AS ECONOMICS Paper 1 The Operation of Markets and Market Failure. RATED A PREDICTOR QUESTIONS AND ANSWERS

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A resource must be scarce if A it has an opportunity cost. B it is non-renewable. C there is a high demand for it. D there is a small quantity supplied. [1 mark] CORRECT METHOD WRONG METHODS3 *... 03* Turn over ► IB/M/Jun20/7135/1 Do not write outside the 0 2 Figure 1 shows demand (D) and supply (S) in the market for electric cars. box Demand is initially at D1 and supply at S1. Figure 1 Other things remaining the same, which one of the following combination of events could have caused demand to shift from D1 to D2 and supply from S1 to S2? A Greater availability of roadside chargers for electric cars and a rise in workers’ wages B Higher petrol prices and an increase in workers’ productivity C Introduction of a road pricing scheme for all vehicles and higher diesel fuel prices D Lower rail and bus fares and the use of new technology for electric car production [1 mark] 0 3 Government failure must have occurred when government intervention A causes income inequality to increase. B has unintended consequences. C is based on imperfect information. D reduces total welfare in the economy. [1 mark]4 *04* IB/M/Jun20/7135/1 Do not write outside the 0 4 Table 1 shows the prices and quantities of rice and pasta sold in a supermarket in one box month. Table 1 Price of rice Quantity of rice (000s packets) Price of pasta Quantity of pasta (000s packets) £2.00 100 £1.50 40 £2.25 80 £1.50 50 When the price of rice rises from £2.00 to £2.25, the cross elasticity of demand for pasta with respect to the price of rice is A –2.0 B –0.5 C +0.5 D +2.0 [1 mark] 0 5 The number of film production companies in a city increases. As a result, the pool of workers skilled in making films grows. Companies experience a reduction in their average costs. The fall in average costs results from A a reduction in diseconomies of scale. B an increase in managerial economies of scale. C the existence of external economies of scale. D the presence of technical economies of scale. [1 mark]5 *05* Turn over ► IB/M/Jun20/7135/1 Do not write outside the 0 6 Table 2 shows total costs and profit for different levels of output produced by a firm. box Table 2 Output Total cost (£) Profit (£) 50 1000 1000 100 1800 1700 150 2400 2400 [Show More]

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