Cambridge A Level Economics 9708 — 2013 May/June Paper 3 · Variant 1

Question 1

1 The introduction of equal pay legislation in a country increases the wages of female workers. What will be the most likely effect of this increase? A a reduction of the rate of female unemployment B a reduction in the wages of male workers C an expansion in the supply of female workers D substitution of male workers by female workers

Accepted Answer

C

Question 2

2 The table shows the total utility that an individual derives from consuming different quantities of a good. quantity of total utility good (units) (units) 1 20 2 36 3 48 4 56 5 60 6 62 The individual’s marginal utility of money is $1 = 2 units of utility. What is the maximum quantity of the good that the individual will buy when its price is $6? A 2 units B 3 units C 4 units D 5 units

Accepted Answer

B

Question 3

3 The table shows the current position of a firm in a perfectly competitive industry. factor X factor Y marginal physical product 2 4 factor price $5.00 $10.00 If the firm sells its product at $3 and aims to maximise profits, what should it employ? A more of both X and Y B more of X and less of Y C more of Y and less of X D less of both X and Y

Accepted Answer

A

Question 4

4 The table shows the output of chairs at a factory when different numbers of workers are employed. number of workers 0 1 2 3 4 5 number of chairs produced 0 7 17 26 34 40 Diminishing marginal returns to labour will set in when A the second worker is employed. B the third worker is employed. C the fourth worker is employed. D the fifth worker is employed.

Accepted Answer

B

Question 5

5 In the diagram, the firm is operating at point X on its long-run average cost curve. LRAC X cost O output Which statement about the firm is correct? A It is operating at its optimal level of output. B It is operating at its cost-minimising level of output. C It is operating its plant at full capacity. D It is producing its current output at minimum cost.

Accepted Answer

D

Question 6

6 The table shows the inputs of the two factors of production, capital and labour, needed to produce varying levels of output. output capital labour 100 5 10 200 8 16 300 12 24 400 16 32 500 24 48 Over which range of output do decreasing returns to scale occur? A 100 to 200 B 200 to 300 C 300 to 400 D 400 to 500

Accepted Answer

D

Question 7

7 In the diagram, XY is a firm’s total cost curve. Y total costs X O output What happens to the firm’s costs as output is increased? average average fixed costs variable costs A decrease decrease B decrease increase C constant decrease D constant increase

Accepted Answer

B

Question 8

8 What is most likely to pose a threat to the survival of small local bakeries? A an increase in the cost per minute of television advertising B a switch in consumer preferences to cheaper mass-produced bread C diseconomies of scale in the process of bread production D increased congestion on road networks

Accepted Answer

B

Question 9

9 The demand for a firm’s product is perfectly elastic. What will be the effect on the firm’s revenue if it increases its price by 5%? A Its revenue will be unchanged. B Its revenue will decrease by 5%. C Its revenue will fall to zero. D Its revenue will increase by 5%.

Accepted Answer

C

Question 10

10 A perfectly competitive industry becomes a profit-maximising monopoly. The marginal cost curve of the monopolist is identical to the supply curve of the perfectly competitive industry. How will output and price be affected? output price A decreases decreases B decreases increases C increases decreases D increases increases

Accepted Answer

B

Question 11

11 A firm earns supernormal profit when its profit is A above that earned by competing firms. B above that needed to cover its fixed costs. C above that needed to keep the firm in production in the short run. D above that required to keep its resources in their present use in the long run.

Accepted Answer

D

Question 12

12 The diagram shows an industry’s supply and demand curves. S u v price w x D O Q quantity The government initially restricts the quantity to OQ. The restriction on the quantity is then removed. In the absence of externalities, which area in the diagram measures the net gain in economic welfare? A u B v C v + w D v + w + x

Accepted Answer

C

Question 13

13 A country has a negative income tax. The curve NT in the diagram shows the country’s initial tax schedule. + NT1 tax NT O income – A change in the tax rate causes the schedule to shift to NT1. What is most likely to be the impact on incentives and on equity? incentives equity A improvement improvement B improvement worsening C worsening improvement D worsening worsening

Accepted Answer

C

Question 14

14 What adjustments to real GNP per head might make it a more reliable indicator when comparing standards of living in different countries? A adjustments to allow for differences in population size in different countries B adjustments to allow for differences in rates of inflation in different countries C adjustments to allow for differences in the relative size of the hidden economy in different countries D the use of market exchange rates rather than purchasing power parity exchange rates

Accepted Answer

C

Question 15

15 Which combination of circumstances is most likely to lead to an increase in a country’s budget deficit? discretionary total GDP unemployment government spending A decreases rises decreases B decreases rises no change C increases falls increases D increases falls no change

Accepted Answer

B

Question 16

16 Which correctly identifies injections into a country’s circular flow of income? private sector public sector trade sector (S > I) (T > G) (X > M) A no no no B no no yes C yes no no D yes yes yes

Accepted Answer

B

Question 17

17 A closed economy with no government has a marginal propensity to consume of 0.9. Its full employment national income is $60 000 m. Its current national income is $40 000 m. To achieve full employment, by how much must investment be increased? A $2000 m B $6000 m C $18 000 m D $20 000 m

Accepted Answer

A

Question 18

18 The diagram sets out how an increase in the rate of growth of national income can lead to a further increase in national income. increase in operation of change in operation of increase in national income ......1...... ......2...... ......3...... national income growth rate What must be inserted into the diagram at points 1, 2 and 3? 1 2 3 A the accelerator induced investment the accelerator B the accelerator induced investment the multiplier C the multiplier autonomous investment the accelerator D the multiplier autonomous investment the multiplier

Accepted Answer

B

Question 19

19 What will result from a rise in interest rates? A a depreciation in the exchange rate B a fall in the price of bonds C an increase in capital spending D an increase in the demand for money

Accepted Answer

B

Question 20

20 In which circumstance will an increase in the public sector deficit not lead to an increase in the money supply, other things being equal? A Commercial bank lending to the private sector is held constant. B The deficit is financed by an increase in government borrowing from private individuals. C The rate of interest is held constant. D There is large-scale unemployment.

Accepted Answer

B

Question 21

21 What is meant by liquidity preference? A a desire to be paid in cash rather than by cheque B a desire to be paid monthly rather than weekly C a desire to hold assets that are convertible into cash D a desire to hold money rather than other assets

Accepted Answer

D

Question 22

22 Which combination is usually found in developing countries? A a low birth rate and a dominant primary sector B capital intensive production and a rapidly growing population C external debt and a low death rate D labour intensive production and a low rate of saving

Accepted Answer

D

Question 23

23 Which pattern of labour market data is likely to indicate an increase in cyclical unemployment? changes in compulsory voluntary redundancies resignations A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

C

Question 24

24 What would an economist include when using social cost-benefit analysis to assess policies to reduce the level of unemployment? changes in changes in changes in crime rates mental health work skills A no no no B no no yes C yes no yes D yes yes yes

Accepted Answer

D

Question 25

25 The diagram shows the short-run trade-off between a country’s inflation rate and its national output level. + rate of inflation O national output – What could cause the curve to shift to the left? A an increase in the money supply B an increase in labour productivity C an increase in the expected future rate of inflation D an increase in the budget deficit

Accepted Answer

C

Question 26

26 Legal reforms to reduce the power of trade unions have in many countries reduced inflationary pressures. Of which policy is this an example? A monetary policy B demand side policy C fiscal policy D supply side policy

Accepted Answer

D

Question 27

27 The table gives the percentage of employment in the primary, secondary and tertiary sectors in four countries. Which country is most likely to be a developed country? primary secondary tertiary sector % sector % sector % A 15 40 45 B 30 40 30 C 35 45 20 D 45 35 20

Accepted Answer

A

Question 28

28 Which combination indicates that a country has a freely floating exchange rate? nominal exchange rate foreign currency reserves A depreciates by 20% decrease by $1 billion B depreciates by 20% unchanged C unchanged decrease by $1 billion D unchanged unchanged

Accepted Answer

B

Question 29

29 An economy has a balance of payments trade surplus and a high level of inflation. What would be an appropriate action for a government to take? A devalue the currency B reduce direct taxes C increase the money supply D remove tariffs on imports

Accepted Answer

D

Question 30

30 What does a government need to do to maintain a balanced budget? A keep tax rates and benefit rates unchanged in a slump B raise taxes in a slump and lower taxes in a boom C raise both tax rates and benefit rates in a boom D raise both tax rates and benefit rates in a slump

Accepted Answer

B

Cambridge A Level Economics 9708 — 2013 May/June Paper 3 · Variant 1

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · The introduction of equal pay legislation in a country increases the wages of female…

Q2 · The table shows the total utility that an individual derives from consuming different…

Q3 · The table shows the current position of a firm in a perfectly competitive industry

Q4 · The table shows the output of chairs at a factory when different numbers of workers are…

Q5 · In the diagram, the firm is operating at point X on its long-run average cost curve

Q6 · The table shows the inputs of the two factors of production, capital and labour, needed…

Q7 · In the diagram, XY is a firm’s total cost curve

Q8 · What is most likely to pose a threat to the survival of small local bakeries?

Q9 · The demand for a firm’s product is perfectly elastic

Q10 · A perfectly competitive industry becomes a profit-maximising monopoly

Q11 · A firm earns supernormal profit when its profit is A above that earned by competing firms

Q12 · The diagram shows an industry’s supply and demand curves

Q13 · A country has a negative income tax

Q14 · What adjustments to real GNP per head might make it a more reliable indicator when…

Q15 · Which combination of circumstances is most likely to lead to an increase in a country’s…

Q16 · Which correctly identifies injections into a country’s circular flow of income?

Q17 · A closed economy with no government has a marginal propensity to consume of 0.9

Q18 · The diagram sets out how an increase in the rate of growth of national income can lead to…

Q19 · What will result from a rise in interest rates?

Q20 · In which circumstance will an increase in the public sector deficit not lead to an…

Q21 · What is meant by liquidity preference?

Q22 · Which combination is usually found in developing countries?

Q23 · Which pattern of labour market data is likely to indicate an increase in cyclical…

Q24 · What would an economist include when using social cost-benefit analysis to assess…

Q25 · The diagram shows the short-run trade-off between a country’s inflation rate and its…

Q26 · Legal reforms to reduce the power of trade unions have in many countries reduced…

Q27 · The table gives the percentage of employment in the primary, secondary and tertiary…

Q28 · Which combination indicates that a country has a freely floating exchange rate?

Q29 · An economy has a balance of payments trade surplus and a high level of inflation

Q30 · What does a government need to do to maintain a balanced budget?

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