Cambridge A Level Economics 9708 — 2012 Oct/Nov Paper 3 · Variant 3
9708/33/O/N/12 · 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 · An economy is operating at a point on its production possibility curve
1 An economy is operating at a point on its production possibility curve. What is true about the way the economy’s resources are being allocated at this point? allocatively efficient productively efficient socially desirable A yes yes possibly B possibly yes yes C possibly possibly possibly D yes possibly yes
Q2 · A household which spends all of its income on bananas and apples makes the following…
2 A household which spends all of its income on bananas and apples makes the following purchases. quantity price per fruit purchased (kg) kg ($) bananas 5 2.50 apples 10 1.00 The household derives twice as much utility from the fifth kg of bananas as from the tenth kg of apples. What should the household do to maximise utility from the purchase of these fruits? purchase of purchase of bananas apples A increase decrease B decrease increase C no change decrease D no change increase
Q3 · Why will the quantity demanded increase when the price of a normal good falls?
3 Why will the quantity demanded increase when the price of a normal good falls? A The income and substitution effects are both positive. B The income and substitution effects are both negative. C The negative income effect is greater than the positive substitution effect. D The positive income effect is greater than the negative substitution effect.
Q4 · The diagram shows a perfectly competitive firm’s average product of labour and marginal…
4 The diagram shows a perfectly competitive firm’s average product of labour and marginal product of labour curves. J K wage ($), labour product (units) M L APL MPL O number employed The market price of the firm’s product is $1. Which segment of the curves represents the firm’s demand for labour curve? A OJ B JK C KL D KM
More questions on Labour market forces and government intervention
Q5 · To increase its labour force from 30 to 31 workers, a firm has to increase the daily wage…
5 To increase its labour force from 30 to 31 workers, a firm has to increase the daily wage rate from $50 to $52. What is the marginal cost of labour per day? A $52 B $62 C $112 D $1612
More questions on Labour market forces and government intervention
Q6 · A trade union seeks to increase the wages a firm pays to its workers while at the same…
6 A trade union seeks to increase the wages a firm pays to its workers while at the same time preserving jobs. What will strengthen the union’s negotiating position? A Capital and labour are close substitutes. B The demand for the good produced by the firm is price elastic. C The supply of labour to the firm is perfectly elastic. D The firm operates in a monopsonistic labour market.
More questions on Labour market forces and government intervention
Q7 · The diagram shows a firm’s short-run total cost curve (TC)
7 The diagram shows a firm’s short-run total cost curve (TC). TC total cost O Q1 Q2 Q3 output Which statement is correct? A Average variable cost is minimised at output OQ3. B Marginal cost is minimised at output OQ1. C Average variable cost is minimised at output OQ1. D Average total cost is minimised at output OQ2.
More questions on Types of cost, revenue and profit, short-run and long-run production
Q8 · A firm employs three factors of production
8 A firm employs three factors of production. The table shows the marginal products of these factors and their respective costs at the current level of output. land labour capital marginal 4 2 9 product (units) marginal cost per unit 4 6 3 of factor ($) Which adjustment in factor use would be most likely to bring the firm nearer to the least-cost combination of inputs for its current output level? land labour capital A no change more more B more less more C no change more no change D more more no change
More questions on Types of cost, revenue and profit, short-run and long-run production
Q9 · The diagram shows the cost and revenue curves of a monopoly
9 The diagram shows the cost and revenue curves of a monopoly. MC AC $ MR AR O X output What is the firm’s objective if it produces output OX? A to achieve normal profit B to maximise profit C to maximise total revenue D to minimise average cost
More questions on Differing objectives and policies of firms
Q10 · The table shows a firm’s total costs corresponding to different levels of output
10 The table shows a firm’s total costs corresponding to different levels of output. units of output 1 2 3 4 5 6 7 8 total cost ($) 8 14 18 22 28 36 46 58 If the market price is $8, within which range of output would a profit maximising firm in a perfectly competitive industry produce in the short run? A 1 - 2 units B 3 - 4 units C 5 - 6 units D 7 - 8 units
Q11 · The diagram shows the cost and revenue curves of a profit-maximising monopolist
11 The diagram shows the cost and revenue curves of a profit-maximising monopolist. ATC MC J revenue, cost K M AR MR O Q output What measures the total monopoly profit made by the firm? A JM B JK C JM × OQ D JK × OQ
Q12 · Some of the firms in an industry agree to set the same price
12 Some of the firms in an industry agree to set the same price. What might threaten the continuation of the agreement? A differences in cost structures between firms B homogeneity of the product C the inclusion of the dominant firm in the industry D significant barriers to entry into the industry
Q13 · What does not pose a threat to the achievement of allocative efficiency?
13 What does not pose a threat to the achievement of allocative efficiency? A imperfect information on the part of consumers B income inequalities C the existence of externalities D the presence of monopolistic elements
Q14 · At present, a monopolist is required by the industry regulator to charge a price equal to…
14 At present, a monopolist is required by the industry regulator to charge a price equal to marginal cost. The table summarises the consequences if the firm were allowed instead to maximise its profits. $million increase in monopoly profits 5 loss of consumer surplus 8 What would be the resulting deadweight loss? A $3 million B $5 million C $8 million D $13 million
Q15 · The government introduces a congestion charge on motorists who drive their vehicles…
15 The government introduces a congestion charge on motorists who drive their vehicles within a designated urban zone. What will be the impact on the overall economic welfare of those who continue to use their cars and on those who switch to travelling by bus? impact on those who impact on those who continue to use their cars switch to buses A loss uncertain B loss loss C uncertain loss D uncertain uncertain
More questions on Private costs and benefits, externalities and social costs and benefits
Q16 · The graphs below show percentage changes in money GDP and consumer prices in a country…
16 The graphs below show percentage changes in money GDP and consumer prices in a country between 2008 and 2010. 10 6 4 % % 5 2 2008 2009 2010 2008 2009 2010 % change in % change in money GDP consumer prices Which conclusion may be drawn from the graphs? A Between 2009 and 2010 money GDP fell but consumer prices continued to rise. B Consumer prices and money GDP both continued to rise throughout the period. C In real terms GDP grew throughout the period. D When consumer prices rose, money GDP fell.
Q17 · The table shows data on a country’s gross domestic product (GDP) at market prices and on…
17 The table shows data on a country’s gross domestic product (GDP) at market prices and on domestic spending. year 1 year 2 year 3 ($m) ($m) ($m) GDP at market prices 630 650 680 private consumption 460 470 480 government consumption 140 160 170 gross investment 20 30 50 In which of these years will the country be faced with a balance of trade deficit? year 1 year 2 year 3 A no no yes B yes yes no C no yes yes D yes no no
Q18 · Which row correctly identifies net leakages from the circular flow of income?
18 Which row correctly identifies net leakages from the circular flow of income? trade surplus (exports - imports) government budget deficit (government spending - taxes) private sector surplus (saving - investment) 0 ON WD > v v x x v x v x << x x
Q19 · According to monetarist theory, which policy objectives are in conflict in the short run…
19 According to monetarist theory, which policy objectives are in conflict in the short run, but not in the long run? A economic growth and full employment B economic growth and price stability C price stability and equilibrium in the balance of payments D price stability and full employment
More questions on Government macroeconomic policy objectives
Q20 · Let C = consumption, I = investment, X = exports, M = imports, Y = national income in an…
20 Let C = consumption, I = investment, X = exports, M = imports, Y = national income in an economy with no government sector. If C = 20 + 0.9Y, I = 60, X = 120 and M = 100, what will be the equilibrium level of Y? A 100 B 180 C 1000 D 2000
More questions on Aggregate Demand and Aggregate Supply analysis
Q21 · Assuming a constant income velocity of circulation of money, if real output grows by 4 %…
21 Assuming a constant income velocity of circulation of money, if real output grows by 4 %, and the money supply grows by 3 %, what will be the approximate change in the price level? A –1 % B +1 % C +3 % D +7 %
Q22 · During a recession a government’s expenditure exceeds its tax revenue
22 During a recession a government’s expenditure exceeds its tax revenue. Which policy might prevent upward pressure on interest rates? A privatisation of government owned enterprises B purchases of government bonds by the country’s central bank C sales of foreign currency from the official reserves D sales of government bonds to the general public
Q23 · An economy’s GDP per capita grows over a certain period of time, but its development when…
23 An economy’s GDP per capita grows over a certain period of time, but its development when measured by the Human Development Index remains unchanged. What could explain the difference? A a decline in life expectancy B an increased crime rate C increased pollution D shorter working hours
Q24 · How can cyclical growth, as opposed to long-run economic growth, be shown on a diagram?
24 How can cyclical growth, as opposed to long-run economic growth, be shown on a diagram? A an inward shift in a production possibility curve B an outward shift in a production possibility curve C a movement from a point inside a production possibility curve to a point on the curve D a movement from a point outside a production possibility curve to a point on the curve
Q25 · In the long run, productive potential in an economy grows at an average rate of 3 % per…
25 In the long run, productive potential in an economy grows at an average rate of 3 % per year. In a particular year actual growth is zero because of a fall in domestic consumption. What is likely to occur? A an increase in unemployment B an increase in the rate of inflation C an increase in the trade deficit D a reduction in the government budget deficit
Q26 · A developing country’s level of debt rises
26 A developing country’s level of debt rises. In which circumstance is this least likely to be a problem? A Global aggregate demand is falling. B Global real interest rates rise. C The country’s Gross Domestic Product rises by less than its debt. D The debt finances capital investment.
Q27 · The natural rate of unemployment in an economy is 5 %
27 The natural rate of unemployment in an economy is 5 %. What will happen if a government persists in trying to achieve a target rate of unemployment of 3 % by expansionary monetary policy? A an accelerating rate of inflation B a diminishing rate of inflation C a high but constant rate of inflation D a negative rate of inflation
Q28 · What is the best measure of the economic cost of an increase in unemployment?
28 What is the best measure of the economic cost of an increase in unemployment? A the loss of potential exports B the money value of the additional social security benefits paid C the goods and services the unemployed workers could have produced D the additional social security benefits paid plus the loss of tax revenue from newly redundant workers
Q29 · What is the most effective policy a government could introduce to reduce frictional…
29 What is the most effective policy a government could introduce to reduce frictional unemployment? A cut welfare spending on benefits B improve information about job vacancies C reduce tax rates D raise interest rates
Q30 · What is likely to be the effect on developing economies of an increase in inward foreign…
30 What is likely to be the effect on developing economies of an increase in inward foreign direct investment? A an acceleration of technology transfer B an increase in the burden of debt C an increase in visible trade deficits D a slowdown of rural-urban migration
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.
3Labour market forces and government intervention3Economic development2Employment/unemployment2National income statistics2Types of cost, revenue and profit, short-run and long-run production2Aggregate Demand and Aggregate Supply analysis1Demand and supply curves1Differing objectives and policies of firms1Economic growth and sustainability1Efficiency and market failure1Globalisation1Government macroeconomic policy objectives1Government policies to achieve efficient resource allocation and correct market failure1Monetary policy1Money and banking1Private costs and benefits, externalities and social costs and benefits1Production possibility curves1Scarcity, choice and opportunity cost1Supply-side policy1The circular flow of income1Utility1What you needed in this session
Cambridge’s own grade thresholds for 2012 Oct/Nov, Paper 3 · Variant 3. A higher threshold means an easier paper — the bar moves with how the cohort did.