Cambridge A Level Economics 9708 — 2013 Oct/Nov Paper 1 · Variant 1

Question 1

1 What will encourage a higher degree of division of labour? A firms wishing for a greater level of self-sufficiency B firms wishing to increase their flexibility in production C firms wishing to raise their level of productivity D firms wishing to reduce their level of risk

Accepted Answer

C

Question 2

2 The diagram shows a country’s production possibility curve. N good Y M O good X What could allow the economy to move from M to N in the long run? A an increase in consumer spending B an increase in demand for exports C an increase in government spending on pensions D an increase in investment

Accepted Answer

D

Question 3

3 Which statement about factors of production is correct? A All factors of production can earn income for their owner. B The factor capital includes human capital, money capital and physical capital. C The factor labour involves only physical effort. D The natural resources classed as land are in unlimited supply.

Accepted Answer

A

Question 4

4 A website compares the prices of groceries. Which function of money is illustrated by this? A medium of exchange B standard of deferred payment C store of value D unit of account

Accepted Answer

D

Question 5

5 It is expected that the price of gold rings will increase in the future. Which diagram shows the impact this expectation is likely to have on demand for gold rings in the present? A B D D start point price of start point price of gold rings gold rings D D O quantity of gold rings O quantity of gold rings C D D1 D D D1 price of price of gold rings gold rings D1 D D D1 O quantity of gold rings O quantity of gold rings

Accepted Answer

C

Question 6

6 Which combination of changes could leave the position of the demand curve for a normal good X unchanged? A a decrease in taste for product X and a decrease in the quality of product Y for which product X is a complement B a decrease in the quality of a substitute and an increase in incomes C an increase in the price of a substitute and an increase in population size D an increase in the price of product Y for which product X is a complement and a successful advertising campaign for product X

Accepted Answer

D

Question 7

7 A product has a normal demand curve and a normal supply curve. What would explain a rise in the price of the product and a fall in the quantity of the product traded? A The decrease in demand is double the decrease in supply. B The decrease in supply is double the decrease in demand. C The increase in demand is double the increase in supply. D The increase in supply is double the increase in demand.

Accepted Answer

B

Question 8

8 The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is always +1? A B C quantity of good D demanded O income

Accepted Answer

C

Question 9

9 The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus fares caused the demand for rail travel to rise by 10%. Which change in bus fares has brought this about? from to (cents) (cents) A 20 21 B 30 33 C 40 45 D 50 60

Accepted Answer

A

Question 10

10 The supply function for a good can be written as Q = 2P + 10, where Q is the quantity supplied in kilos and P is the price per kilo in dollars. The price rises from $10 to $15 per kilo. The value of price elasticity of supply for this price increase lies in a range from A 1  to 4 1 . B 3  to 2 1 . C 2  to 4 3 . D 1 4 1  to 1 2 1 . 6 8 3

Accepted Answer

C

Question 11

11 The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh shows domestic supply and Sw shows world supply. Domestic supply then shifts to Sh1. Sh Sh1 price Sw D O R T U V quantity What will be the level of consumption and the associated volume of imports after the supply shift? consumption volume of imports A OU TU B OU UV C OV TV D OV UV

Accepted Answer

C

Question 12

12 The table shows the price Rashid is willing to pay for successive cans of cola. cans of cola 1st 2nd 3rd 4th price willing to pay $0.90 $0.80 $0.65 $0.50 If the price is $0.50 and Rashid buys four cans, what is the monetary value of Rashid’s consumer surplus? A $0.15 B $0.85 C $0.90 D $1.35

Accepted Answer

B

Question 13

13 In the diagram, the supply curve shows the number of spaces in a car park and the demand curves show the demand for spaces on four different days (D1, D2, D3 and D4). S P4 P3 D4 price P2 D3 P1 D2 D1 O quantity The owner wishes to charge a parking fee on each of these days to allocate the spaces according to the market mechanism. Which pricing policy should the owner use? A set a fixed price at P1 B set a fixed price at P4 C vary prices between P2 and P3 D vary prices between P1 and P4

Accepted Answer

D

Question 14

14 Which situation would indicate the presence of an externality? A Producers’ actions cause a shortage of a particular good. B Private motorists contribute to traffic congestion in city centres. C Differences in ability cause inequality in the distribution of income in an economy. D Increased demand for a good by the rich raises its price for poorer consumers.

Accepted Answer

B

Question 15

15 The term ‘cost’ in public sector cost-benefit analysis is defined as A external costs. B financial costs. C private costs. D social costs.

Accepted Answer

D

Question 16

16 One definition of a merit good is that it is one that will be underconsumed because of poor decision making. Who would usually be responsible for this poor decision making? A the consumers of the good B the dealers who trade the good C the firms producing the good D the government

Accepted Answer

A

Question 17

17 A local council charges for the use of tennis courts but not for the use of street lights. How would an economist explain this? A Tennis courts are a luxury but street lights are a necessity. B Tennis courts are worth more than street lights. C There is an opportunity cost of using land to build tennis courts but not street lights. D The use of street lights cannot be restricted.

Accepted Answer

D

Question 18

18 The government is considering building flood defences along a river. It has calculated the costs and benefits as follows. costs benefits $m $m private 450 260 external 60 190 According to cost-benefit analysis, which decision and reasoning about flood defences is correct? decision reasoning A build external benefits are greater than external costs B build social benefits are greater than private benefits C do not build private costs are greater than the external benefits D do not build social costs are greater than the social benefits

Accepted Answer

D

Question 19

19 In the diagram, MN is the production possibility curve of a country that has a comparative advantage in the production of good Y. M R quantity of good X O N quantity of good Y What might enable the country to consume the quantities of X and Y indicated by point R? A increased specialisation in the production of good X B international trade C a reduction in unemployment D increased specialisation in the production of good Y

Accepted Answer

B

Question 20

20 A country is willing to undertake free trade with its neighbours and to allow the free movement of factors of production with them. It is unwilling, however, to share a common currency and common external tariff. In what sort of economic relationship is it likely to be with its neighbours? A a common market B a customs union C an economic union D a free trade area

Accepted Answer

A

Question 21

21 Which combination of price changes must cause an improvement in the country’s terms of trade? average price average price of exports of imports A falls falls B falls rises C rises falls D rises rises

Accepted Answer

C

Question 22

22 Which item that relates to a Japanese-owned car assembly plant in the US will not be recorded in the current account of the balance of payments of the US? A components imported from Japan B interest charges on a loan from a US based international bank C investment by the parent company in the plant’s assembly line D profits remitted to the Japanese parent company

Accepted Answer

C

Question 23

23 The table shows the number of workers employed by four firms in the same industry, the average number of hours worked each day and the total output each firm produces each day. Which firm’s workers have the highest productivity? average number number of total output per of hours worked workers day (units) per day A 4 8 320 B 5 7 420 C 6 7 462 D 7 9 630

Accepted Answer

B

Question 24

24 The diagram shows the aggregate demand (AD) and short-run aggregate supply (SRAS) for an economy with a price level OP. SRAS price P level AD O real output Which combination of events would definitely cause a rise in the general price level? world commodity domestic prices unemployment A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

C

Question 25

25 It is anticipated that the rate of inflation in a country will continue to rise. What is most likely to increase as a result? A balance of payments surplus B confidence in fixed interest bonds C individuals’ need for cash balances D the real value of money

Accepted Answer

C

Question 26

26 A country experiences a devaluation of its currency. Under which circumstances is this most likely to cause inflation in the country? dependence on price elasticity of price elasticity of imported raw demand for demand for materials imports exports A high inelastic elastic B high elastic inelastic C low inelastic elastic D low elastic inelastic

Accepted Answer

A

Question 27

27 Why may a government seek to reduce a current account surplus on the balance of payments? A to lower inflation B to lower unemployment C to raise the economic growth rate D to raise the exchange rate

Accepted Answer

A

Question 28

28 In the diagram, D1D1 and S1S1 are the initial demand and supply curves of the pound sterling (£) on the foreign exchange market. D2 S2 D1 S1 price of £s in $US D2 D1 S2 S1 O quantity of £ What will cause the demand curve to shift to D2D2 and the supply curve to S2S2? A an appreciation of the pound B an increase in UK interest rates C a reduction in the level of UK import tariffs D a reduction in the quality of UK goods

Accepted Answer

B

Question 29

29 In a country the Marshall-Lerner condition for an improvement in the trade balance is satisfied in the long run, but quantities of imports and exports are slow to respond to price changes. The government devalues its currency to reduce its trade deficit. Which curve indicates the probable behaviour of the trade balance? A B + trade C 0 balance – D time

Accepted Answer

B

Question 30

30 A country has a long running current account deficit on the balance of payments. Its government was using an expenditure switching policy but decides to change to an expenditure reducing policy. What could have been the old policy and its new policy? old policy new policy A export subsidies quotas B income tax interest rate C quotas exchange rate control D tariffs income tax

Accepted Answer

D

Cambridge A Level Economics 9708 — 2013 Oct/Nov Paper 1 · Variant 1

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · What will encourage a higher degree of division of labour?

Q2 · The diagram shows a country’s production possibility curve

Q3 · Which statement about factors of production is correct?

Q4 · A website compares the prices of groceries

Q5 · It is expected that the price of gold rings will increase in the future

Q6 · Which combination of changes could leave the position of the demand curve for a normal…

Q7 · A product has a normal demand curve and a normal supply curve

Q8 · The diagram shows how the quantity demanded of four goods changes as income changes

Q9 · The cross elasticity of demand between bus travel and rail travel is +2

Q10 · The supply function for a good can be written as Q = 2P + 10, where Q is the quantity…

Q11 · The diagram shows a market for a good which is supplied partly from domestic production…

Q12 · The table shows the price Rashid is willing to pay for successive cans of cola

Q13 · In the diagram, the supply curve shows the number of spaces in a car park and the demand…

Q14 · Which situation would indicate the presence of an externality?

Q15 · The term ‘cost’ in public sector cost-benefit analysis is defined as A external costs

Q16 · One definition of a merit good is that it is one that will be underconsumed because of…

Q17 · A local council charges for the use of tennis courts but not for the use of street lights

Q18 · The government is considering building flood defences along a river

Q19 · In the diagram, MN is the production possibility curve of a country that has a…

Q20 · A country is willing to undertake free trade with its neighbours and to allow the free…

Q21 · Which combination of price changes must cause an improvement in the country’s terms of…

Q22 · Which item that relates to a Japanese-owned car assembly plant in the US will not be…

Q23 · The table shows the number of workers employed by four firms in the same industry, the…

Q24 · The diagram shows the aggregate demand (AD) and short-run aggregate supply (SRAS) for an…

Q25 · It is anticipated that the rate of inflation in a country will continue to rise

Q26 · A country experiences a devaluation of its currency

Q27 · Why may a government seek to reduce a current account surplus on the balance of payments?

Q28 · In the diagram, D1D1 and S1S1 are the initial demand and supply curves of the pound…

Q29 · In a country the Marshall-Lerner condition for an improvement in the trade balance is…

Q30 · A country has a long running current account deficit on the balance of payments

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