EDUMAX GLOBAL COLLEGE

0774 880 751 or 0771 503 198

N2025 A LEVEL ECONOMICS P1 MS
Prepared by Senzere A The Hunter
Expert Guidance:
Multiple choice questions are a crucial component of Economics assessments,
testing cognitive skills and in-depth understanding of economic principles. This
objective paper requires learners to select the correct answer from four options, with
no partial marks or impression-based marks awarded.

Although some economists argue that this format can be limiting, as it doesn't allow
learners to justify their reasoning, the paper remains an engaging and challenging
assessment. The Economics multiple choice paper consists of 40 compulsory
questions, each with four options. Learners have 1 hour 30 minutes to complete the
paper. Questions vary in difficulty, ranging from straightforward to more
challenging.

This component assesses skills such as:

 Knowledge and understanding: Learners must demonstrate their

comprehension of economic concepts, theories, and principles.
 Interpretation and application: Learners must interpret economic data, graphs,
and charts, and apply economic principles to real-world scenarios.
 Analysis: Learners must analyze economic information, identify patterns and
relationships, and draw logical conclusions.
A multiple choice question comprises a stem (the question itself) and four possible
answers (A, B, C, and D). To answer correctly, learners must:
1. Read the responses carefully: Learners must thoroughly read each option,
paying attention to key words, phrases, and concepts.
 2. Underline key words or identify incorrect options: Learners should identify
key words, phrases, or concepts that are relevant to the question, and eliminate
options that contain incorrect information.

3. Choose the correct answer: Learners should select the option that best answers
the question, based on their understanding of economic principles and
concepts.
Each correct answer scores one mark, with no negative marking for incorrect
answers. The correct answer is consistent with the stem, while the three incorrect
answers (distracters) are designed to test learners' understanding.

To excel in this format, learners should:

 Understand the demands of each question: Learners should carefully read the
question and identify what is being asked.

 Draw diagrams where necessary: Learners should use diagrams, graphs, and
charts to help them understand complex economic concepts and relationships.

 Manage their time effectively: Learners should allocate their time wisely,
answering easier questions first and leaving more challenging questions for
later.

 Practice, practice, practice: Learners should practice answering multiple

choice questions regularly, using sample questions or past papers.

By mastering the technique of responding to multiple choice questions, learners can

develop critical thinking skills, analyze complex concepts, and demonstrate their
understanding of Economics principles. This will not only improve their
performance in assessments but also enhance their knowledge and appreciation of
Economics.
Stem Key Description of key Mark
1 B Absolute resource inequality typically causes widespread, hardship and 1
suffering in society because resources are unevenly distributed leaving
many without enough.
2 C It shows bars that are subdivided into different components ,making it 1
composite bar chart and thus a composite presentationof data.
3 B When relative price of inputs changes, firms adjust their production 1
methods by substituting cheaper inputs for more expensive ones.
4 C Sustainable resources are resources than can be used without being 1
depleted,allowing them to be available in the future generations.
5 B By definition. 1
6 D A shift of the budget line from CB to CE means the consumer can buy 1
more potatoes while orange intercept stays the same , indicates the price
of the potatoes has fallen
7 B MU fruit/P fruit =MU fish /P fish=MU meat /P meat 1
10 40 50
=42 =60
12

0.833=0.952=0.833

The consumer should reallocate spending toward the good with the
higher marginal utility per dollar for each good.
8 B PED along a linear demand curve decreases with a fall in price (moving 1
from elastic to inelastic as price falls).
9 D B has unitary demand hence total revenue remains unchanged as price 1
changes. Good A has perfect elastic demand because total revenue falls
to zero when price increases.
10 B Market equilibrium price is found where total supply equals to market 1
demand.

At $70
2 200 +3 000= 8 000
5 200 =8 000

At $60
2 900 +2 000= 5 400
4 900 =5 400
At $50
 2 500 + 3 300 = 5 800
5 800 =5 800
At $40
6 500 + 7 000 =8 000
13 500 =8 000

11 C The profit maximising condition in a perfectly competitive factor market 1

is actually expressed by the equality of the MRP of a factor to its price.
12 C By definition. 1
13 B There is no firm that will employ labour as long as MRP is greater than 1
ARP.
14 D In the short run as output expands beyond a certain point, adding more of 1
the variable inputs to fixed inputs causes diminishing marginal returns,
which raises marginal cost.
15 D Any straight line curve that meet the horizontal axis is said to be in elastic. 1
16 D When demand for beef rises cattle slaughter increases yielding leather 1
.This increases leather supply shifting the supply curve to the right from
S0 to S 1.
17 C By definition 1
18 D A monopsonist chooses the quantity of labour where the MC of labour 1
equals to the MRP .The wage rate is then set on the supply curve(S) at
W1 employing L1 workers.
19 B With a perfectly elastic supply curve all earnings are transfer earnings. 1
20 D By definition. 1
21 C The MC must cut the MR curve from below to ensure its profit maximum, 1
not a minimum.
22 C In a free market producers ignore the external cost to others. Therefore 1
output will be at Q1 (where demand = supply)
23 D That is loss in consumer and producer surplus caused by monopoly 1
pricing.
24 D Assigning property rights (privatising the resource/use of rights) is a 1
common economic solution to mitigate this problem, as it gives
individuals or groups an incentive to manage the resource sustainably.
25 C 2019 80 -100 /100 x 100 = -20% 1

2020 125 - 80/80 x 100 = 56.25%

2021 160 -125 /125 x 100 = 28%

2022 60-160/160 x100 =-62.5%

The highest positive rate of inflation is 56.25%
26 A The price level is still rising but a decreasing rate. 1
27 B An ad valorem tax on imports raises the cost of imported goods, reducing 1
the quantity supplied at every price and causing a leftward, non-parallel
shift of the supply curve.

Tip: Ad valorem taxes are calculated as a percentage of an item’s value,

meaning tax amounts rise with price increase.

28 C When a country’s currency appreciates imports become cheaper, which 1

usually leads to an increase in volume of imports.
29 C 𝑖𝑛𝑑𝑒𝑥 𝑜𝑓 𝑒𝑥𝑝𝑜𝑟𝑡 𝑝𝑟𝑖𝑐𝑒𝑠 1
TOT =𝑖𝑛𝑑𝑒𝑥 𝑜𝑓 𝑖𝑚𝑝𝑜𝑟𝑡 𝑝𝑟𝑖𝑐𝑒𝑠 X 100

88
= 92 X 100

=95.65

30 A S = -a+ (1-b) y where S is savings, 1-b is MPS, Y is income and a is 1

autonomous dissaving.
31 B Y =C+1+G+(X-M) 1
Y =100+150+150+150-0.1Y
Y= 550-0.1Y
Y+0.1Y=550
1.1Y /1.1 =550/1.1
Y= 500

Net exports =150 - 0.1(500)

=150-50
=$100

32 B MPC=∆C/∆Y 1
70−55
= 100−75

=15/25
=0.60
33 A It’s not a standard motive in the usual Keynesian classification. 1
34 C Money created =1/reserve ratio X initial deposit 1
Let X represent the reserve ratio
600 000=1/X x (75 000)
600 000X/6000 =75 000/600 000
X =0,125
Hence reserve ratio set is 12.5%
35 C When reserve ratio drops from 20% to 5% the money multiplier rises 1
from 5 to 20 .The increase is 20-5 =15 .So the multiplier goes up by 5.
36 B To maintain the exchange rate the central bank must adjust interest rates 1
or intervene in foreign exchange markets which limits ability to manage
domestic money supply independently.
37 A Reducing government spending lowers AD and curbs inflation (demand 1
pull inflation).
38 C Higher benefits can raise reservation wage, potentially reducing job 1
search intensity and increasing the natural rate of unemployment.
39 B Per capita income is a mathematical average. 1
40 C By definition. 1