Candidate

Name

Centre
Number

Candidate
Number
2

GCE A level
1133/01
ECONOMICS EC3
A.M. WEDNESDAY, 23 June 2010
1

4 hours

For Examiners use only

01

1133 01

Mark
Question Maximum
Awarded
Mark

10

8 or 9
or 10

20

Total

60

ADDITIONAL MATERIALS
In addition to this examination paper, you will need a calculator.
INSTRUCTIONS TO CANDIDATES
Write your name, centre number and candidate number in the spaces at the top of this page.
Answer all the questions in Section A. You may use continuation paper on page 10 if necessary, taking
care to number the continuation correctly.
Answer one question from Section B.
You are advised to spend no more than one hour on Section A.
INFORMATION FOR CANDIDATES
The number of marks is given in brackets at the end of each question or part-question. Section A has 40
marks and Section B has 20 marks.
You are reminded that assessment will take into account the quality of written communication used in
answers that involve extended writing (Section B).
You are reminded that the essay questions in Section B are synoptic and so will test understanding of
the connections between the different elements of the subject.
LH*(S10-1133-01)

Examiner
only

SECTION A
Answer all the questions in this section.
1.

Profit
maximisation

Social and
community
objectives

Revenue
maximisation
Business
objectives

Survival

Market share
maximisation

The diagram shows examples of business objectives. Explain what is meant by the argument that
most businesses satisfice between objectives rather than pursue one single objective.
[2]
....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

Total mark
(1133-01)

3
2.

(a)

Examiner
only

Explain the difference between the short-run and long-run periods for a firm.

[2]

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

(b)

Using the diagram below, explain what is meant by internal economies and internal
diseconomies of scale.
[4]
LRAC = Long-run average cost
SRAC = Short-run average cost

COSTS

SRAC1
SRAC2

SRAC5

1133 01

LRAC
SRAC3

Q2

Q3

Q4

Q5

OUTPUT

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

(1133-01)

03

SRAC4

Total mark
Turn over.

Examiner
only

3.
AC

Costs and
Revenue
MC

AR = Average Revenue
MR = Marginal Revenue
AC = Average Cost
MC = Marginal Cost

MR

AR
Output

The diagram above illustrates the long-run equilibrium of a firm in monopolistic competition.
Discuss whether this is a less desirable situation than that of perfect competition in the long-run.
[6]
....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

(1133-01)

Total mark

Examiner
only

4.

Unemployment passes two million

There are now 10 jobseekers for every vacancy advertised in UK jobcentres, the TUC claimed
earlier this week. The Office of National Statistics added that average earnings, including bonuses,
rose only 1.8% in the year to January, the lowest annual rise since records began in 1991. David
Kern, chief economist at the British Chamber of Commerce, said the government should now
seriously consider temporary wage subsidies.
BBC News March 3 2009
(a)

Explain why rising unemployment might lead to lower wage rises.

[3]

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

(b)

Explain how wage subsidies might help to prevent unemployment rising.

[3]

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

Total mark

(1133-01)

Turn over.

1133 01

....................................................................................................................................................................................................................................

05

....................................................................................................................................................................................................................................

Examiner
only

5.

UK Inflation
CPI inflation down to 2.9%, RPI inflation down to -0.4%
6
Percentage
Change
5

4
3
2
1
0
-1
Mar

Jun

2007

Sept

Dec

Mar

Jun

Sep

2008

Dec

Mar

2009

RPI
CPI
Annual inflation rates - 12 month percentage change
Source: Office of National Statistics April 21 2009
With reference to the chart, explain why there may be significant differences in the rate of inflation
as measured by the Consumer Prices Index (CPI) and the Retail Prices Index (RPI).
[4]
....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

(1133-01)

Total mark

7
6.

Examiner
only

The table below shows the maximum possible production possibilities in units of food and clothing
(the only two goods which can be produced) by the worlds only two countries, Barluna and
Comenia.
Units of Food

Units of Clothing

Barluna

500

OR

100

Comenia

1000

OR

250

Using the figures, evaluate whether trade between Barluna and Comenia is worthwhile.

[6]

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

07

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

Total mark

(1133-01)

Turn over.

1133 01

....................................................................................................................................................................................................................................

Examiner
only

7.
Gross domestic product (GDP) per head 2008 ($US)

GDP per head in US dollars

GDP per head adjusted for

purchasing power parity (PPP)
in US dollars

UK

44 000

36 000

India

1 000

3 000
Source: International Monetary Fund

(a)

Explain what is meant by GDP per head adjusted for purchasing power parity (PPP).

[2]

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

(1133-01)

9
(b)

Examiner
only

Discuss whether GDP per head figures are the best way to compare the standard of living of
the UK and India.
[8]

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................

Total mark

(1133-01)

Turn over.

1133 01

....................................................................................................................................................................................................................................

09

....................................................................................................................................................................................................................................

10
For continuation only.
...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Examiner
only

11

Examiner
only

SECTION B
Answer one question from this section.
8.

Discuss the view that the Government should never try to influence the free market prices of goods
and services.
[20]

9.

Perfect competition in all markets for goods and services would maximise efficiency in the
economy. The Government should therefore aim to achieve this situation. Discuss.
[20]

10. Discuss the view that public and merit goods are so important that the Government should pay for
them to be given free of charge to users.
[20]

Answer the question from Section B using the following pages.

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Turn over.

12
...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Examiner
only

13

Examiner
only

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Turn over.

14
...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Examiner
only

15

Examiner
only

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Turn over.

16
...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Examiner
only

17

Examiner
only

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Turn over.

18
...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Examiner
only

19

Examiner
only

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Turn over.

20
...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

...............................................................................................................................................................................................................................................

(1133-01)

Examiner
only