Cambridge A Level Economics 9708 — 2013 Oct/Nov Paper 1 · Variant 2

Question 1

1 ‘From the age of twelve I made a living by buying towels, needles, shampoo and soap and re-selling them as a street vendor. Now, I run three hotels in Hanoi’ - Duong Than Binh. Which factors of production are likely to be involved in the above events? A land only B land and labour only C land, labour and capital only D land, labour, capital, enterprise

Accepted Answer

D

Question 2

2 What is the correct order of these economic concepts? A B C D inevitability opportunity costs opportunity costs scarce resources of choices ↓ ↓ ↓ ↓ inevitability scarce resources inevitability key opportunity costs of choices of choices ↓ = leads to ↓ ↓ ↓ ↓ inevitability scarce resources scarce resources of choices opportunity costs

Accepted Answer

D

Question 3

3 A farmer can produce both beef and lamb. The opportunity cost of a kilo of beef is three kilos of lamb. The price of a kilo of beef is twice that of lamb. What should he do if his aim is to maximise his revenue? A concentrate on beef production B concentrate on lamb production C produce beef and lamb in the ratio 3:2 D produce twice as much beef as lamb

Accepted Answer

B

Question 4

4 What advantage do banknotes (paper money) have over coins (metallic money)? A They are cheaper to produce. B They are more useful for low value transactions. C They are the only form of legal tender. D They have greater intrinsic value.

Accepted Answer

A

Question 5

5 The diagram shows an individual’s demand curve. D X price Y D O quantity What does XY measure? A the consumer surplus derived by the individual from the last unit consumed B the equilibrium price of the good C the quantity demanded by the individual at any given price D the value of the individual’s marginal benefit from the last unit consumed

Accepted Answer

D

Question 6

6 The diagram represents the market for diamonds. S2 D P2 S1 price S2 P1 D S1 O Q2 Q1 quantity What could have caused price to change from P1 to P2? A a fall in the price of substitute gems B a fall in the tax on diamonds C a rise in the productivity of diamond miners D a rise in the wages of diamond miners

Accepted Answer

D

Question 7

7 How is the market supply of a product in a competitive market obtained? A by aggregating the supply of all firms producing the product B by averaging the supply of all firms producing the product C by calculating the supply of the typical firm producing the product D by estimating the supply of the largest firm producing the product

Accepted Answer

A

Question 8

8 The diagram shows the demand for a product for which there are only three buyers, Freeman, Hardy and Willis. D 25 20 price 15 ($) 10 5 D 0 0 10 20 30 40 50 quantity The table shows the demand from two of the three buyers. price ($) Freeman’s demand Hardy’s demand 10 24 6 15 15 5 20 6 4 Which statement about the demand for the product from Willis is correct? A It has unitary price elasticity of demand. B It is a downward sloping straight line demand curve. C It is a perfectly elastic demand curve. D It is a perfectly inelastic demand curve.

Accepted Answer

D

Question 9

9 The diagram shows the demand and supply curves for tractors. The present equilibrium point is at X. What could be the new equilibrium if the government were to tax the country’s tractor manufacturers? S2 A S1 D price C X D2 B D1 D3 O quantity

Accepted Answer

D

Question 10

10 The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. S WP2 WP1 price D O W Y X Z quantity The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and exports? domestic consumption quantity of exports A OX to OZ OY to OX B OX to OZ OY to OZ C OY to OW YX to WZ D OY to OW YX to OZ

Accepted Answer

C

Question 11

11 The diagram shows the market for sugar which is in equilibrium at a price of OP. S Q R price P P1 S U T D O L M N quantity A government then fixes a maximum price of OP1. What will happen as a result? A an increase in consumer surplus equal to PRUP1 B a reduction in expenditure by people who still buy sugar equal to PQSP1 C a reduction in farmers’ receipts equal to QRML D farmers’ receipts would be PQLO

Accepted Answer

B

Question 12

12 A consumer needed a new camera and a new armchair. She was prepared to spend $500 on one item. She discovered that the camera cost $450 and the armchair $500. She bought the camera. What was her opportunity cost and her consumer surplus? opportunity consumer cost surplus A the armchair $50 B the armchair $500 C $50 $450 D $450 $50

Accepted Answer

A

Question 13

13 In which set of circumstances will prices play no part in determining how resources are allocated between alternative uses but may still have a role as a rationing mechanism? A The government sets maximum prices for all goods above their market clearing price. B The government sets minimum wages for all workers below the market rates of pay. C The quantities of consumer goods produced are determined by the government. D The total income consumers have available to spend is fixed by the government.

Accepted Answer

C

Question 14

14 The table shows the expected costs and benefits from four government projects. The government can afford only one project. Which project should the government choose? private benefits external benefits private costs external costs ($m) ($m) ($m) ($m) A 40 200 60 70 B 60 160 100 20 C 100 210 100 120 D 150 90 120 140

Accepted Answer

A

Question 15

15 What will be the result, from society’s view, if the market price for a product does not reflect the positive externalities in its production? A too little consumption and too little production B too little consumption and too much production C too much consumption and too little production D too much consumption and too much production

Accepted Answer

A

Question 16

16 A good is produced which consumers are unable to avoid consuming. What type of good is this? A demerit good B inferior good C private good D public good

Accepted Answer

D

Question 17

17 A government introduces a subsidy to reduce the price of heating oil, maximum rents for apartments and a national minimum wage rate. Who is meant to benefit from each of these? heating oil apartment labour market market market A consumers landlords employers B consumers tenants workers C producers landlords workers D producers tenants employers

Accepted Answer

B

Question 18

18 In the diagram, D is the demand curve for a commodity. S1 and S2 are the supply curves before and after an intervention by the government. S1 S2 price P1 P2 D O Q1 Q2 quantity What action has the government taken? A It has given producers a subsidy to encourage greater output. B It has given a subsidy to consumers. C It has imposed a tax equal to P1 – P2 to discourage production. D It has purchased a quantity Q2 – Q1 for government use.

Accepted Answer

A

Question 19

19 The table shows the ability of two countries, P and Q, to produce two goods, Y and Z. production of good Y production of good Z per person per person country P 1000 1600 country Q 1500 2000 Which statement is correct? A P has an absolute advantage in Z and Q has a comparative advantage in Y. B P has an absolute advantage in Z and Q has an absolute advantage in Y. C P has a comparative advantage in Z and Q has an absolute advantage in Y. D P has a comparative advantage in Y and Q has an absolute advantage in Z.

Accepted Answer

C

Question 20

20 What is the least likely outcome for participating countries of a move towards freer trade? A greater international specialisation B greater product choice C higher standards of living D more equal distribution of income

Accepted Answer

D

Question 21

21 A country joins a trade organisation, where the only requirements are that members must have identical tariff rates towards non-members and no trade barriers to fellow members. With which possible change in status for the country is this condition consistent? A from independent trade to membership of a free trade area B from membership of a customs union to membership of an economic union C from membership of a free trade area to membership of a customs union D from membership of a free trade area to membership of an economic union

Accepted Answer

C

Question 22

22 In Australia in 2005 a shipload of exported iron ore paid for 2200 imported flatscreen TVs. In 2010 the same size shipload paid for 22 000 imported flatscreen TVs. Which combination of price changes is certain to cause this change in the terms of trade of Australia? average export price average import price A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

C

Question 23

23 A country has a population of 500 million. 15 million people are unemployed and the country has an unemployment rate of 6 %. What is the size of the labour force? A 90 million B 250 million C 470 million D 485 million

Accepted Answer

B

Question 24

24 The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS) in an economy during a year. AS general P1 price level P AD1 AD O Q Q1 real output What explains the rise in the general price level? A boom in consumer spending B higher taxes on company profits C reduction in government-financed projects D rising costs of raw materials

Accepted Answer

A

Question 25

25 What would increase both demand-pull and cost-push inflation? A an appreciation of a country’s currency B an increase in the cost of borrowing C an increase in the level of its import tariffs D an increase in the price of oil

Accepted Answer

C

Question 26

26 A UK resident buys shares in a Spanish company. What will be the immediate and subsequent effects on the UK’s balance of payments? immediate effect subsequent effect on financial account on current account A credit credit B credit debit C debit credit D debit debit

Accepted Answer

C

Question 27

27 The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest trade deficit? value of exports of value of imports of value of net income goods ($m) goods ($m) and transfers ($m) A 3914 3005 +110 B 3950 4073 +80 C 4774 4781 –65 D 5226 5102 –101

Accepted Answer

B

Question 28

28 Country X trades with only two countries, the USA and Japan. 90 % of the country’s trade is with the USA and 10 % is with Japan. The original value of the trade-weighted exchange rate index is 100. The value of country X’s currency against the US$ rises by 10%. The value of country X’s currency against the Japanese yen rises by 50 %. What will be the value of country X’s new trade-weighted exchange rate index? A 114 B 115 C 130 D 160

Accepted Answer

A

Question 29

29 What is most likely to cause a rise in a country’s exchange rate? A a fall in its direct taxes B a fall in its export orders C a rise in its interest rates D a rise in its imports

Accepted Answer

C

Question 30

30 An economy has a high level of unemployment and a large balance of payments deficit on the current account. What would be a suitable policy for the government to adopt? A decrease government spending B devalue the currency C increase direct taxation D increase interest rates

Accepted Answer

B

Cambridge A Level Economics 9708 — 2013 Oct/Nov Paper 1 · Variant 2

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · ‘From the age of twelve I made a living by buying towels, needles, shampoo and soap and…

Q2 · What is the correct order of these economic concepts?

Q3 · A farmer can produce both beef and lamb

Q4 · What advantage do banknotes (paper money) have over coins (metallic money)?

Q5 · The diagram shows an individual’s demand curve

Q6 · The diagram represents the market for diamonds

Q7 · How is the market supply of a product in a competitive market obtained?

Q8 · The diagram shows the demand for a product for which there are only three buyers…

Q9 · The diagram shows the demand and supply curves for tractors

Q10 · The diagram shows a country’s domestic supply of, and demand for, a commodity that it…

Q11 · The diagram shows the market for sugar which is in equilibrium at a price of OP

Q12 · A consumer needed a new camera and a new armchair

Q13 · In which set of circumstances will prices play no part in determining how resources are…

Q14 · The table shows the expected costs and benefits from four government projects

Q15 · What will be the result, from society’s view, if the market price for a product does not…

Q16 · A good is produced which consumers are unable to avoid consuming

Q17 · A government introduces a subsidy to reduce the price of heating oil, maximum rents for…

Q18 · In the diagram, D is the demand curve for a commodity

Q19 · The table shows the ability of two countries, P and Q, to produce two goods, Y and Z

Q20 · What is the least likely outcome for participating countries of a move towards freer…

Q21 · A country joins a trade organisation, where the only requirements are that members must…

Q22 · In Australia in 2005 a shipload of exported iron ore paid for 2200 imported flatscreen TVs

Q23 · A country has a population of 500 million

Q24 · The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS)…

Q25 · What would increase both demand-pull and cost-push inflation?

Q26 · A UK resident buys shares in a Spanish company

Q27 · The table gives details of some parts of a country’s balance of payments

Q28 · Country X trades with only two countries, the USA and Japan

Q29 · What is most likely to cause a rise in a country’s exchange rate?

Q30 · An economy has a high level of unemployment and a large balance of payments deficit on…

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