.
C. A household decides to reduce its demand for fuel.
D. A trade union decides to go on strike.
61. What is a feature of a market in equilibrium?
A. demand exceeds supply
B. no profits are earned
C. the market will clear
D. there will be a surplus of products

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 62. When will a central bank act as lender of last resort to a commercial bank?
A. when a commercial bank faces a liquidity crisis
B. when a commercial bank fails to make a profit
C. when a commercial bank needs to raise share capital
D. when a commercial bank reduces its lending rates
63. 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
64. What is a likely reason why firms do not grow in size?
A. External diseconomies of scale occur at high levels of output.
B. Internal economies of scale occur at high levels of output.
C. Internal economies of scale occur at low levels of output.
D. Internal diseconomies of scale occur at low levels of output
65. 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
66. A government wishes to increase its spending on public goods. Which sector should have a
spending increase to achieve this?
A. education
B. healthcare
C. national defence
D. railways
67. Which government measure would lead directly to more exports of goods?
A. a devaluation of the currency
B. a restriction of bank credit creation
C. an increase in the rate of interest
D. the issue of more bank notes and coins
68. The diagram shows the supply curve for a good.
S

P Y

0 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

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 69. The diagram shows a production possibility curve (PPC) for an economy that can
produce cotton and cars. The economy is at point Q.

output Z W

of cotton Q

0 Output of car

There is improved technology that can only be used in the production of cars. How would this
be represented on this diagram?
A. by a movement from Q to W
B. by a movement from Q to X
C. by a movement from Q to Y
D. by a movement from Q to Z

70. A firm has fixed costs of $20 and the following total variable costs.
Output 10 20 30 40
Total variable 40 60 80 100
cost($)

What happens to average total cost over this output range?

A. It falls continuously.
B. It falls then rises.
C. It rises continuously.
D. It rises then falls

Structured Questions
1. Living standards, including education, have improved for most people in South Africa in recent
years. Most households have more money and the government has more tax revenue. There is,
however, considerable income inequality. In 2020, 36% of the population were living in poverty.
An increase in unemployment benefit payments might reduce this poverty.
(a) Identify two functions of money. [2]
(b) Explain how improved education may affect the demand for cigarettes and for fresh fruit. [4]
(c) Analyse the causes of an increase in a government’s tax revenue. [6]
(d) Discuss whether or not an increase in unemployment benefit payments would reduce poverty.
[8]
2. The number of Chinese restaurants in the UK fell by approximately 7% in 2020 compared to the
year before. Reasons for this include falling demand for Chinese food and increasing competition
from other types of food. Some small firms selling Chinese food are also unwilling to invest in
the

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 latest technology because of the possible opportunity costs.
(a) Identify two challenges facing small firms. [2]
(b) Explain two possible opportunity costs for firms if they invest in the latest technology. [4]
(c) Analyse two causes of a fall in demand for a product such as Chinese food. [6]
(d) Discuss whether or not competition is harmful to a firm. [8]

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