AQA A Level Economics Paper 3: Economic principles and issues November 2020 question paper 7136/3

Economics is a social science because

All other things being equal, the demand for labour is more likely to be wage elastic if

Table 1 contains data for the rates of growth of nominal and real GDP and the rate of inflation for an economy in a given year. Which one of the following combinations, A, B, C or D, shows the correct relationship between the three variables?

Figure 1 shows three aggregate demand (AD) curves, a short-run aggregate supply (SRAS) curve and a long-run aggregate supply (LRAS) curve.

In Figure 1, when

In an economy, over the last decade, each of the top five decile groups has experienced a fall in their share of total income. In contrast, the bottom five decile groups have experienced a substantial increase in their share of total income.

It can be concluded that, over this period, the distribution of income is most likely to have

In an economy, the marginal propensity to consume is 0.6. All other things being equal, which one of the following statements is correct?

Which one of the following combinations, A, B, C or D, shows the essential characteristics

Figure 2 shows the equilibrium position, point E, of a profit-maximising firm in a monopolistically competitive industry.

All other things being equal, which one of the following applies to the firm’s equilibrium at point E? The firm is

A long-dated £100 government bond with a coupon rate of 5% has a current market value

All other things being equal, in which one of the following circumstances is the Bank of England most likely to raise Bank Rate to maintain financial stability?

Figure 3 shows a firm’s total revenue (TR) curve.

Which one of the following combinations, A, B, C or D, describes how the firm’s average revenue and marginal revenue will change as the firm expands its output?

According to the hypothesis of diminishing marginal utility, when marginal utility is zero

Table 2 shows the inflation rate and the rate of growth of the money supply for an economy between 2016 and 2019.

From the data in Table 2 it may be concluded that, all other things being equal, there was

Increased output results from specialisation and the division of labour because they enable

Figure 4 shows a firm’s demand (D) curve and its marginal revenue (MR) curve for good X. The firm initially sells OQ 1 units of X per day at a price of OP 1.

If the firm increases its price by 10%

Which one of the following distinguishes a private good from a pure public good?

Table 3 shows the demand for and supply of oranges at a range of prices between 10 pence and 30 pence.

As a result of an increase in consumers’ incomes, the demand for oranges increases by 25% at each of the prices shown in Table 3.

After the rise in incomes:

Which one of the following government policies is most likely to reduce market failure and

The long-run Phillips curve shows that

Figure 5 shows the market demand for labour (D_{L =} MRP_L), the market supply of labour (S_L=AC_L), and the marginal cost of labour (MC_L), in a particular industry. The employer in this industry is a monopsonist.

From Figure 5, it can be concluded that, in the absence of a trade union or a minimum wage, the firm will employ

All other things being equal, which one of the following is most likely to increase the

Table 4 shows the weights used in the Consumer Prices Index (CPI) for a selection of items in 2008 and 2018.

The data in Table 4 indicate that between 2008 and 2018 the

Figure 6 shows the marginal private and social benefit (MPB and MSB) curves and the marginal private and social cost (MPC and MSC) curves in the market for domestically produced solar panels. The initial market equilibrium is at E₁.

To correct the market failure, the government introduces a subsidy to domestic manufacturers of solar panels of £200 per unit produced. Which one of the following represents the total amount of subsidy payments made by the government in the first

Moral hazard results when individuals and organisations make investment decisions

An economy is estimated to be experiencing a 2% rate of frictional unemployment plus a 3% rate of structural and real wage unemployment. If it is also experiencing cyclical unemployment of 4%, its natural rate of unemployment is most likely to be

Figure 7 shows two aggregate demand (AD₁ and AD₂) curves and two long-run aggregate supply (LRAS₁ and LRAS₂) curves for an economy.

All other things being equal, which one of the following combinations, A, B, C or D, is most likely to explain the movement of the economy from E₁ to E₂?

An increase in the

Which one of the following is correct for a proportional tax on income?

Table 5 contains data for a firm’s marginal cost of producing different outputs of shirts per day. The firm operates in a perfectly competitive market.

If the market price is £10 per shirt, at which one of the following outputs per day, A, B, C or D, will the firm maximise its profit?

Figure 8 shows two supply (S₁ and S₂) curves and the demand (D) curve for euros on the foreign exchange market and the price of euros in terms of pounds sterling.

Which one of the following is the most likely explanation for the change in the exchange rate shown in Figure 8 ?

An increase in eurozone

The behaviour of a consumer buying a 75-inch large screen TV is biased due to bounded rationality and the anchoring effect. This implies that the choice of which TV to buy is

To what extent, if at all, do the data suggest that living standards in the UK improved between 2007 and 2017? You must use the data in Extract B to support your assessment.

Explain how a sustained slowdown in the world economy is likely to affect living standards in the UK.

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government implement a further substantial increase in the National Living Wage? Justify your recommendation.