Economic Principles and Issues · 7136/3
AQA A-level Paper 3, June 2024
All 3 written questions and 30 multiple choice questions from AQA A-level Paper 3 (June 2024), Economic Principles and Issues. Case studies: Regional inequality in the UK. Each question shows its marks and topic, with an examiner insight on 3, and opens the question paper and mark scheme at the right page.
Case study
Regional inequality in the UK
Extracts: The regional problem · Selected economic indicators for the North East (NE) and South East · The ‘levelling up’ agenda · Is regional policy destined to fail?
Q31
To what extent, if at all, do the data suggest that people living in the South East (SE) of England are better off than people living in the North East (NE) of England?
TopicDistribution of income and wealthInequality & poverty
Examiner insight
- What to cover
- Compare income, employment, productivity and health between the SE and NE.
- Evaluation
- Judge overall, using several indicators.
- Watch out
- Quote numbers from the extract.
Q32
Explain why investment in infrastructure in the less-prosperous regions could help to improve the prosperity of people living in these regions.
TopicFiscal policy and supply-side policiesSupply-side policiesInequality & poverty
Examiner insight
- What to cover
- Infrastructure raises productivity, attracts firms, improves access to jobs and lowers costs.
- Diagram
- LRAS shift right.
- Watch out
- Link infrastructure to prosperity.
Q33
After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government intervene in the economy to try to reduce the differences in the economic prosperity of the various regions of the United Kingdom?
Justify your recommendation.
Justify your recommendation.
TopicFiscal policy and supply-side policiesSupply-side policiesInequality & poverty
Examiner insight
- What to cover
- Case for intervention: inequality, immobility, external benefits.
- Evaluation
- Consider cost, government failure, and market-based alternatives. Make a recommendation.
- Watch out
- Recommendation with conditions.
Q1
Which one of the following is a consequence of the basic economic problem of limited resources and unlimited wants?
- AAll goods and services will have a market price
- BEmployment of factors of production has an opportunity cost
- CMarkets are unable to allocate resources efficiently
- DThere will not be an excess supply in markets
Show the answer
The answer is B.
TopicEconomic methodology and the economic problemScarcity & choice
Q2
A profit-maximising firm, in the service sector, needs to recruit a new employee. Which one of the following explains why asymmetric information could mean that the most suitable person is not chosen?
- AIt is difficult to calculate the marginal revenue productivity of workers in the service sector
- BOccupational immobility of labour means that there is a limited supply of workers with the right skill set
- CThe firm may have to recruit the worker from the local area because labour is often geographically immobile
- DThe firm is unlikely to know everything about job applicant’s skills, abilities and motivation
Show the answer
The answer is D.
TopicIndividual economic decision makingImperfect information
Q3
Figure 1 shows the production possibility boundary for petrol-powered cars and electric- powered cars in a country's car industry.
Figure 1
If production has moved from Point A to Point B, which one of the following must be true?
Figure 1
If production has moved from Point A to Point B, which one of the following must be true?
- AAllocative efficiency in the car industry is unchanged
- BDemand for electric-powered vehicles has increased
- CProductive efficiency in the car industry is unchanged
- DStatic efficiency in the car industry has improved
Show the answer
The answer is C.
TopicEconomic methodology and the economic problemPPB / PPC
Q4
A household's annual income increases from £35 000 to £38 500. All other things being equal, if the household's income elasticity of demand for Good X is –0.2 and its income elasticity of demand for Good Y is 0.4, which one of the following statements is correct?
- ASpending on Good X will fall by £70 and spending on Good Y will increase by £140
- BSpending on Good X will fall by £700 and spending on Good Y will increase by £1400
- CSpending on Good X will fall by 2% and spending on Good Y will increase by 4%
- DSpending on Good X will fall by 20% and spending on Good Y will increase by 40%
Show the answer
The answer is C.
TopicPrice determination in a competitive marketIncome elasticity
Q5
Table 1 shows the effect of cash benefits and taxes on household incomes in the UK in 2020–21.
Table 1
Income of Income of top Ratio of top to bottom quintile quintile (£s) bottom quintile (£s) Original 107 551 8 196 13.1 income plus cash 2 581 7 267 0.4 benefits Gross income 110 132 15 463 7.1 less direct 32 000 2 267 14.1 taxes Disposable 78 131 13 196 5.9 income less indirect 7 133 3 024 2.4 taxes Post-tax 70 998 10 172 7.0 income Source: Office for National Statistics Which one of the following can be concluded from the data in Table 1 regarding the distribution of income between the top and bottom quintile of households?
Table 1
Income of Income of top Ratio of top to bottom quintile quintile (£s) bottom quintile (£s) Original 107 551 8 196 13.1 income plus cash 2 581 7 267 0.4 benefits Gross income 110 132 15 463 7.1 less direct 32 000 2 267 14.1 taxes Disposable 78 131 13 196 5.9 income less indirect 7 133 3 024 2.4 taxes Post-tax 70 998 10 172 7.0 income Source: Office for National Statistics Which one of the following can be concluded from the data in Table 1 regarding the distribution of income between the top and bottom quintile of households?
- ACash benefits were less effective than direct taxes in redistributing income from the bottom quintile of households to the top quintile
- BDirect taxes made the distribution of income more unequal
- CIndirect taxes made the distribution of income more unequal
- DIndirect taxes were more effective than cash benefits in redistributing income from the top quintile of households to the bottom quintile
Show the answer
The answer is C.
TopicDistribution of income and wealthInequality & poverty
Q6
Table 2 shows the UK's balance of trade in goods and services in successive quarters.
Table 2
Quarter 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 Balance of trade –8.5 3.6 0.9 –12.1 –4.7 –25.3 –25.0 (£bn) What was the UK's median quarterly balance of trade over the period shown in Table 2?
Table 2
Quarter 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 Balance of trade –8.5 3.6 0.9 –12.1 –4.7 –25.3 –25.0 (£bn) What was the UK's median quarterly balance of trade over the period shown in Table 2?
- A–£12.1bn
- B–£10.2bn
- C–£8.5bn
- D£11.4bn
Show the answer
The answer is C.
TopicThe international economyBalance of paymentsTrade & comparative advantage
Q7
Which one of the following is an injection into the circular flow of income?
- AFactor incomes
- BGovernment borrowing
- CInvestment
- DSavings
Show the answer
The answer is C.
TopicHow the macroeconomy works (AD/AS)Circular flow
Q8
Figure 2 shows the total utility that a consumer derives from their daily consumption of bananas.
Figure 2
Based on the information in Figure 2, which one of the following statements is correct?
Figure 2
Based on the information in Figure 2, which one of the following statements is correct?
- AA rational consumer will choose to consume 3 bananas each day
- BDiminishing marginal utility sets in with the consumption of the 4th banana
- CMarginal utility is maximised with the consumption of the 3rd banana
- DMarginal utility from consuming the 3rd banana is less than the 2nd
Show the answer
The answer is D.
TopicIndividual economic decision makingUtility
Q9
A government introduces a number of supply-side policies that increase the size of the country's working population and labour productivity. All other things being equal, which one of the following statements identifies the most likely effects of the policies on the country's economy?
- AAn increase in real national income and a reduction in the balance of payments deficit
- BAn increase in short-run economic growth and inflation
- CAn increase in the trend rate of economic growth and a growing balance of payments deficit
- DA reduction in unemployment and an increase in inflation
Show the answer
The answer is A.
TopicFiscal policy and supply-side policiesSupply-side policiesAggregate supply
Q10
Figure 3 shows how the markets for Good X and Good Y are affected by an increase in the demand for Good X.
Figure 3
It can be concluded that Good X and Good Y are in
Figure 3
It can be concluded that Good X and Good Y are in
- Acompetitive demand.
- Bcomposite demand.
- Cderived demand.
- Djoint supply.
Show the answer
The answer is D.
TopicPrice determination in a competitive marketDemand & supplyCross elasticity
Q11
Figure 4 shows the short-run average costs (AC), marginal costs (MC), average revenue (AR) and marginal revenue (MR) curves for a typical firm in a monopolistically competitive market.
Figure 4
In the long run, market forces are most likely to cause the firm's revenue curves to
Figure 4
In the long run, market forces are most likely to cause the firm's revenue curves to
- Ashift left and become flatter.
- Bshift left and become steeper.
- Cshift right and become flatter.
- Dshift right and become steeper.
Show the answer
The answer is A.
TopicMarket structuresMonopolistic competitionRevenue & profit
Q12
According to the kinked demand curve model of oligopoly, which one of the following would be most likely to explain price stability in an oligopolistic market?
- AA firm's revenue would fall with any change in price
- BCollusion between firms is likely to lead to price-fixing
- CFirms do not seek to maximise their profits
- DIndividual firms do not have the ability to set prices
Show the answer
The answer is A.
TopicMarket structuresOligopoly
Q13
Table 3 shows how the price affects the number of shirts a shop sells in a week.
Table 3
Price of shirts Number of shirts sold £40 £36 £33 The marginal revenue of the 12th shirt sold is
Table 3
Price of shirts Number of shirts sold £40 £36 £33 The marginal revenue of the 12th shirt sold is
- A–£3
- B£0
- C£33
- D£396
Show the answer
The answer is B.
TopicProduction, costs and revenueRevenue & profit
Q14
In 2015, the UK government introduced a tax on firms using landfill sites to dispose of waste. After the tax was introduced, there was a significant rise in illegal dumping of waste. This is most likely to be an example of
- Aa negative externality in consumption.
- Bgovernment failure due to unintended consequences.
- Cmarket failure resulting from imperfect information.
- Dthe tragedy of the commons.
Show the answer
The answer is B.
TopicMarket failure and government interventionGovernment failure
Q15
Which one of the following functions of money is likely to be most effective during a period of deflation?
- AMeasure of value
- BStandard of deferred payment
- CStore of value
- DUnit of account
Show the answer
The answer is C.
TopicFinancial markets and monetary policyMoney & bankingInflation & deflation
Q16
An economy's long-run trend rate of economic growth in real gross domestic product (GDP) is 2.8% per annum. In 2018, the economy's actual real GDP was equal to its trend level of real GDP. Table 4 shows the economy's actual rate of growth in real GDP over a five-year period.
Table 4
Year Change in real GDP 2019 2.0% 2020 2.8% 2021 3.5% 2022 3.4% 2023 1.8% All other things being equal, in which year was the economy likely to experience the most inflationary pressure?
Table 4
Year Change in real GDP 2019 2.0% 2020 2.8% 2021 3.5% 2022 3.4% 2023 1.8% All other things being equal, in which year was the economy likely to experience the most inflationary pressure?
- A2020
- B2021
- C2022
- D2023
Show the answer
The answer is C.
TopicEconomic performanceEconomic growth & cycleInflation & deflation
Q17
Table 5 shows a household's income and the amount the household has to pay in tax for three taxes.
Table 5
Income Tax F Tax G Tax H (£) (£) (£) (£) 10 000 1 000 500 500 30 000 2 500 1 500 1 800 60 000 4 000 3 000 4 000 Which one of the following statements is correct?
Table 5
Income Tax F Tax G Tax H (£) (£) (£) (£) 10 000 1 000 500 500 30 000 2 500 1 500 1 800 60 000 4 000 3 000 4 000 Which one of the following statements is correct?
- ATax F is a progressive tax and Tax H is a progressive tax
- BTax F is a regressive tax and Tax G is a progressive tax
- CTax F is a regressive tax and Tax G is a proportional tax
- DTax F is a regressive tax and Tax H is a regressive tax
Show the answer
The answer is C.
TopicFiscal policy and supply-side policiesFiscal policy & public financesInequality & poverty
Q18
Figure 5 shows the short-run average cost curve (SRAC) for a firm producing electrical components.
Figure 5
Which one of the following is most likely to explain the change in short-run average cost when output rises from 5 units to 10 units?
Figure 5
Which one of the following is most likely to explain the change in short-run average cost when output rises from 5 units to 10 units?
- AFalling total costs of production
- BIncreasing marginal returns to labour
- CIncreasing returns to scale
- DTechnical economies of scale
Show the answer
The answer is B.
TopicProduction, costs and revenueCosts & economies of scale
Q19
Table 6 shows the national debt and gross domestic product (GDP) for the UK in the second quarters of 2020 and 2022.
Table 6
National debt GDP Year (£bn) (£bn) 2020 2069 2190 2022 2437 2391 All other things being equal, which one of the following is most likely to help the government manage the impact of the changes shown in Table 6?
Table 6
National debt GDP Year (£bn) (£bn) 2020 2069 2190 2022 2437 2391 All other things being equal, which one of the following is most likely to help the government manage the impact of the changes shown in Table 6?
- AContractionary monetary policy by the Bank of England
- BFalling demand for government bonds from foreign investors
- CRising interest rates in global financial markets
- DSustained rises in nominal national income in future years
Show the answer
The answer is D.
TopicFiscal policy and supply-side policiesFiscal policy & public finances
Q20
A firm has a downward-sloping average revenue curve and a U-shaped average total cost curve. Which one of the following meets the condition required for the firm to be productively efficient?
The firm is producing the quantity at which
The firm is producing the quantity at which
- Aaverage revenue equals average total cost.
- Baverage revenue equals marginal cost.
- Cmarginal cost equals average total cost.
- Dmarginal revenue equals marginal cost.
Show the answer
The answer is C.
TopicProduction, costs and revenueProductivity & efficiencyCosts & economies of scale
Q21
All other things being equal, Table 7 shows how the number of workers employed by a profit-maximising firm affects its total output per hour and the price it is able to charge for the product produced.
Table 7
Number of workers Total output per hour Price (£) 1 3 5.00 2 7 4.50 3 15 4.20 4 20 4.10 5 24 4.00 The firm pays its workers £18 per hour. It does not have any other variable costs and its fixed costs are £3 per hour.
How many workers will the firm employ?
Table 7
Number of workers Total output per hour Price (£) 1 3 5.00 2 7 4.50 3 15 4.20 4 20 4.10 5 24 4.00 The firm pays its workers £18 per hour. It does not have any other variable costs and its fixed costs are £3 per hour.
How many workers will the firm employ?
- A2
- B3
- C4
- D5
Show the answer
The answer is C.
TopicThe labour marketLabour demand & supply
Q22
Figure 6 shows a perfectly competitive labour market. The left-hand diagram shows the supply of labour (SLI) and demand for labour (DLI) for the industry. The right-hand diagram shows the demand for labour (DLF) for one firm in the industry.
Figure 6
All other things being equal, which one of the following is most likely to cause an increase in the wage rate paid by the firm?
Figure 6
All other things being equal, which one of the following is most likely to cause an increase in the wage rate paid by the firm?
- AA decrease in the price of a substitute for the industry's product
- BA price increase for a good jointly demanded with the industry's product
- CAn increase in the number of workers qualified to work in the industry
- DAn increase in the price of the industry's product caused by changing tastes
Show the answer
The answer is D.
TopicThe labour marketLabour demand & supplyPerfect competition
Q23
Figure 7 shows two long-run aggregate supply curves (LRAS) for an economy.
Figure 7
Which one of the following is most likely to explain the shift of the long-run aggregate supply curve from LRAS1 to LRAS2?
Figure 7
Which one of the following is most likely to explain the shift of the long-run aggregate supply curve from LRAS1 to LRAS2?
- AA reduction in the basic and higher rates of income tax
- BA reduction in the geographical mobility of labour
- CAn increase in immigration
- DAn increase in imports of goods and services
Show the answer
The answer is B.
TopicHow the macroeconomy works (AD/AS)Aggregate supply
Q24
Following a reduction in the level of cash reserves required by the regulator, a commercial bank increases its mortgage lending.
Which one of the following describes how the bank’s liquidity and profitability are most likely to change?
Which one of the following describes how the bank’s liquidity and profitability are most likely to change?
- ALiquidity and profitability both improve
- BLiquidity and profitability both worsen
- CLiquidity improves and profitability worsens
- DLiquidity worsens and profitability improves
Show the answer
The answer is D.
TopicFinancial markets and monetary policyMoney & banking
Q25
A country joins a customs union. Which one of the following is the most likely consequence of its membership?
- AExports to non-member countries will increase
- BExports to other member countries will be more expensive
- CImports from non-member countries will be cheaper
- DImports from other member countries will increase
Show the answer
The answer is D.
TopicThe international economyProtectionism & trading blocs
Q26
Which one of the following helps to explain why, in a freely floating exchange rate system, market forces are likely to automatically reduce a deficit or surplus on a country's balance of trade?
- AA deficit will lead to excess demand for the country's currency and a depreciating exchange rate.
- BA deficit will lead to excess supply of the country's currency and an appreciating exchange rate.
- CA surplus will lead to excess demand for the country's currency and an appreciating exchange rate.
- DA surplus will lead to excess supply of the country's currency and a depreciating exchange rate.
Show the answer
The answer is C.
TopicThe international economyExchange ratesBalance of payments
Q27
Table 8 shows an index of copper exports for a country during the years 2020 to 2023.
Table 8
Index of copper exports Year (2020 = 100) 2020 100.0 2021 106.0 2022 112.1 2023 118.0 Which one of the following statements is correct?
Table 8
Index of copper exports Year (2020 = 100) 2020 100.0 2021 106.0 2022 112.1 2023 118.0 Which one of the following statements is correct?
- ABetween 2020 and 2023, the mean annual rate of growth in the country's exports of copper was 6%
- BIn 2022, the country's exports of copper grew by 6.1%
- CThe highest rate of growth in the country's exports of copper was in 2023
- DThe rate of growth in the country's exports of copper was higher in 2021 than in 2022
Show the answer
The answer is D.
TopicThe international economyTrade & comparative advantage
Q28
Table 9 shows the price index for an economy at the end of each of the years from 2019 to 2023.
Table 9
Year Price index 2019 110 2020 108 2021 117 2022 123 2023 135 In which year did the economy experience disinflation?
Table 9
Year Price index 2019 110 2020 108 2021 117 2022 123 2023 135 In which year did the economy experience disinflation?
- A2020
- B2021
- C2022
- D2023
Show the answer
The answer is C.
TopicMeasuring macroeconomic performancePrice indices & inflation measurementInflation & deflation
Q29
Which one of the following might be part of a market-based strategy for promoting economic growth and development in a less-developed economy?
- AAdopting a fixed exchange rate
- BEncouraging overseas aid
- CPrivatising key industries
- DSubsidising exports
Show the answer
The answer is C.
TopicThe international economyDevelopmentEconomic growth & cycle
Q30
Figure 8 shows the market demand (DL) and supply (SL) of labour in a labour market with a trade union. The initial trade union negotiated wage is W 2.
Figure 8
The trade union negotiates an increase in the wage from W 2 to W 3. All other things being equal, unemployment in this labour market will increase by
Figure 8
The trade union negotiates an increase in the wage from W 2 to W 3. All other things being equal, unemployment in this labour market will increase by
- A3 000
- B5 000
- C8 000
- D16 000 30
Show the answer
The answer is C.
TopicThe labour marketLabour demand & supplyTrade unions & monopsonyUnemployment
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