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
Tuesday 12 May 2026 Morning Time allowed: 1 hour 30 minutes
Materials
For this paper you must have: For Examiner’s Use
• the Insert
Section Mark
• a calculator.
A
Instructions B
• Use black ink or black ball-point pen. Pencil should only be used for drawing.
TOTAL
• 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.
*Jun267135101*
IB/M/Jun26/G4004/V3 7135/1
, 2
Do not write
outside the
Section A box
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.
0 1 Which one of the following is the correct definition of a positive economic statement?
[1 mark]
A A statement that can be tested by the evidence
B A statement that contains a value judgement
C A statement that must be true according to the evidence
D A statement that supports the most desirable outcome
0 2 Why do higher prices provide an incentive to increase production?
[1 mark]
A Higher prices are needed to cover higher costs
B Higher prices lead to higher profits
C Producers will allocate resources more efficiently
D Producers will satisfy more needs and wants
*02*
IB/M/Jun26/7135/1
, 3
Do not write
outside the
0 3 Which one of the following situations shows negative externalities in consumption box
and production?
[1 mark]
A Air pollution from oil refineries and noise pollution caused by fuel deliveries
to motorway service stations
B Consumers experiencing breathing problems and longer journey times due
to an increase in the use of diesel cars
C Increased road congestion from rising car use and higher oil prices raising
the price of plastic
D Water pollution from leaking oil tankers and rising global temperatures
caused by households using petrol cars
0 4 Hamida is paid £2000 per month to manage a business offering tutoring services to
sixth-form students. The business has a contract to rent premises for £3000 per month
and has a broadband contract that costs £100 per month. Tutors are paid £35 per hour.
There are no other costs.
In April 2025 the business had an average total cost of £52 per hour of tuition. How many
hours of tuition did it sell in the month?
[1 mark]
A 59
B 98
C 182
D 300
0 5 Which one of the following is most likely to be an example of the opportunity cost of the
government increasing its spending on health care by £20 billion?
[1 mark]
A An increase in investment by firms in new machinery
B An increase in spending by consumers on goods from abroad
C An increase in spending by the government on education
D An increase in wages for workers in the private sector
Turn over ►
*03*
IB/M/Jun26/7135/1
, 4
Do not write
outside the
0 6 Figure 1 shows the supply curve for coffee. box
Figure 1
Which one of the following could have caused the movement along the supply curve from
V to W?
[1 mark]
A An increase in the costs of production of coffee
B An increase in the price of a complementary good for coffee
C An increase in the price of a substitute good for coffee
D An increase in the subsidy for coffee
0 7 Which one of the following characteristics of a perfectly competitive market is most likely to
lead to firms charging the same price?
[1 mark]
A Buyers have perfect information
B Firms agree to charge the same price
C New firms cannot enter the market
D Products are differentiated
*04*
IB/M/Jun26/7135/1
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
Tuesday 12 May 2026 Morning Time allowed: 1 hour 30 minutes
Materials
For this paper you must have: For Examiner’s Use
• the Insert
Section Mark
• a calculator.
A
Instructions B
• Use black ink or black ball-point pen. Pencil should only be used for drawing.
TOTAL
• 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.
*Jun267135101*
IB/M/Jun26/G4004/V3 7135/1
, 2
Do not write
outside the
Section A box
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.
0 1 Which one of the following is the correct definition of a positive economic statement?
[1 mark]
A A statement that can be tested by the evidence
B A statement that contains a value judgement
C A statement that must be true according to the evidence
D A statement that supports the most desirable outcome
0 2 Why do higher prices provide an incentive to increase production?
[1 mark]
A Higher prices are needed to cover higher costs
B Higher prices lead to higher profits
C Producers will allocate resources more efficiently
D Producers will satisfy more needs and wants
*02*
IB/M/Jun26/7135/1
, 3
Do not write
outside the
0 3 Which one of the following situations shows negative externalities in consumption box
and production?
[1 mark]
A Air pollution from oil refineries and noise pollution caused by fuel deliveries
to motorway service stations
B Consumers experiencing breathing problems and longer journey times due
to an increase in the use of diesel cars
C Increased road congestion from rising car use and higher oil prices raising
the price of plastic
D Water pollution from leaking oil tankers and rising global temperatures
caused by households using petrol cars
0 4 Hamida is paid £2000 per month to manage a business offering tutoring services to
sixth-form students. The business has a contract to rent premises for £3000 per month
and has a broadband contract that costs £100 per month. Tutors are paid £35 per hour.
There are no other costs.
In April 2025 the business had an average total cost of £52 per hour of tuition. How many
hours of tuition did it sell in the month?
[1 mark]
A 59
B 98
C 182
D 300
0 5 Which one of the following is most likely to be an example of the opportunity cost of the
government increasing its spending on health care by £20 billion?
[1 mark]
A An increase in investment by firms in new machinery
B An increase in spending by consumers on goods from abroad
C An increase in spending by the government on education
D An increase in wages for workers in the private sector
Turn over ►
*03*
IB/M/Jun26/7135/1
, 4
Do not write
outside the
0 6 Figure 1 shows the supply curve for coffee. box
Figure 1
Which one of the following could have caused the movement along the supply curve from
V to W?
[1 mark]
A An increase in the costs of production of coffee
B An increase in the price of a complementary good for coffee
C An increase in the price of a substitute good for coffee
D An increase in the subsidy for coffee
0 7 Which one of the following characteristics of a perfectly competitive market is most likely to
lead to firms charging the same price?
[1 mark]
A Buyers have perfect information
B Firms agree to charge the same price
C New firms cannot enter the market
D Products are differentiated
*04*
IB/M/Jun26/7135/1
