1. The curve JK in the diagram is a consumer’s initial budget line.

Which combination could cause the budget line to shift to GH?

	Price of good X	Consumer’s Money Income
A	increase	increase
B	decrease	decrease
C	increase	decrease
D	decrease	increase

2. The diagram shows a consumer’s indifference curves (IC) for goods F and G together with the
consumer’s budget lines.

What could explain the movement from X to Z on the diagram?
A a fall in the price of G when G is an inferior good
B a fall in the price of G when F is a Giffen good
C a fall in the price of G when G is a normal good
D a fall in the price of G when G is a Giffen good

3. A firm has the choice between five levels of output. The table shows the total cost and total
revenue of producing at each output level. The firm could sell whatever output it produces.

Output (units)	Total cost ($)	Total revenue ($)
1000	8000	10000
2000	12000	18000
3000	19000	24000
4000	23000	28000
5000	25000	25000

The firm decides to produce 4000 units.
What is the firm’s aim?
A to maximise profit
B to maximise sales
C to maximise revenue
D to minimise average costs

4. In which type of market structure are commercial banks usually found?
A perfect competition, because they all link their interest rates to that of the central bank
B perfect competition, because they offer identical products and services
C monopolistic competition, because a competitive market prevents them making excess
profits
D oligopoly, because they are affected by the actions of other banks

5. What is a condition for operating a successful cartel?
A a large number of firms in the industry
B each firm has a differentiated product
C low barriers of entry to the industry
D strictly enforced production quotas

Answers