Cambridge A Level Economics 9708 — 2014 Oct/Nov Paper 1 · Variant 1
9708/11/O/N/14 · 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 paper16 pages
Mark scheme2 pages
Answers below. Sit the paper first if you are practising.
Questions as text
Q1 · What are involved in the allocation of resources in a market economy?
1 What are involved in the allocation of resources in a market economy? A factors of production and subsidies for essential goods B prices and choices C production possibilities and trade restrictions D unlimited wants and public goods
More questions on Resource allocation in different economic systems
Q2 · The curve JK in the diagram is an economy’s production possibility curve
2 The curve JK in the diagram is an economy’s production possibility curve. J M N good X O K good Y What could cause the economy to move from point M to point N? A a decrease in the dependency ratio B a decrease in the population of working age C an increase in the participation rate D an increase in the unemployment rate
Q3 · In the twentieth century the nature of a typical car assembly plant changed
3 In the twentieth century the nature of a typical car assembly plant changed. The industry had fewer firms, they operated on larger sites and they had more automated machinery. How is this change most likely to have affected the relative use of factors of production in the industry? increased relative use decreased relative use A capital and enterprise labour and land B enterprise and labour land and capital C labour and land capital and enterprise D land and capital enterprise and labour
Q4 · What is meant by ‘the value of money’?
4 What is meant by ‘the value of money’? A the amount of goods that can be purchased with a given sum of money B the amount of wealth stored in the form of money C the cost of production of money D the opportunity cost of holding wealth in the form of money
Q5 · What might shift an individual’s demand curve for petrol to the right?
5 What might shift an individual’s demand curve for petrol to the right? A a fall in the price of cars B a fall in the price of public transport C a rise in the price of parking D a rise in the price of petrol
Q6 · The diagram shows a consumer’s short-run and long-run demand curves for coconuts
6 The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q at price P. V X P Y price Z W O Q quantity If the price of coconuts increases from P, the consumer’s short-run response is greater than his long-run response. If the price decreases from P his short-run response is smaller than his long- run response. What is the consumer’s short-run demand curve? A VYW B VYZ C XYW D XYZ
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q7 · The diagram shows the demand curve for a product
7 The diagram shows the demand curve for a product. M N price S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle OPQR, which statement is correct? A A rise in price from OR to ON results in the same proportionate fall in quantity demanded. B Consumer surplus falls by RSMN if the price rises from OR to ON. C The price elasticity of demand is unitary for all changes in price. D Total revenue falls by MSQ if the price rises from OR to ON.
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q8 · Which elasticity values indicate that cars are normal goods and that petrol is a…
8 Which elasticity values indicate that cars are normal goods and that petrol is a complement to car use? cross elasticity demand of income elasticity of (XED) for petrol relative to demand (YED) for cars changes in car prices A YED is negative XED is negative B YED is negative XED is positive C YED is positive XED is negative D YED is positive XED is positive
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q9 · A specific tax is placed upon each bottle of perfume sold
9 A specific tax is placed upon each bottle of perfume sold. In the diagram, SS is the supply curve before tax and StSt is the supply curve after tax. St S W R price U Q X P T St D S O Y Z quantity Which area represents the revenue received by the government from the tax? A ORWY B PQUT C PRWT D QRWU
More questions on Methods and effects of government intervention in markets
Q10 · When demand for a good increases, equilibrium price stays the same
10 When demand for a good increases, equilibrium price stays the same. What is the good’s elasticity of supply? A –1 B zero C +1 D infinite
Q11 · A manufacturer has estimated that the price elasticity of supply of ice cream is +1.5
11 A manufacturer has estimated that the price elasticity of supply of ice cream is +1.5. If the demand for ice cream rises and price increases by 10%, how much more will the manufacturer supply to the market? A 0.15% B 1.5% C 15% D 150%
Q12 · Consumer X is the largest of five consumers and buys 50% of sales
12 Consumer X is the largest of five consumers and buys 50% of sales. The table shows the quantity of the good demanded by consumer X and the market supply of the good. price demand from market supply $ consumer X 4 20 28 6 16 32 8 12 40 10 10 45 What would be the market equilibrium price? A $4 B $6 C $8 D $10
Q13 · The difference between what consumers pay for a product and what they are prepared to pay…
13 The difference between what consumers pay for a product and what they are prepared to pay is known as A a shortage. B consumer surplus. C excess demand. D opportunity cost.
Q14 · What types of externalities arise from 1 a firm creating an extra supply of trained…
14 What types of externalities arise from 1 a firm creating an extra supply of trained labour and, 2 the excessive noise made by a householder cutting his lawn? 1 2 A negative production externality negative consumption externality B negative production externality positive consumption externality C positive production externality negative consumption externality D positive production externality positive consumption externality
More questions on Private costs and benefits, externalities and social costs and benefits
Q15 · The table shows the total amount consumers are willing to pay for different quantities of…
15 The table shows the total amount consumers are willing to pay for different quantities of good X and the total external benefits that arise from the consumption of X. quantity of consumers’ total external good X willingness to pay benefits (000 units) ($000) ($000) 1 100 20 2 180 38 3 240 54 4 280 68 5 300 80 What is the value of the marginal social benefit when 5000 units are consumed? A $12 000 B $32 000 C $80 000 D $380 000
More questions on Private costs and benefits, externalities and social costs and benefits
Q16 · A company applied to build a supermarket on the edge of a town near a river
16 A company applied to build a supermarket on the edge of a town near a river. Permission to do this involved an expensive planning process with the local government. In order to gain approval the company agreed to build a bridge across the river near the supermarket. What would be included in a social cost-benefit study of this application which would not be included in a private calculation? A the value of the extra customers the supermarket gets by people using the new bridge B the value of the land used which could have been used for housing C the value of the time of the local government’s officials in the planning process D the value of the time saved by people using the new bridge to get to work in the town
More questions on Private costs and benefits, externalities and social costs and benefits
Q17 · A good is most suitable to be provided by the market if it is A excludable and non-rival
17 A good is most suitable to be provided by the market if it is A excludable and non-rival. B excludable and rival. C non-excludable and non-rival. D non-excludable and rival.
Q18 · In moving towards a market economy government price controls were removed
18 In moving towards a market economy government price controls were removed. In the diagram below, the government initially set an effective maximum price. D S 10 price 8 $ 6 S D 0 quantity What effect was there on price and quantity when the government removed the maximum price? price quantity A falls from $10 to $8 removes shortage B falls from $10 to $8 removes surplus C rises from $6 to $8 removes shortage D rises from $6 to $8 removes surplus
More questions on Methods and effects of government intervention in markets
Q19 · The diagrams show the production possibility curves of two countries, X and Y, both of…
19 The diagrams show the production possibility curves of two countries, X and Y, both of which can produce food and clothes. country X country Y 1000 food food 500 (units) (units) O 600 O 500 clothes (units) clothes (units) Which statement about production in the two countries is correct? A X has absolute advantage in clothes and Y has absolute advantage in food. B X has absolute advantage in clothes and Y has comparative advantage in food. C X has absolute advantage in food and Y has absolute advantage in clothes. D X has absolute advantage in food and Y has comparative advantage in clothes.
Q20 · The diagram shows the effect of removing a tariff on imports of sugar into a country
20 The diagram shows the effect of removing a tariff on imports of sugar into a country. domestic supply price of sugar T Y PT world supply + tariff U V W X P world supply domestic demand O Q1 Q2 Q3 Q4 quantity of sugar Which area represents the loss of producer surplus for domestic producers of sugar in the country? A PTTUP B PTTVP C PTYXP D TYWV
Q21 · What must be the result for a country of a rise in its export prices relative to its…
21 What must be the result for a country of a rise in its export prices relative to its import prices? A a deficit in its trade in goods B an improvement in its terms of trade C an increase in its inflation rate D a rise in its exchange rate
More questions on Current account of the balance of payments
Q22 · A country imports components which it uses in the production of electrical goods for the…
22 A country imports components which it uses in the production of electrical goods for the domestic market. The country is experiencing a rise in incomes. What is likely to happen to the price of electrical goods and the country’s balance of trade? price of balance electrical goods of trade A fall improve B fall worsen C rise improve D rise worsen
More questions on Current account of the balance of payments
Q23 · The table gives figures for household spending in the UK economy between 2008 and 2010
23 The table gives figures for household spending in the UK economy between 2008 and 2010. nominal household real household consumption spending consumption spending (£ million) (£ million) 2008 878 024 878 024 2009 858 242 846 961 2010 900 204 855 302 What can be concluded from the figures? A All households bought more goods and services in 2010 than in 2008. B Households saved more in 2008 than in 2010. C Inflation was higher in 2010 than in 2009. D Living standards were lower in 2009 than 2010.
Q24 · In the diagram AS1 is an economy’s long-run aggregate supply curve
24 In the diagram AS1 is an economy’s long-run aggregate supply curve. AS1 AS2 general price level O real GDP What will cause the aggregate supply curve to shift from AS1 to AS2? A an increase in consumer spending B an increase in inflation C an increase in net exports D an increase in productivity
More questions on Aggregate Demand and Aggregate Supply analysis
Q25 · The table shows an index of consumer prices (2005 = 100) for a number of countries for…
25 The table shows an index of consumer prices (2005 = 100) for a number of countries for 2009, 2010 and 2011. Which country experienced the lowest rate of fall in the real value of money between 2009 and 2011? 2009 2010 2011 A Canada 107.8 108.9 112.0 B Japan 100.3 99.6 99.3 C Portugal 107.4 108.9 112.9 D Switzerland 104.3 104.5 104.7
Q26 · National inflation rates vary widely but they have declined for most countries in recent…
26 National inflation rates vary widely but they have declined for most countries in recent years. Which combination might best explain this decline in inflation rates? A increased consumer expenditure and tighter control on international trade B increasing international competition and reduced world incomes C low interest rates and expectations of future price increases D protectionist trade measures and a rise in raw material prices
Q27 · Why is a balance of payments deficit a potential problem for an economy with a fixed…
27 Why is a balance of payments deficit a potential problem for an economy with a fixed exchange rate? A Domestic money supply will increase. B Rival economies may react with trade protection measures. C The economy’s foreign exchange reserves may decrease. D The economy’s short-run standard of living will be reduced.
Q28 · What is most likely to cause Australia’s exchange rate to depreciate?
28 What is most likely to cause Australia’s exchange rate to depreciate? A an increase in Australia’s demand for imports B an increase in Australia’s interest rate C an increase in demand for Australia’s exports D an increase in tourist visits to Australia
Q29 · With an exchange rate of 4 Egyptian pounds (EGP) = 1 US$, an American product sells in…
29 With an exchange rate of 4 Egyptian pounds (EGP) = 1 US$, an American product sells in Egypt for EGP120. Assuming that the dollar price remains unchanged, what will be the price of the product in Egypt if the Egyptian pound depreciates to EGP5 = 1 US$? A EGP90 B EGP96 C EGP144 D EGP150
Q30 · The US Central Bank lowers its interest rate to raise aggregate demand
30 The US Central Bank lowers its interest rate to raise aggregate demand. This has an effect on the exchange rate of the US$. The diagram shows the resulting changes in the demand for and supply of US$ in the foreign exchange market. W X exchange rate of US$ Y Z O quantity of US$ Assume a change is shown by a move from a curve numbered 1 to a curve numbered 2. What should curves W, X, Y and Z be labelled to show the effect of the interest rate rise on the exchange rate? W X Y Z A S1 S2 D1 D2 B S1 S2 D2 D1 C S2 S1 D1 D2 D S2 S1 D2 D1
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.
4Price elasticity, income elasticity and cross elasticity of demand3Private costs and benefits, externalities and social costs and benefits3Current account of the balance of payments2Methods and effects of government intervention in markets2Price elasticity of supply2Price stability2Aggregate Demand and Aggregate Supply analysis1Classification of goods and services1Consumer and producer surplus1Demand and supply curves1Factors of production1National income statistics1Production possibility curves1Protectionism1Resource allocation in different economic systems1Scarcity, choice and opportunity cost1The interaction of demand and supply1The reasons for international trade1What you needed in this session
Cambridge’s own grade thresholds for 2014 Oct/Nov, Paper 1 · Variant 1. A higher threshold means an easier paper — the bar moves with how the cohort did.