Cambridge A Level Economics 9708 — 2013 Oct/Nov Paper 1 · Variant 3

1 What is not a factor of production? A fish stocks B money C oil reserves D roads

Mark scheme: B

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2 Two workers, George and Zaheer, can produce the following amounts in one working day if they concentrate on producing only one of the products. units of food units of clothing pairs of shoes George 9 or 18 or 36 Zaheer 15 or 45 or 30 First they decide to produce for themselves the 6 units of food they need to survive. Then they specialise in the product at which they are relatively efficient. What will be the total output of clothing and shoes, in addition to the 12 units of food, that is produced in one working day? units of clothing pairs of shoes A 6 18 B 21 22 C 27 12 D 36 12

Mark scheme: C

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3 A centrally planned economy introduces a significant role for free market forces in determining how its economic resources are allocated. What is most likely to occur in the short run? A an improvement in the balance of trade B an increase in the general level of prices C an increase in the level of employment D an increase in the level of output

Mark scheme: B

More questions on Resource allocation in different economic systems

4 In recent years there was an extremely rapid inflation rate in Zimbabwe. Which two functions of money might the Zimbabwe dollar have still performed during this hyperinflation? A medium of exchange and store of value B standard for deferred payments and unit of account C store of value and standard for deferred payments D unit of account and medium of exchange

Mark scheme: D

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5 The diagram shows the demand for telephone calls in four countries in 2004 and 2009. telephone calls France minutes per month fixed mobile Germany line 2004 2009 Spain Japan 0 200 400 600 Which statement about the demand for telephone calls is correct? A Between 2004 and 2009 the demand for fixed line calls decreased in each of the four countries. B Between 2004 and 2009 the total demand for telephone calls increased in each of the four countries. C In 2004 demand for fixed line calls was greater than demand for mobile calls in each of the four countries. D In 2009 demand for mobile calls was greater than demand for fixed line calls in each of the four countries.

Mark scheme: C

More questions on Demand and supply curves

6 There are three firms (X, Y and Z) supplying a market. The table shows their supply at four different prices. price ($) firm X’s supply firm Y’s supply firm Z’s supply 10 50 40 10 20 60 60 20 30 85 80 35 40 120 100 55 Which price change is required for market supply to double? A $10 to $20 B $10 to $30 C $20 to $30 D $20 to $40

Mark scheme: B

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7 The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between total expenditure on the product and its price? A B total C expenditure D O price

Mark scheme: C

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8 The price of good X rises by 20 %. As a result, the demand for a substitute good Y rises by 10 %. What is the cross-elasticity of demand for good Y with respect to good X? A +2 B +0.5 C –0.5 D –2

Mark scheme: B

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9 A car rental firm rents out the cars in its fleet on weekdays to business users and at weekends to tourists. What is likely to result from an increase in the demand by tourists for car rentals? price of weekend price of weekday size of car fleet rentals rentals A decrease unchanged decrease B decrease unchanged unchanged C increase increase decrease D increase increase unchanged

Mark scheme: C

More questions on The interaction of demand and supply

10 The table shows the demand and supply schedules for a good before and after the imposition of a tax. price quantity quantity supplied quantity supplied ($) demanded before tax after tax 20 340 440 380 19 340 430 340 18 340 410 290 17 340 380 230 16 340 340 160 15 340 290 80 14 340 230 0 What was the amount of the tax revenue raised for the government? A $1020 B $1360 C $5440 D $6460

Mark scheme: A

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11 Oranges and apples are substitutes. The diagram shows the equilibrium position in the market for oranges at X. Weather conditions reduce the number of oranges grown but increase the number of apples grown. Which point is likely to indicate the new equilibrium for oranges? S2 S1 S3 B A X C price of oranges D D2 D1 D3 O quantity of oranges

Mark scheme: A

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12 A consumer saved $700 and preferred to spend the money on a new television rather than a new washing machine. When she went to the shop she discovered that the television cost $500 and the washing machine cost $400. She bought the television. What was the consumer surplus and the opportunity cost? consumer surplus opportunity cost A $100 $400 B $200 the washing machine C $200 $500 D $400 the washing machine

Mark scheme: B

More questions on Scarcity, choice and opportunity cost

13 What is generally considered to be one of the advantages of using the price mechanism as a rationing device? A It ensures that goods are allocated in accordance with the needs of consumers. B It ensures that suppliers cannot make excessive profits. C No one can be prevented from consuming a good if they are willing and able to pay the market price. D The allocation of goods is determined by consumers’ wealth.

Mark scheme: C

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14 A government is planning to intervene in a free market to fix output at the currently economically desirable level. MSC = MPC Y costs/ T benefits X S MSB MPB O W R output To achieve its objective, what should the government introduce? A a subsidy of TS B a subsidy of YX C a tax of TS D a tax of YX

Mark scheme: A

More questions on Government policies to achieve efficient resource allocation and correct market failure

15 What does a government compare when carrying out a cost-benefit analysis of a project? A external benefit and external cost B financial benefit and opportunity cost C real benefit and monetary cost D social benefit and social cost

Mark scheme: D

More questions on Private costs and benefits, externalities and social costs and benefits

16 What is the defining characteristic of a private good? A Consumption by one individual reduces the amount of the good available to others. B The benefits derived from the good are confined to those who consume it. C The good is wholly produced within the private sector. D To acquire the good a consumer must be willing and able to pay for it.

Mark scheme: A

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17 Which pair of government actions are intended to directly benefit suppliers? A government provision of consumer goods and maximum price laws B maximum price laws and price stabilisation policies C price stabilisation policies and indirect taxes D production subsidies and minimum price laws

Mark scheme: D

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18 The diagram shows the imposition of a maximum price (OM) on a product. S S T U W R price V M D O X Y quantity An organisation buys up the total supply at the maximum price and then resells it illegally to gain maximum revenue. What is the organisation’s revenue? A OMVY B ORUX C ORWY D OSTX

Mark scheme: D

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19 Which two groups within a country are likely to benefit from the introduction of tariffs? A consumers and shareholders B declining industries and importers C exporters and monopolies D growing industries and the government

Mark scheme: D

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20 What will cause a deterioration in a country’s terms of trade? A a fall in its inflation rate B a fall in the price of its imports C a rise in incomes abroad D a rise in its exchange rate

Mark scheme: A

More questions on The reasons for international trade

21 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

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22 What is not an item in a country’s current account of its balance of payments? A exports of primary commodities B money received from banking services C overseas investment D profits sent back by companies overseas

Mark scheme: C

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23 In the diagram, AD1 is an economy’s initial aggregate demand curve. general price level AD2 AD1 O real output What could cause the curve to shift to AD2? A Businessmen have come to expect a lower rate of return on capital investment. B Domestic consumers have become more thrifty. C Exports have become more competitive in overseas markets. D The economy’s propensity to import has increased.

Mark scheme: C

More questions on Aggregate Demand and Aggregate Supply analysis

24 A country has a population of 100 million. 5 million people are unemployed and the country has an unemployment rate of 10%. What is the size of the labour force? A 10 million B 50 million C 90 million D 95 million

Mark scheme: B

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25 The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 8 6 services % annual 4 price change 2 0 2007 2008 2009 2010 2011 2012 –2 goods –4 What can be deduced from the graph? A On average the price of services was higher than the price of goods throughout the period. B The average price of goods was higher in 2012 than in 2010. C The average price of services was higher in 2012 than in 2010. D There was a fall in the general price level between 2008 and 2010.

Mark scheme: C

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26 What combination is most likely to cause a surplus in a country’s trade in goods and services? international value rate of inflation of currency A high strong B high weak C low strong D low weak

Mark scheme: D

More questions on Current account of the balance of payments

27 With an exchange rate of 30 Thai baht to $US1 an American export sells in Thailand for 150 baht. What change in the exchange rate of the baht would cause the export to sell for 165 baht? A a depreciation of 10% B a depreciation of 15% C an appreciation of 10% D an appreciation of 15%

Mark scheme: A

More questions on Exchange rates

28 The diagram shows demand and supply curves of the £ sterling against the US dollar. S price of £ sterling in US dollars D2 S D1 O quantity of £s What is likely to cause a shift in the demand curve from D1 to D2? A an adverse balance of payments in the UK B an increased demand for UK goods in the USA C an increase in UK tourists visiting the USA D an increase in US interest rates

Mark scheme: B

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29 According to the Purchasing Power Parity theory, what determines the rate of exchange between two countries? A relative price levels in the two countries B the bargaining power of the respective governments C the comparative advantage of the two countries D the size of their foreign currency reserves

Mark scheme: A

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30 What is most likely to immediately reduce the deficit on the current account of a country’s balance of payments? A a cut in its interest rates B a rise in its income tax rates C cuts in subsidies to domestic industry D purchases of its currency by its government

Mark scheme: B

More questions on Policies to correct imbalances in the current account of the balance of payments