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*Jun257135101 * IB/M/Jun25/G4003/V4 7135/1
For Examiner’s Use Section Mark A B TOTAL
Tuesday 13 May 2025 Morning Time allowed: 1 hour 30 minutes
Materials
For this paper you must have:
• the Insert • a calculator.
Instructions • Use black ink or black ball-point pen. Pencil should only be used for drawing.• Fill in the boxes at the top of this page.• Answer all questions in Section A.• Answer either Context 1 or Context 2 in Section B .• You will need to refer to the Insert provided to answer Section B.• You must answer the questions in the spaces provided. Do not write outside the box around each page or on blank pages.• If you need extra space for your answer(s), use the lined pages at the end of this book. Write the question number against your answer(s).• Do all rough work in this book. Cross through any work you do not want to be marked.
Information • The maximum mark for this paper is 70.• The marks for questions are shown in brackets.• No deductions will be made for wrong answers.Please write clearly in block capitals.Centre number
Candidate number
Surname
Forename(s)
Candidate signature
I declare this is my own work.
AS
ECONOMICS
Paper 1 The Operation of Markets and Market Failure 1 / 4
2
*02* IB/M/Jun25/71351/1
Do not write outside the box
Section A
Answer all questions in this section.
Only one answer per question is allowed.
For each question completely fill in the circle alongside the appropriate answer.
CORRECT METHOD
WRONG METHODS
If you want to change your answer you must cross out your original answer as shown.
If you wish to return to an answer previously crossed out, ring the answer you now wish to select as shown.
- 1
Which one of the following would not be classified by an economist as a factor of production?[1 mark]
A Labour temporarily out of work
B Money in a firm’s bank account
C Non-agricultural land
D Risk-taking entrepreneurs
- 2
The central purpose of economic activity is the production of goods and services to satisfy needs and wants.
Which of the following is one of the three key decisions that has to be taken to achieve this?[1 mark]
A How to achieve economies of scale
B What goods and services to produce
C Where to locate businesses
D Whether to maximise profit or sales
- / 4
3
*03* Turn over ►
IB/M/Jun25/71351/1
Do not write outside the box
- 3
Figure 1 shows the market demand for electric cars.
Figure 1
The shift of the market demand curve from D1 to D2 would most likely be caused by [1 mark]
A a fall in the price of electric cars.
B a government subsidy to producers of electric cars.
C a marketing campaign promoting electric cars.
D a reduction in the price of petrol and diesel fuels.
- 4
A firm hopes to increase its market share by setting its prices lower than most of its competitors.
What is the most likely reason for this strategy?[1 mark]
A The firm has a licence that gives it a temporary monopoly
B The firm is a price taker in a very competitive market
C The firm is aiming to differentiate its products from its competitors
D The firm is aiming to increase its long-run profits
- / 4
4
*04* IB/M/Jun25/71351/1
Do not write outside the box
- 5
A firm allows customers to personalise a mug with a name of their choice, which it sells for £15. The firm pays £3 for each mug. The paint and labour cost an extra £7. The firm has fixed costs of £150 per month and in a typical month, it produces and sells 60 mugs.
What is the average cost of producing one personalised mug?[1 mark]
A £2.50
B £5
C £10
D £12.50
- 6
One reason why merit goods, such as education and health care, can lead to market failure is that [1 mark]
A individuals are unwilling to pay for merit goods.
B individuals have incomplete information about merit goods.
C merit goods are generally provided free by the government.
D merit goods are subject to the free-rider problem.
- / 4
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