Component 1: Economic Principles · A520U10-1
Eduqas A-level Component 1, June 2022
All 8 written questions and 20 multiple choice questions from Eduqas A-level Component 1 (June 2022), Component 1: Economic Principles. Each question shows its marks and topic, and opens the question paper and mark scheme at the right page.
The 2022 question paper carries the Z22 reference, from the adapted summer 2022 series. Its mark scheme is the summer 2022 one.
Section A
Q1
The diagram below shows the PPFs for the economies of Country A and Country B, producing cars and wine. Which one of the following statements is correct? (The diagram is in the question paper.)
- AThere are no gains from trade between Country A and Country B
- BCountry A has an absolute advantage in the production of wine
- CCountry B has comparative advantage in the production of cars
- DCountry B has comparative advantage in the production of both goods
- ECountry A has comparative advantage in the production of cars
Show the answer
The answer is E.
Q2
The chart in the question paper shows the UK's CPI between April 2018 and January 2019. Which of the following is true?
- APrices rose by 1.6% between April 2018 and December 2018
- BPrices rose by 0.9% between April 2018 and January 2019
- CInflation was positive in every month in the period shown
- DPrices rose by 5.4% in April 2018
- EPrices were highest at the end of the period
Show the answer
The answer is A.
Q3
The excessive consumption of junk food imposes external costs on society, resulting in market failure. Which of the following diagrams best illustrates this economic problem? (Options A to E are diagrams: see the question paper.)
Show the answer
The answer is D. Open the question paper to read the options.
TopicMarket failureAggregate demandThe economic problem and resource allocation
Q4
Suppose that a firm's research has shown that its total revenue increases if any one of the following occurs: (i) It increases its prices (ii) The economy enters a recession (iii) A related firm cuts its prices It can be concluded that for this firm's product:
- APED is: Elastic; YED is: Positive; XED is: Negative
- BPED is: Inelastic; YED is: Negative; XED is: Negative
- CPED is: Elastic; YED is: Positive; XED is: Positive
- DPED is: Inelastic; YED is: Positive; XED is: Negative
- EPED is: Inelastic; YED is: Negative; XED is: Positive
Show the answer
The answer is B.
TopicDemand, supply and elasticityEconomic growth and the economic cycleCosts, revenues and profit
Q5
The diagram below shows the supply and demand for a country's currency. The central bank manages the exchange rate to keep it between E1 and E2. Suppose that demand rises from D1 to D2. What would the central bank need to do to maintain the exchange rate at E1? (The diagram is in the question paper.)
- ABuy AC of its own currency
- BBuy AD of its own currency
- CSell BD of its own currency
- DSell AD of its own currency
- ESell CD of its own currency
Show the answer
The answer is E.
TopicInternational trade and exchange ratesThe financial sectorCosts, revenues and profit
Q6
Which one of the following is an internal economy of scale?
- ADiscounts from suppliers to firms who order in bulk
- BEfficient local transport networks
- CSpecialist training facilities provided by local colleges
- DThe reputation of an area for a particular product
- ENew technology becomes available to all firms in an industry Study the graph opposite, which shows a firm in an imperfect market, to answer questions 7 and 8.
Show the answer
The answer is A.
Q7
Questions 7 and 8 use a graph in the question paper showing a firm in an imperfect market (MC, ATC, AVC, AR and MR curves, output 0 to 15). The firm's total fixed costs if it produces the profit maximising output are (to the nearest £):
- A£30
- B£36
- C£44
- D£66
- E£95
Show the answer
The answer is B.
Q8
Questions 7 and 8 use a graph in the question paper showing a firm in an imperfect market (MC, ATC, AVC, AR and MR curves, output 0 to 15). The firm's abnormal profit if it produces the sales revenue maximising output will be:
- A£96
- B£90
- C£30
- D£16
- E£0 (Normal profit)
Show the answer
The answer is D.
Q9
The chart in the question paper (UK: more people at work) shows the UK unemployment rate and nominal wage inflation from 2006 to 2018. The chart shows that over the period:
- ALow levels of nominal wage growth cause high levels of unemployment
- BUnemployment increased and then fell, but nominal wages fell and then increased
- CUnemployment increased and then fell, but nominal wages increased in each year
- DIncreased unemployment causes nominal wages to fall
- EReductions in unemployment always increase nominal wage growth
Show the answer
The answer is C.
Q10
The table below has information on the US money supply and nominal GDP. Money supply Nominal GDP 2015 $2.9bn $18.0bn 2016 $3.1bn $18.4bn 2017 $3.3bn $19.2bn 2018 $3.5bn $20.0bn 2019 $3.7bn $20.9bn It can be concluded that:
- AThe price level must have been rising
- BReal GDP must have been rising
- CThe velocity of circulation was constant
- DThe velocity of circulation was falling
- EThe price level and real GDP must both have been rising
Show the answer
The answer is D.
TopicMeasuring economic performanceMacroeconomic objectives and policy
Q11
The chart in the question paper shows the value of the UK's exports and imports of goods and services as a percentage of GDP in 2017, split by EU-27, US, China, EFTA and the rest of the world. It can be concluded that:
- AThe UK had an overall balance of trade surplus on goods and services
- BThe UK had a balance of trade surplus on goods and services with EFTA
- CThe UK had a balance of trade surplus on goods and services with the US
- DThe UK had a balance of trade surplus on goods and services with China
- EThe UK had a balance of trade surplus on goods and services with the EU
Show the answer
The answer is C.
TopicInternational trade and exchange ratesMeasuring economic performance
Q12
The chart in the question paper shows average nominal and real mortgage interest rates on variable mortgages between 1995 and 2016. The real rate is after adjusting for CPI inflation (excluding housing costs). It can be concluded that:
- AInflation was positive each year between 1995 and 2016
- BInflation was highest in 1998
- CInflation was rising between 2011 and 2015
- DThere was deflation in 2011
- EInflation was rising between 2009 and 2011
Show the answer
The answer is E.
TopicMacroeconomic objectives and policyMeasuring economic performance
Q13
An appreciation in the exchange rate would be most likely to improve the current account balance if the price elasticities of demand (PED) for exports and imports were:
- APED for exports: -0.2; PED for imports: -0.2
- BPED for exports: -0.5; PED for imports: -0.5
- CPED for exports: -0.9; PED for imports: -1.4
- DPED for exports: -1.4; PED for imports: -0.9
- EPED for exports: -1.4; PED for imports: -1.4
Show the answer
The answer is A.
TopicInternational trade and exchange ratesDemand, supply and elasticity
Q14
A firm faces the following cost and revenue situation. The firm's total fixed costs are £20 per day. Marginal revenue is £15 for every unit. Marginal cost of the 1st to 7th unit per day: £5, £7, £9, £11, £13, £16, £19. If the firm produces the output at which profits are highest, its overall level of profit or loss will be:
- A£20 loss
- B£0
- C£9 profit
- D£10 profit
- E£30 profit
Show the answer
The answer is D.
Q15
The table below gives the index of UK export prices and the index of UK import prices. January 2016: exports 98, imports 99. January 2017: 111, 109.5. January 2018: 112, 111. It can be concluded from the table that:
- AThe terms of trade worsened between January 2016 and January 2017
- BThe terms of trade worsened between January 2017 and January 2018
- CThere was a trade deficit in January 2016
- DThe terms of trade index improved each year
- EThere was a trade deficit in January 2018
Show the answer
The answer is B.
TopicInternational trade and exchange ratesMeasuring economic performance
Q16
The chart in the question paper shows the unemployment rate and the NAIRU (the non-accelerating inflation rate of unemployment) in Australia from 1982 to 2017. The information in the chart suggests that it is most likely that:
- AIncreases in the NAIRU increase unemployment
- BInflation should have been rising in the mid-1980s
- CInflation should have been falling in the 1990s
- DIncreases in unemployment increase the NAIRU
- EInflation should have been falling between 2003 and 2008
Show the answer
The answer is C.
Q17
The table below gives information on a hypothetical country's income tax structure. Annual income £10 000: tax due £1 000. £15 000: £1 200. £20 000: £1 400. £40 000: £2 400. £60 000: £3 000. It can be deduced from the above data that the tax being imposed is:
- AA progressive tax
- BAn ad valorem tax
- CAn indirect tax
- DA specific tax
- EA regressive tax
Show the answer
The answer is E.
TopicGovernment intervention in marketsPoverty and inequality
Q18
Suppose an economy has a GDP of $200bn and enjoys constant 2% economic growth for the next 5 years. What will be the value of the economy's GDP after 5 years?
- A$220.00bn
- B$220.82bn
- C$221.84bn
- D$222.22bn
- E$223.52bn
Show the answer
The answer is B.
Q19
The price elasticity of demand for a product is unity (–1). Which of the following will increase as a result of an increase in the supply of the product?
- AExpenditure on the product
- BExpenditure on substitute products
- CMarginal revenue
- DQuantity demanded
- EThe price of the product
Show the answer
The answer is D.
TopicDemand, supply and elasticityCosts, revenues and profit
Q20
The payoff matrix below shows two firms' expected revenues from different pricing decisions (Firm A first). Firm A £10 and Firm B £20: £500, £2000. Firm A £10 and Firm B £25: £750, £1750. Firm A £9 and Firm B £20: £450, £1800. Firm A £9 and Firm B £25: £650, £1500. It can be concluded, other things being equal, that the price elasticity of demand for each firm's product is:
- AFirm A: Elastic; Firm B: Elastic
- BFirm A: Elastic; Firm B: Inelastic
- CFirm A: Inelastic; Firm B: Elastic
- DFirm A: Inelastic; Firm B: Inelastic
- EFirm A: Unknown; Firm B: Unknown
Show the answer
The answer is C.
Section B
Q21(a)
Calculate the four firm concentration ratio for this sector.
Mark splitApplication 1
TopicMarket structures
Q21(b)
Outline the market structure of the industry.
Mark splitKnowledge 2
Q22(a)
State the type of integration involved if Sainsbury's had merged with Asda.
Mark splitKnowledge 1
TopicBusiness growth and objectivesCompetition policy and regulation
Q22(b)
Using a cost and revenue diagram, explain how a switch from profit maximisation to sales revenue maximisation might affect Sainsbury's market share.
Mark splitKnowledge 2Analysis 2
TopicBusiness growth and objectivesCosts, revenues and profit
Q23
Discuss the extent to which the UK's terms of trade will have deteriorated after the EU referendum in 2016.
Mark splitKnowledge 1Application 1Analysis 3Evaluation 3
Q24
Using a costs and revenue diagram, discuss the likely impact on UK firms' profitability of the wage increases shown in the table above.
Mark splitKnowledge 2Application 1Analysis 2Evaluation 3
TopicThe labour market
Q25
Using economic theory and the information above, discuss the relationship between base interest rates and economic growth in Azerbaijan.
Mark splitApplication 2Analysis 3Evaluation 3
TopicMacroeconomic objectives and policyEconomic growth and the economic cycle
Q26
With reference to the data, and using appropriate economic analysis, discuss whether governments should significantly increase indirect taxes on meat.
Mark splitApplication 2Analysis 3Evaluation 3
Question text is quoted from the question papers, © WJEC CBAC Ltd (Eduqas), for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.