Cambridge A Level Economics 9708 — 2015 May/June Paper 1 · Variant 1

Question 1

1 Which combination of events must increase the level of scarcity in an economy? A discovery of new oil reserves and higher saving ratios B improved application of technology and new invention C less certain weather patterns and a fashion for greater consumption D more efficient power generation and a reduced birth rate

Accepted Answer

C

Question 2

2 Some people are shipwrecked on a tropical island and allocate their time between gathering coconuts and fishing. Each individual is equally productive in collecting coconuts or catching fish. Which diagram represents the production possibility curve of this community? A B C D coconuts coconuts coconuts coconuts O fish O fish O fish O fish

Accepted Answer

A

Question 3

3 Which characteristic of money is most essential if it is to serve effectively as a store of value? A divisibility B liquidity C portability D scarcity

Accepted Answer

D

Question 4

4 A worker can make 10 hats or 5 pairs of shoes in a day. In the market, three hats can be sold at the same price as two pairs of shoes. The worker should make A hats only. B shoes only. C 4 hats and 3 pairs of shoes daily. D 6 hats and 2 pairs of shoes daily.

Accepted Answer

A

Question 5

5 In the diagram, D1D1 shows an individual’s initial demand curve for public transport. D2 price of public D1 transport D1 O quantity of public transport What could cause the demand curve to shift to D2D1? A The costs of running the individual’s car fall. B The individual is no longer able to drive. C The price of public transport falls. D The public transport services are reduced.

Accepted Answer

B

Question 6

6 The table shows the price elasticity of demand for four goods and services. price elasticity motorcycles –1.6 telephone calls –1.0 football tickets –0.3 light bulbs 0.0 If the price of each item increased by 1%, for which items would the total expenditure increase? A football tickets and light bulbs B football tickets only C motorcycles and telephone calls D motorcycles only

Accepted Answer

A

Question 7

7 In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. P1 M1 price M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of demand if the price is halved from P1 to P2? A zero B –0.5 C –1 D infinity

Accepted Answer

C

Question 8

8 Four firms supply the market. The market supply is 50 units at $20 and 100 units at $40. The table shows the market share of each firm at the two prices. Which firm does not have a normal upward-sloping supply curve? market share (%) market share (%) at $20 at $40 A 10% 10% B 20% 50% C 30% 20% D 40% 20%

Accepted Answer

D

Question 9

9 The price of a good doubles but firms are able to increase production by only 10%. This is an example of A excess supply. B inelastic supply. C market disequilibrium. D market failure.

Accepted Answer

B

Question 10

10 In a market there is a surplus of a good. Which change would cause the market to come to an equilibrium? A a decrease in demand B a fall in price C a government minimum price D an increase in supply

Accepted Answer

B

Question 11

11 The market for sugar is in equilibrium. A disease affects the sugar crop and newspapers report harmful health effects of consuming sugar. Which combination of changes in demand and supply matches these events? demand supply A falls falls B falls rises C rises falls D rises rises

Accepted Answer

A

Question 12

12 The diagram shows a demand curve for journeys on a toll road. 5 toll per journey ($) 3 demand 0 1000 2000 number of journeys per day If there is a reduction in the toll from $5 to $3, what is the resulting increase in the daily consumer surplus? A $1000 B $2000 C $3000 D $4000

Accepted Answer

C

Question 13

13 What is an economic reason why hospitals are often built and funded by the government? A Hospitals are a public good. B Hospitals are very expensive to build and run. C Hospitals cannot use price to allocate demand. D Hospital treatments may benefit many apart from those who use them.

Accepted Answer

D

Question 14

14 The diagrams show the costs and benefits in four markets. 1 2 marginal marginal social social cost cost price price ($) ($) marginal marginal marginal private marginal social social benefit private benefit benefit benefit O quantity O quantity 3 4 marginal marginal social private cost cost marginal marginal private social price cost price cost ($) ($) marginal marginal social social benefit benefit O quantity O quantity Which pair of diagrams show the existence of a positive consumption externality and a negative production externality? positive negative consumption production externality externality A 1 2 B 2 3 C 3 4 D 4 1

Accepted Answer

B

Question 15

15 Which statement about costs is correct? A External cost only affects consumers. B Opportunity cost affects all transactions. C Private cost only affects producers. D Social cost affects all members of society equally.

Accepted Answer

B

Question 16

16 A government is considering building a high-speed rail link. Why would it not proceed with the project? A The external benefit is greater than the external cost. B The private cost is greater than the private benefit. C The social benefit is greater than the social cost. D The social cost is greater than the social benefit.

Accepted Answer

D

Question 17

17 The production of a product generates a negative externality that increases as output rises. Which form of government intervention in the market is most suitable to tackle this externality? A a direct income tax B a specific indirect tax C a subsidy D an ad valorem indirect tax

Accepted Answer

D

Question 18

18 The government places a maximum price P1 on an agricultural product. The supply and demand conditions for this product are shown in the diagram. S P1 price D O quantity What will be the outcome in the market for this product? A There will be an equilibrium price and output. B There will be a surplus of the product. C There will be higher than expected profits. D There will be shortages of the product.

Accepted Answer

A

Question 19

19 Country M specialises in the production of cars while country N specialises in the production of televisions. They then trade with each other. What is most likely to reduce the level of specialisation and trade? A There is rising productivity in the production of cars in M and televisions in N. B There is a change from fixed to floating exchange rates between M and N. C There is a decrease in the costs of transporting cars and televisions between M and N. D There is an increase in the mobility of factors of production within M and within N.

Accepted Answer

B

Question 20

20 In the diagram, D is a country’s demand curve for an imported good. The country’s government imposes an import tariff equal to PWPC on the good. PC price x y PW z D O quantity Which areas measure the resulting loss in consumer surplus and the resulting gain in government revenue? loss in gain in consumer government surplus revenue A x + y x B x + y z C y x D y z

Accepted Answer

A

Question 21

21 In the base year, which combination of export and import price changes will have the greatest effect on the country’s terms of trade? export prices import prices A decrease by 1% increase by 1% B decrease by 2% no change C increase by 1% decrease by 1% D no change increase by 2%

Accepted Answer

C

Question 22

22 The table shows selected balances from a country’s balance of payments accounts in 2012. $ billion trade in goods –20 trade in services +5 net income +8 net foreign transfers –4 net foreign loans –3 What was the country’s current account balance in 2012? A –$15 billion B –$14 billion C –$11 billion D –$7 billion

Accepted Answer

C

Question 23

23 The table shows the changing structure of employment (%) in four countries between 1980 and 2012. Which country did not follow the same trends as the other three countries between 1980 and 2012? 1980 2012 not not agriculture industry services agriculture industry services employed employed (%) (%) (%) (%) (%) (%) (%) (%) A Australia 3.8 16.7 37.8 41.7 1.8 12.2 48.7 37.3 B Canada 3.0 16.5 40.8 39.7 1.4 12.0 49.1 37.5 C Japan 6.2 21.5 33.6 38.7 2.1 13.9 40.2 43.8 D Republic 19.0 16.0 20.9 44.1 3.7 14.2 41.5 40.6 of Korea

Accepted Answer

C

Question 24

24 Aggregate demand in an economy may decrease as a result of an increase in A consumption expenditure. B government expenditure. C import expenditure. D investment expenditure.

Accepted Answer

C

Question 25

25 The table shows the CPI rate of inflation (%) in the US from 2006 to 2013. 2006 2007 2008 2009 2010 2011 2012 2013 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 2.0% What can be concluded from the figures about the period 2006 to 2013? A There was one year of constant prices. B There were three years of deflation. C There were only four years of inflation. D There were eight years of rising living costs.

Accepted Answer

D

Question 26

26 How might an increase in the general price level lead to a rise in real household expenditure? A by increasing the expectations of further price increases B by increasing the level of real household debts C by increasing the level of real wages D by increasing the spending on exports

Accepted Answer

A

Question 27

27 Between 2011 and 2013, high street retailers reported that expenditure on home-produced and imported goods was reduced. Consumers did not take out loans as the economy was in a recession. What is the likely result of this? A a decline in the deficit in the trade account B a decline in the level of savings C a decline in the terms of trade D a decline in unemployment

Accepted Answer

A

Question 28

28 What does not directly increase the supply of £ sterling on the world currency market? A lower interest rates in the United Kingdom B higher interest rates in the United States C an increase in investment opportunities for foreign capital in Latin America D an increase in sales of United Kingdom exports to the United States

Accepted Answer

D

Question 29

29 There is a depreciation in a country’s exchange rate. If wage costs remain unchanged, what would be the most likely consequence? A a fall in the rate of inflation B an increase in profits of manufacturing exporters C an increase in unemployment D an outflow of foreign direct investment

Accepted Answer

B

Question 30

30 The currency of a small island economy floats against the US$. The island’s Government introduces foreign exchange control restrictions on its citizens. What is the likely effect on the international value of the island currency and of the US$? island currency US$ value value A falls rises B rises no effect C rises rises D uncertain falls

Accepted Answer

B

Cambridge A Level Economics 9708 — 2015 May/June Paper 1 · Variant 1

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · Which combination of events must increase the level of scarcity in an economy?

Q2 · Some people are shipwrecked on a tropical island and allocate their time between…

Q3 · Which characteristic of money is most essential if it is to serve effectively as a store…

Q4 · A worker can make 10 hats or 5 pairs of shoes in a day

Q5 · In the diagram, D1D1 shows an individual’s initial demand curve for public transport

Q6 · The table shows the price elasticity of demand for four goods and services

Q7 · In the diagram, area OP1M1Q1 is equal to area OP2M2Q2

Q8 · Four firms supply the market

Q9 · The price of a good doubles but firms are able to increase production by only 10%

Q10 · In a market there is a surplus of a good

Q11 · The market for sugar is in equilibrium

Q12 · The diagram shows a demand curve for journeys on a toll road

Q13 · What is an economic reason why hospitals are often built and funded by the government?

Q14 · The diagrams show the costs and benefits in four markets

Q15 · Which statement about costs is correct?

Q16 · A government is considering building a high-speed rail link

Q17 · The production of a product generates a negative externality that increases as output…

Q18 · The government places a maximum price P1 on an agricultural product

Q19 · Country M specialises in the production of cars while country N specialises in the…

Q20 · In the diagram, D is a country’s demand curve for an imported good

Q21 · In the base year, which combination of export and import price changes will have the…

Q22 · The table shows selected balances from a country’s balance of payments accounts in 2012

Q23 · The table shows the changing structure of employment (%) in four countries between 1980…

Q24 · Aggregate demand in an economy may decrease as a result of an increase in A consumption…

Q25 · The table shows the CPI rate of inflation (%) in the US from 2006 to 2013

Q26 · How might an increase in the general price level lead to a rise in real household…

Q27 · Between 2011 and 2013, high street retailers reported that expenditure on home-produced…

Q28 · What does not directly increase the supply of £ sterling on the world currency market?

Q29 · There is a depreciation in a country’s exchange rate

Q30 · The currency of a small island economy floats against the US$

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