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Summer Test

The document outlines a series of economic questions and scenarios related to various regions, including Hawaii, Mexico, and South America, focusing on issues such as poverty, labour mobility, and the impact of education on earnings. It presents multiple-choice questions that require analysis and discussion on topics like government intervention, healthcare spending, and the effects of mergers in the vaccine industry. Each section encourages critical thinking about economic principles and their real-world applications.

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Ayaan Tyagi
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7 views6 pages

Summer Test

The document outlines a series of economic questions and scenarios related to various regions, including Hawaii, Mexico, and South America, focusing on issues such as poverty, labour mobility, and the impact of education on earnings. It presents multiple-choice questions that require analysis and discussion on topics like government intervention, healthcare spending, and the effects of mergers in the vaccine industry. Each section encourages critical thinking about economic principles and their real-world applications.

Uploaded by

Ayaan Tyagi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SECTION B
Answer any three questions.
Each question is introduced by stimulus material. In your answers you may refer to the material
and/or other examples you have studied.

2 Hawaii’s economy has grown due to tourism but the growth in this sector has also increased
inflation in this US island state. It is estimated that 9% of Hawaii’s population were living in
poverty in 2022. Many families struggled to save. Young workers were able to leave due to
high levels of labour mobility between US states. However, Hawaii is now facing an ageing
population including many more retired people.
(a) Define labour mobility. [2]
(b) Explain the effects of an ageing population on spending and saving levels. [4]
(c) Analyse possible reasons why a government may want to intervene in a market. [6]
(d) Discuss whether or not a government should increase its spending on healthcare. [8]

3 In 2020, wages paid to Mexican workers, including those in the primary sector, fell. This fall
contributed to a 9% rise in poverty in the country. In the same year, many small and medium-
sized firms closed down. The country also suffered from traffic congestion. Its capital, Mexico
City, is the world’s most congested city.
(a) Identify two possible opportunity costs of producing primary sector products. [2]
(b) Explain two policy measures which may reduce poverty. [4]
(c) Analyse how the closure of firms may harm consumers. [6]
(d) Discuss whether or not a government should encourage people to walk to school and work.
[8]
4 South America is a large geographical area with millions of microeconomic decision-makers.
During a recent pandemic, schools stayed closed for longer than anywhere else in the world.
As a result, students received less education. The World Bank estimated that the average
student would earn $24,000 less over their lifetime. Some students may earn only the
minimum wage. In 2020, South America had an inflation rate of 6.3% and an economic
growth rate of only 1.8%.
(a) Identify the difference between microeconomics and macroeconomics. [2]
(b) Explain how less education can reduce a person’s lifetime earnings. [4]
(c) Analyse how the introduction of a minimum wage could affect unemployment. [6]
(d) Discuss whether or not consumers would benefit from firms buying new capital equipment.
[8]
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5 In 2020, investment in vaccine production was very high. There was a plan for a major
vaccine producer to horizontally merge with another firm but the plan was cancelled.
This was not surprising as a similar merger of two firms in the same industry had failed the
previous year. However, most firms in this industry are still meeting their objectives and also
creating many external benefits for the wider economy.
(a) Identify two benefits of a horizontal merger. [2]
(b) Explain two possible external benefits of vaccines. [4]
(c) Analyse potential reasons why a merged firm may fail. [6]
(d) Discuss whether or not an increase in government spending on housing would benefit an
economy. [8]
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