G.C.E.

Advanced Level Examination

Economics

Past Questions from 2007-2021

INTRODUCTION TO ECONOMICSs

BASIC ECONOMIC CONCEPTS

PRODUCTION RESOURCES
PRODUCTION POSSIBILITIES MODEL

ECONOMIC SYSTEMS

Pushpa Kumara Hearath

B.Sc. Business Administration (Special) University of Sri layewardenepura

Economlos Pudtpa &lumana Hearall

 2
INTRODUCTION TO ECONOMICS
2021 (2022 February)
. A more complete short definition of economics would be that economics is the study of
h o w employment opportunities in society could be created to make its citizens better off.
how countries trade goods and services in a global market place.
2 how goods and services are produced without damaging the environment.
4) how unlimited resources are allocated among limited wants.
S) how scare resources are allocated to satisfy unlimited wants.

2. Production possibilities frontiers linear because

are

1) resources are being used fully and efficiently.

2) of the Law of increasing opportunity costs.
3) of inefficiencies in the economy.
4) of constant opportunity costs.
5) of non-homogeneous resources.

3. Which of the following is a fundamental feature of the free market economy?

1) Strict government control of production
2) More imports than exports
Public ownership of resources
Private property
5) Prices and wages set by the government

4. What is not a benefit of division of labour?

1) Increased flexibility of the workforce.
2) Reduced total cost of producing goods and services.
3) Increased productivity.
4) Increased ability to introduce innovations.
5) Increased income equality.

2020 October
5. A free good has which one of the following characteristics?
1) It has some degree of scarcity in relation to demand.
2) It has no opportunity cost in supply.
3) Its consumption or production does not generate any externality.
4) It is supplied by the government free of charge.
5) It is supplied by the government itself because its consumption is socially desirable.

6. Economists refer the term 'capital' exclusively to

1) human-made goods which are used to produce other goods and services.
money used to purchase capital in the form of stocks and bonds.
3) savings accumulated by households to purchase capital.
4) money used by an entrepreneur to purchase capital.
5) real estate, forests, metals, and mineral resources.

Pushpa Kumara Hearath

E&onomiesPudlpaAumara Hearalh
 7. What is meant by the statement that every economic system faces the problem of scarcity?
1) The quantities available of some resources in the society exceed the demand for them.
2) Mineral deposits are available only in finite amounts in a country.
3) Countries have failed to achieve full employment due to scarcity of resources.
4) The productive resources are not sufficient to satisfy all wants of the society.
5) Economic systems have cyclically recurring expansionary phases during which scarcity of resource occurs.

S. The allocatively efficient point on a production possibilities curve is achieved where

1) the minimum quantity of inputs are used to produce each good.
2each good is produced at a level where marginal benefits equal marginal cost.
3) large amount of capital goods are produced relative to consumer goods.

4) large amounts of consumer goods are produced relative to capital goods.

5) each good is produced at a level where price of the good exceeds marginal benefits.

2019 August
9. The branch of economic that studies the decisions of individual households and firms is called
1) macroeconomics. ) microeconomics.
3) positive economics. 4) normative economics.
5) weltare economics.

10. The income payments made to resource owners of land, labour, capital and entrepreneurship respectively are
1) interest, wages, rent and profit. 2) rent, wages, dividends and interest.
3 rent, profit, wages and interest. 4) rent, wages, interest and profit.
5) interest, wages, dividends and rent.

11. Which of the following is a salient feature of a command economic system?

1) Private ownership of capital
2) Heavy reliance on markets
3) Central planning
4) Concentration of market power
5) Decision making based on self-interest
12. The diagram below shows production possibilities frontier for an economy producing at point A.
Good Y

800

400
200

0 100 200 300 Good X

What is the quantity of good X given up to produce the quantity of good Y?
100 200 3) 300 4) 400 5) S00

2018 August
13. Which of the following statements is a normative statement

1) Increasing fuel prices will encourage the demand for electric cars.
2) If income increases, sales of luxury goods will fall.
3) As laptop prices fall, people will buy more of them.
4) Government should control the rents that house-owners charge.
5) The quantity demanded of a good is inversely related to changes in its price

Pushpa Kumara Hearath

EeonomioSw Pukpa &umara Hlearalo

 14. Which one of the following is an example of land as a factor of production
2) Southern expressway 3) Victoria dam
1) Magampura harbor
4) Ambewela dairy farm 5) Pasikkudah beach

15. Which of the following is always true of an economy operating on its production possibilities frontier?
t must be a free market economy.
2) It must be a command economy.
3) Its resources are fully employed.
4 It has achieved production efficiency but impossible to achieve allocative eficiency.
S) It must have a linear production possibilities frontier.

26. 0n a diagram of a production possibilities frontier, opportunity cost is represented by

1 the slope of the production pOssibilities frontier.

2a point inside the production possibilities frontier.

3) a ray through the origin.

4a
5)
point on the vertical axis.
a point on the horizontal axis.

17 Which of the following is necessary for a well-functioning capitalist economy, but not in a command economy?

1 Centralized decision-making 2) Scarcity of resources

3) Monopolies 4) Protection of property rights
5) Positive externalities

18. when a firm is

producing the allocative efficient level of output,
1) total revenue is equal to total
cost.
3) marginal revenue is greater than marginal cost. 2) marginal revenue is equal to marginal cost.
4) price is equal to average total cost.
5) price is equal to marginal cost.

2017 August
19.
Which
1)
one of the following is not a factor of production?
Natural resources 2) Human resources 3) Capital
4 Money 5) Entrepreneurship

20. The problem of scarcity

1) exists only in developing economies.
2) exists only in market economies.
3 exists because prices of goods and services are too high.
4) exists now but will be eliminated with economic growth.
5) exists because of limited resources.

21. Which of the following is assumed in constructing a production possibilities curve?

1) The economy is using its resources inefficiently.
2) Resources are utilized to produce only private goods.
3) Full employment, but not full production, is being realized.
4) Production technology is fixed.
5) There is no inflation in the economy.

22. An economy has achieved productive efficiency when

1) it is unable
produce more of one good without producing less
to
of another.
2) the marginal cost of producing each good is
equal to its price.
3) it has eliminated all negative
4) the resources are allocated t0
externalities
produce g00ds and services most wanted by
5) it is self-sufficient in all products. society.

Pushpa Kumara Hearath

E&onomiSPukpa &unmara Hearalh

 23. The main function of prices in a market economy Is to
1) generate more profits to the entrepreneurs.
2) guide households to choose investment opportunities.
3) determine the elasticity of demand curves.

4) improve the distribution of income.

5) allocate scarce resources among alternative uses.

and For whom to produce

are essentially
4. The tundamental economic questions of 'what to produce'
interdependent because
different patterns of demand and therefore different
1) different patterns of income distribution generate

patterns of resource allocation.

of income distribution.
4derent patterns ot production methods generate different patterns
concentrated in the hands of the economically powerful segments of society.
3) income and wealth are

4) markets cannot be relied upon to allocate resource efficlently.

S) a particular level of output may be produced by many different combinations of inputs.

2016August
25. The term 'human capital' refers to
1) the labour resource used to make capital equipment.
2) buildings and machinery.
the skill and knowiedge endowment of labour force.
3
4) entrepreneurship and risk-taking ability.
5) labour force employed in the health and education sectors.

26. Potential output is

) the maximum GDP that an economy actually achieved during the last ten years.
in tradable goods producing sector.
2) achieved during periods when all of the labour force is employed
3) a goal that can never be achieved by the economy using all its resources most efficiently.
4) the GDP that could be produced when the economy's resources were fully employed at a normal intensity

of utilization.
5) the GDP that could be produced when the economy's resources were fully employed at a maximum

intensity of utilization.

| 2015 AugUSt
27. Which of the following is a microeconomic statement
1) The price of rubber declined by 10% last year
2) Unemployment was 3.8% of the labour force last year.
3) The real Gross Domestic Product increased by 7% last year.

4) The general price level increased by 4% last year.

5) The tax revenue of the government decreased by 8% last year.

28. The opportunity cost of a particular activity

1) is the same for everyone pursuing the activity.
2) includes both monetary costs and foregone income.

3) includes monetary cOst oniy.

4) includes foregone income only.
5) measures the direct benefits of that activity.

Pushpa Kumara Hearath

E&onomioSPulpa unara Heamalh