Cambridge A Level Economics 9708 — 2006 May/June Paper 1 · Variant 1
9708/11/M/J/06 · 30 questions · 30 marks · ≈34 min
The question paper and its mark scheme, free to read here and free to download. This is Cambridge’s own paper, exactly as it was sat.
Question paper12 pages
Mark scheme2 pages
Answers below. Sit the paper first if you are practising.
Questions as text
Q1 · A consumer allocates his expenditure over time
1 A consumer allocates his expenditure over time. What would cause an increase in the opportunity cost of current consumption to the consumer? A a decrease in his current income B a decrease in interest rates C an increase in his current income D an increase in interest rates
Mark scheme: D
Q2 · In the diagram the original production possibility curve is LM
2 In the diagram the original production possibility curve is LM. L N good X O good Y P M What might cause the curve to shift to NP? A technological progress B unemployment of resources C the depletion of natural resources D a reallocation of resources
Mark scheme: C
Q3 · A government proposes to introduce a road congestion charge which would require private…
3 A government proposes to introduce a road congestion charge which would require private motorists to pay a toll for road use. Which statement relating to the proposal is normative? A Bus passengers will benefit at the expense of motorists. B Motorists with higher incomes will be prepared to pay the charge in return for reduced journey times. C Motorists with lower incomes will not be able to afford to use the roads. D The proposal will be unfair to motorists who have no alternative means of transport.
Mark scheme: D
Q4 · What would encourage the growth of the international division of labour?
4 What would encourage the growth of the international division of labour? A an improvement in transport systems B instability in international exchange rates C restrictions on the movement of resources D the widespread introduction of tariffs
Mark scheme: A
Q5 · Which piece of information would enable you to construct the market demand curve for a…
5 Which piece of information would enable you to construct the market demand curve for a product? A the equilibrium price of the product B the number of consumers who would purchase the product at each price C the number of firms in the industry D the quantity that each consumer would be willing and able to buy at each price
Mark scheme: D
Q6 · What is most likely to increase the demand for compact disc players?
6 What is most likely to increase the demand for compact disc players? A a fall in disposable incomes B a fall in the price of cinema tickets C a fall in the price of compact discs D a fall in the price of video recorders
Mark scheme: C
Q7 · The price elasticity of demand for good X is 1
7 The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantity demanded is 20 000 units? A $2.00 B $2.40 C $2.66 D $20.00
Mark scheme: B
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q8 · The diagrams show possible relationships between income and the quantity of a good…
8 The diagrams show possible relationships between income and the quantity of a good purchased. Which diagram shows an inferior good? A B 45o income income O quantity O quantity purchased purchased C D income income O quantity O quantity purchased purchased
Mark scheme: D
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q9 · When demand for a good increases, equilibrium price stays the same
9 When demand for a good increases, equilibrium price stays the same. What is its elasticity of supply? A –1 B zero C +1 D infinite
Mark scheme: D
Q10 · The diagram shows the market for computer games
10 The diagram shows the market for computer games. The market starts in equilibrium at X. What will be the new equilibrium if the tax on computer games is increased and incomes fall? S2 S1 S3 A price of X B computer games C D D2 D1 O quantity of computer games
Mark scheme: B
Q11 · Assume the price elasticity of demand for best-quality French wine is zero
11 Assume the price elasticity of demand for best-quality French wine is zero. What would be the effect in New Zealand if the New Zealand government imposed a tariff on such wine? A The price of the wine would rise by an amount less than the tariff. B Demand for the wine would fall. C Expenditure on the wine would rise. D Sales of the wine would cease.
Mark scheme: C
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q12 · In the diagram, S1 is the original supply curve and D is the original demand curve
12 In the diagram, S1 is the original supply curve and D is the original demand curve. W S2 S1 V T price R P Q D O M N quantity If supply shifts to S2, which area represents the change in consumer surplus? A PQVT B PQW C PRVT D TVW
Mark scheme: A
Q13 · The diagram shows the demand and supply curves for parking spaces in a hospital car park
13 The diagram shows the demand and supply curves for parking spaces in a hospital car park. S price P D O number of spaces The managers decide to rely on the price mechanism to allocate parking spaces at the hospital most effectively. What is required in order for this to work? A Alternative means of transport must be provided for those unable to afford price OP. B A survey will be needed to find out the amount users are willing to pay. C The capacity of the car park will need to be expanded. D The price charged for parking spaces must be OP.
Mark scheme: D
Q14 · In which situation are there definitely positive externalities?
14 In which situation are there definitely positive externalities? A Private benefits exceed private costs. B Private benefits exceed social benefits. C Social benefits exceed private benefits. D Social benefits exceed private costs.
Mark scheme: C
More questions on Private costs and benefits, externalities and social costs and benefits
Q15 · Correct use of cost-benefit analysis should produce an outcome where A social costs are…
15 Correct use of cost-benefit analysis should produce an outcome where A social costs are minimised and social benefits are maximised. B social benefits are in excess of social costs. C marginal private benefits equal marginal social benefits. D marginal social benefits equal marginal social costs.
Mark scheme: D
More questions on Private costs and benefits, externalities and social costs and benefits
Q16 · A lighthouse is considered to be a public good
16 A lighthouse is considered to be a public good. Which characteristic contributes to this? A It gives external benefit. B It causes external cost. C It is non-excludable. D There is rivalry in its use.
Mark scheme: C
Q17 · The diagram illustrates a market for wheat
17 The diagram illustrates a market for wheat. The government sets a maximum price of OP. S P price D O quantity What could cause the maximum price to have an impact on the market? A an increased wheat harvest B a fall in the price of rice C an advertising campaign for bread D an increase in subsidies to wheat farmers
Mark scheme: C
More questions on Methods and effects of government intervention in markets
Q18 · A government wishes to encourage the consumption of a merit good and reduce the…
18 A government wishes to encourage the consumption of a merit good and reduce the consumption of a demerit good. Which policy should it adopt towards each good? merit good demerit good A impose a minimum price produce only in the public sector B increase advertising on the benefits of put legal controls on output the good C confine access to certain age groups tax output D subsidise the good set a minimum level of output
Mark scheme: B
More questions on Methods and effects of government intervention in markets
Q19 · The graphs show the production possibilities for commodities X and Y in two countries M…
19 The graphs show the production possibilities for commodities X and Y in two countries M and N. country M country N Y Y 50 140 X X 0 100 0 560 What will be the effect of an agreement between M and N to exchange the commodities at a rate of 1Y for 3X? A Both countries will gain, because their consumption possibilities will increase. B Consumers in country M will lose, because a unit of Y will now cost 3X instead of 2X. C Only country N will gain, because N can produce more of both commodities than M. D Neither country will gain, because they both have a comparative advantage in the production of the same commodity, X.
Mark scheme: A
Q20 · The supply of an imported good is shown by curve S
20 The supply of an imported good is shown by curve S. What will be the new supply curve if an ad valorem (percentage) tariff is imposed on the good? A B S C D price O quantity
Mark scheme: A
Q21 · The table refers to a particular country
21 The table refers to a particular country. index of import index of export year prices prices (2000 = 100) (2000 = 100) 1995 48.1 57.0 2005 122.4 120.8 Which statement about the period 1995 to 2005 is correct? A The balance of trade improved. B The balance of payments worsened. C The terms of trade worsened. D The exchange rate appreciated.
Mark scheme: C
More questions on Current account of the balance of payments
Q22 · What will improve Cuba’s current account balance immediately?
22 What will improve Cuba’s current account balance immediately? A a Cuban buying sports equipment produced in the US B a US resident investing in property in Cuba C a US multi-national company building a new factory in Cuba D Cubans working in the US sending money to their relatives in Cuba
Mark scheme: D
More questions on Current account of the balance of payments
Q23 · What will cause an immediate rise in the size of a country’s labour force?
23 What will cause an immediate rise in the size of a country’s labour force? A an increase in the birth rate B an increase in the age of retirement C an increase in the school leaving age D an increase in the number of redundancies
Mark scheme: B
Q24 · The table shows the year-on-year percentage changes for a country's consumer price index…
24 The table shows the year-on-year percentage changes for a country's consumer price index from 1999 to 2005. year % change 1999 18.0 2000 11.7 2001 8.6 2002 4.6 2003 4.9 2004 6.1 2005 4.5 Which statement about the price level is correct? A It fell over the first half of the period. B It was at its highest at the start of the period. C It was at its lowest at the end of the period. D It was at its lowest at the start of the period.
Mark scheme: D
Q25 · What is most likely to cause demand-pull inflation?
25 What is most likely to cause demand-pull inflation? A an increase in indirect taxes B an increase in interest rates C a reduction in direct taxes D a reduction in the money supply
Mark scheme: C
Q26 · What might explain an increase in the volume of a country’s imports?
26 What might explain an increase in the volume of a country’s imports? A an appreciation of the country’s exchange rate B an increase in the country’s tariffs C a recession in the country D a rise in the country’s rate of income tax
Mark scheme: A
More questions on Current account of the balance of payments
Q27 · Increased international competition leads to a worsening in a country’s current account…
27 Increased international competition leads to a worsening in a country’s current account balance. In the absence of any offsetting factors, how is this likely to affect domestic inflation and the exchange rate? inflation exchange rate A increase appreciate B increase depreciate C decrease appreciate D decrease depreciate
Mark scheme: D
Q28 · The diagram shows the number of US dollars ($) and Euros (€) which exchanged for one…
28 The diagram shows the number of US dollars ($) and Euros (€) which exchanged for one pound sterling (£) between 2002 and 2004. 1.8 $ per £ 1.7 1.6 1.5 1.4 € per £ 1.3 2002 2003 2004 What happened to the exchange rate of the $ against the £ and € during this period? $ exchange rate $ exchange rate against £ against € A appreciated appreciated B appreciated depreciated C depreciated appreciated D depreciated depreciated
Mark scheme: D
Q29 · The diagram shows the demand for sterling and the supply of sterling in the foreign…
29 The diagram shows the demand for sterling and the supply of sterling in the foreign exchange markets. S £ exchange rate D O quantity of £ Other things being equal, if UK interest rates increase, what is likely to happen to the demand and supply curves in the diagram? demand curve supply curve A shifts to left shifts to left B shifts to right shifts to right C shifts to left shifts to right D shifts to right shifts to left
Mark scheme: D
Q30 · In an attempt to correct a balance of trade deficit the government of Indonesia has…
30 In an attempt to correct a balance of trade deficit the government of Indonesia has decided to employ expenditure-dampening methods. Which policy would best fit this description? A introducing quotas on imported goods B raising income tax rates C subsidising home-produced goods D taxing imported goods
Mark scheme: B
More questions on Policies to correct imbalances in the current account of the balance of payments
What was in this paper
The subtopics covered by these 30 questions, and how many questions each got. Open one in a new tab to see every Cambridge question on it.
3Exchange rates3Price elasticity, income elasticity and cross elasticity of demand3Demand and supply curves2Methods and effects of government intervention in markets2Price stability2Private costs and benefits, externalities and social costs and benefits2The interaction of demand and supply2The reasons for international trade2Classification of goods and services1Consumer and producer surplus1Economic methodology1Policies to correct imbalances in the current account of the balance of payments1Price elasticity of supply1Production possibility curves1Protectionism1Scarcity, choice and opportunity cost1Unemployment1What you needed in this session
Cambridge’s own grade thresholds for 2006 May/June, Paper 1 · Variant 1. A higher threshold means an easier paper — the bar moves with how the cohort did.