OCR A-Level Economics sample questions and answers (H460)
Guide overview All 12 topics Sample questions Papers and weighting Look inside Questions and answers
58 sample questions and answers
Taken from every topic of OCR A-Level Economics, specification H460. The full guide has 1,226.
Component 01, Component 03
Introduction to Microeconomics
70 questions in the guide, across 7 subtopics. More from this topic
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Economic and free goods, scarcity and positive and normative statements
State the economic problem in a single sentence.
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Human wants are unlimited but the resources available to satisfy them are finite, so choices about how resources are used must be made. -
Economic and free goods, scarcity and positive and normative statements
What is a normative statement?
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A value judgement about what ought to be, which cannot be shown true or false by evidence alone. -
Economic agents and the factors of production
What is the main economic role of firms?
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Firms buy factors of production and combine them to produce goods and services for sale. -
Economic agents and the factors of production
What does the factor land include besides the ground itself?
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All natural resources, such as minerals, forests, fish stocks, water and fertile soil. -
Factor rewards, rationality and the objectives of economic agents
What does rationality mean in economics?
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Agents are assumed to weigh the costs and benefits of each option and choose the one that best meets their own objective, such as maximum utility or profit.
Component 01, Component 03
Microeconomics: the Role of Markets
257 questions in the guide, across 22 subtopics. More from this topic
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Specialisation, the division of labour and barter
Why does the division of labour reduce average costs?
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Higher output per worker spreads fixed costs over more units and makes specialised machinery worth installing. -
Individual and market demand and joint, competitive and composite demand
What is competitive demand?
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Demand for goods that are substitutes for one another, so a consumer buys one instead of the other. -
Movements along and shifts of the supply curve
Which way does the supply curve shift if wages in an industry rise sharply?
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It shifts to the left, because higher costs mean less is supplied at every price. -
How changes in price affect consumer and producer surplus
What is the deadweight welfare loss triangle?
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The consumer and producer surplus lost on transactions that no longer take place, which is not transferred to anyone. -
Price and income elasticity of demand and total revenue
Which three factors make demand for a good more price elastic?
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The availability of close substitutes, the good taking up a large share of income, and a longer time period over which consumers can adjust.
Component 01, Component 03
Microeconomics: Business Objectives
72 questions in the guide, across 6 subtopics. More from this topic
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Profit maximisation and alternative business objectives
A firm abandons profit maximisation for revenue maximisation. What happens to its price and output?
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Output rises and price falls, because the firm keeps expanding past the point where marginal cost equals marginal revenue until marginal revenue reaches zero. -
Profit maximisation and alternative business objectives
What does utility maximisation mean as a business objective?
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It means managers or owners pursuing their own satisfaction — status, perks, a larger department or an easier working life — rather than the greatest possible profit for the firm. -
Corporate social responsibility and the principal-agent problem
Which information failure lies behind the principal-agent problem?
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Asymmetric information — the agent knows far more about their own effort and the firm's day-to-day position than the principal can observe. -
Corporate social responsibility and the principal-agent problem
How does the intensity of competition affect a firm's freedom to choose an objective?
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In highly competitive markets firms must maximise profit, or at least minimise costs, simply to survive, whereas firms with market power have the slack to satisfice or pursue social and managerial goals. -
Fixed, variable, average and marginal costs
Define marginal cost.
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Marginal cost is the addition to total cost from producing one more unit of output.
Component 01, Component 03
Microeconomics: Market Structures
113 questions in the guide, across 10 subtopics. More from this topic
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Perfect competition in the short and long run and allocative efficiency
For a price taker, how are price, average revenue and marginal revenue related?
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They are all equal, so the single horizontal line is at once the demand, average revenue and marginal revenue curve. -
Productive efficiency and perfect competition as a benchmark
Which efficiency condition does perfect competition meet in both runs, and which only in the long run?
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Allocative efficiency is met in both the short and the long run, while productive efficiency is met only in the long run. -
Monopoly characteristics, equilibrium and static efficiency
What is on each axis of the monopoly diagram, and which curves appear on it?
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Quantity is on the horizontal axis and price and cost on the vertical; the diagram shows a downward-sloping average revenue curve, a marginal revenue curve below it falling twice as steeply, and the firm's marginal cost and average cost curves. -
Dynamic efficiency, price discrimination and natural monopoly
Define price discrimination and state the three conditions it requires.
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Price discrimination is charging different prices to different consumers for the same product for reasons unrelated to cost; it requires monopoly power over price, the ability to separate consumers by their price elasticity of demand, and the prevention of resale between them. -
Characteristics of monopolistic competition and its short run equilibrium
What distinguishes monopolistic competition from oligopoly?
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There are many firms and no interdependence, since each is too small for its decisions to provoke a reaction, and barriers to entry are low rather than high.
Component 01, Component 03
Microeconomics: the Labour Market
75 questions in the guide, across 7 subtopics. More from this topic
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Derived demand for labour and wage elasticity of demand
Why does a rise in labour productivity raise the demand for labour at a given wage?
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Each worker now adds more output and so more revenue, which raises marginal revenue product and makes it profitable to employ more workers at the same wage. -
Derived demand for labour and wage elasticity of demand
Why is the demand for labour more wage-elastic when wages make up a large share of a firm's total costs?
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A given wage rise then raises total costs and prices sharply, so sales and therefore employment fall by a large proportion. -
Labour productivity, unit labour costs and marginal revenue product
Why do rising unit labour costs damage a country's international competitiveness?
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Domestic goods become dearer relative to foreign rivals, so exports fall and imports rise sharply. -
Labour productivity, unit labour costs and marginal revenue product
Describe the shape of the marginal revenue product curve and explain why it takes that shape.
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It eventually falls from left to right, because as more workers share a fixed stock of capital diminishing marginal returns set in, so marginal physical product and hence marginal revenue product decline. -
Supply of labour and wage elasticity of supply
An occupation removes a costly licensing requirement for new entrants. What happens to the supply of labour to it?
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Supply increases and the supply curve shifts to the right, because the barrier to entering the occupation has been lowered.
Component 02, Component 03
Macroeconomics: Aggregate Demand and Aggregate Supply
111 questions in the guide, across 10 subtopics. More from this topic
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The circular flow of income, injections and leakages
In the simple two-sector circular flow, what do firms provide and what do they receive?
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Firms provide goods and services to households and receive consumer expenditure in return. -
Methods of measuring national income
What does the output method sum, and how does it avoid double counting?
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It sums the value added by each firm at each stage of production rather than the total value of its sales, so the value of bought-in inputs is not counted twice. -
Components of aggregate demand and their determinants
Which component of aggregate demand is itself the difference between two flows, and why does that matter?
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Net exports (X − M), because it is the difference between two separate flows, exports and imports, so it changes whenever either of them changes and can be negative. -
The slope of the aggregate demand curve and what shifts it
What is the only change that causes a movement along the aggregate demand curve rather than a shift of it?
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A change in the general price level; any change in planned spending at a given price level shifts the whole curve instead. -
Consumption, income and the role of expectations
How does a rise in house prices affect consumption even when incomes have not changed?
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Owners feel wealthier and can borrow against the higher value of their property, so consumption rises through the wealth effect.
Component 02, Component 03
Macroeconomics: Economic Policy Objectives
202 questions in the guide, across 16 subtopics. More from this topic
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Economic growth, real and nominal GDP and GDP per capita
Why can nominal GDP rise in a year when real GDP falls?
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Because prices can rise fast enough that the higher money value of output conceals a fall in the physical quantity actually produced. -
Economic structure, deindustrialisation and sustainable development
How do the shares of the three sectors typically change as a country develops?
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The primary sector's share of output and employment falls, the secondary sector's share rises and then declines, and the tertiary sector's share rises until it dominates. -
Employment, unemployment rates and the objective of full employment
What does it mean to be economically inactive?
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To be of working age but neither in work nor actively seeking it, for example students, carers, the long-term sick and the early retired. -
Inflation, deflation, real values and the CPI and RPI
What is the United Kingdom's inflation target, and who sets policy to meet it?
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A 2% annual rise in the Consumer Prices Index, which the Bank of England's Monetary Policy Committee sets interest rates to achieve. -
Balance of payments accounts and current account calculations
What is recorded under trade in goods?
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Exports and imports of physical, tangible products such as cars, food, machinery and oil.
Component 02, Component 03
Macroeconomics: Implementing Policy
97 questions in the guide, across 9 subtopics. More from this topic
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The government budget, types of tax and the budget balance
What happens to the average rate of tax as income rises under a progressive tax, and under a proportional tax?
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Under a progressive tax it rises, so higher earners hand over a larger proportion of their income, whereas under a proportional tax it stays the same at every income level. -
National debt, cyclical and structural deficits and crowding out
Why is the structural part of a deficit harder to measure than the headline figure?
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It depends on an estimate of the output gap, and the trend level of output cannot be observed directly, so the figure rests on a model and is frequently revised. -
The Laffer curve, average and marginal tax rates and limits of fiscal policy
If a government is on the downward-sloping section of the Laffer curve, what happens to revenue when it cuts the tax rate?
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Revenue rises, because the increase in declared and taxable activity more than offsets the lower rate charged on each pound. -
Interest rates, the money supply and inflation targets
Why does a rise in interest rates reduce planned investment?
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It raises the cost of borrowing and the opportunity cost of using retained profit, so fewer projects deliver a return above the required rate and firms shelve them. -
Quantitative easing, the exchange rate and limits of monetary policy
When does a central bank turn to quantitative easing rather than simply cutting its policy rate?
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When the policy rate is already close to zero and cannot usefully be cut further, so conventional interest rate policy has run out of room.
Component 02, Component 03
Macroeconomics: the Global Context
102 questions in the guide, across 8 subtopics. More from this topic
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Patterns of international trade and global supply chains
What is intra-industry trade?
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It is trade in similar products within the same industry, such as a country both importing and exporting cars, driven by product differentiation and consumers' taste for variety. -
Advantages and disadvantages of international trade
Why has trade been so valuable to emerging economies?
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Export-oriented manufacturing has brought in foreign exchange, transferred technology and allowed economies of scale, which together have driven rapid growth and large reductions in poverty. -
Exchange rate calculations and how exchange rates are determined
A machine is priced at $9,000 when the exchange rate is £1 = $1.20. Calculate its cost in pounds.
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Dividing by the rate gives 9,000 ÷ 1.20 = £7,500. -
Exchange rate changes, the Marshall-Lerner condition and exchange rate systems
How does a depreciation affect aggregate demand?
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Cheaper exports and dearer imports raise net exports, so aggregate demand shifts to the right and both real output and the price level rise. -
Globalisation, international competitiveness and comparative advantage
What is the difference between price and non-price competitiveness?
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Price competitiveness depends on relative unit labour costs, productivity and the exchange rate, while non-price competitiveness depends on quality, design, reliability, branding and speed of delivery.
Component 02, Component 03
Macroeconomics: the Financial Sector
75 questions in the guide, across 6 subtopics. More from this topic
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Functions of money, credit creation and narrow and broad money
Which function of money breaks down first during hyperinflation, and why?
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The store of value function, because purchasing power falls so quickly that holding money for even a short time destroys wealth, which is why people switch to goods or a foreign currency. -
Functions of money, credit creation and narrow and broad money
How does a central bank add directly to the stock of money in the economy?
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It issues notes and coin and creates reserve balances for commercial banks, for example by buying financial assets under quantitative easing and paying for them with newly created reserves. -
The quantity theory of money and interest rates in the money market
Which two assumptions must hold before MV = PQ implies that money growth causes proportional inflation?
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Velocity of circulation must be stable and real output must be fixed, which in practice means the economy is already at full capacity. -
The quantity theory of money and interest rates in the money market
Describe the shape of the money supply curve in this diagram and explain why it takes that shape.
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It is drawn as a vertical line, because the quantity of money is treated as set by the monetary authorities rather than by the rate of interest. -
Roles of the financial sector, saving and investment
How does the financial sector allow individuals and firms to reduce risk?
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Insurers pool the risks of many customers so that individual losses are covered from shared premiums, and forward and futures markets let firms fix the price of a currency or commodity in advance and hedge against adverse price movements.
Component 01, Component 02, Component 03
Quantitative Skills for Economics
26 questions in the guide, across 2 subtopics. More from this topic
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Ratios, percentages, averages, graphs, index numbers and real values
Unemployment falls from 8% of the labour force to 6%. State the fall in percentage points and calculate the percentage fall in the unemployment rate.
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It is a fall of 2 percentage points, which is a 2 ÷ 8 = 25% fall in the rate itself. -
Ratios, percentages, averages, graphs, index numbers and real values
A worker's money wage is £30,000 in a year when the consumer price index stands at 120, with the base year at 100. Calculate the real wage at base-year prices.
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The real wage is £30,000 × 100 ÷ 120 = £25,000 at base-year prices. -
Cost, revenue, profit and elasticity calculations
A firm has fixed costs of £20,000 and average variable cost of £13 at an output of 2,500 units. Calculate average fixed cost, average total cost and total cost.
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Average fixed cost is £20,000 ÷ 2,500 = £8, average total cost is £8 + £13 = £21, and total cost is 2,500 × £21 = £52,500. -
Cost, revenue, profit and elasticity calculations
A 20% rise in market price brings forth a 10% increase in quantity supplied. What is the price elasticity of supply, and what does it suggest about the industry?
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PES is 10 ÷ 20 = 0.5, so supply is inelastic, suggesting firms cannot expand output quickly, perhaps because of long production times or limited spare capacity.
Component 01, Component 02, Component 03
Themes in Economics: Synoptic Application
26 questions in the guide, across 2 subtopics. More from this topic
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Choosing models and judging data and assumptions in an unseen theme
Explain how a microeconomic market failure can be linked to a macroeconomic policy objective in a single argument.
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If workplace training is under-provided because firms cannot capture all its benefits, the resulting shortfall in skills holds down labour productivity, which limits long-run aggregate supply and therefore the economy's potential growth; the intervention that corrects the market failure is simultaneously a supply-side policy. -
Choosing models and judging data and assumptions in an unseen theme
Name three assumptions common to economic models that real behaviour frequently breaks.
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Perfect information, rational maximising behaviour by consumers and firms, and ceteris paribus — the assumption that everything other than the variable under study stays constant. -
Efficiency, equity, sustainability and ethics in economic judgements
Why do moral and ethical questions about economic activity take a different form at global level than at national level?
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Costs and benefits cross borders, so production in one country can impose environmental or labour costs on people in another, and no single government is accountable to everyone affected or able to compensate them. -
Efficiency, equity, sustainability and ethics in economic judgements
Why is the answer "it depends" only a partial evaluation?
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Because evaluation requires you to name what it depends on, such as the size of the relevant elasticity, the time period considered or the current state of the economy, and then say which way that factor points in this case.
OCR A-Level Economics Active Recall Guide
The other 1,168 questions, with the answers printed after each section.