Cambridge A Level Economics 9708 — 2015 May/June Paper 1 · Variant 3

Question 1

1 What is the fundamental assumption of the economic problem? A Factors of production are finite. B Individuals are the best judges of their own wellbeing. C Individuals can be relied upon to behave rationally. D The principal aim of private firms is profit maximisation.

Accepted Answer

A

Question 2

2 To improve their economic performance, Eastern European countries have switched from planned economies to mixed economies. What is likely to be the most common outcome of such a change? A short-term and long-term success in improving economic performance B short-term and long-term failure in improving economic performance C short-term failure and long-term success in improving economic performance D short-term success and long-term failure in improving economic performance

Accepted Answer

C

Question 3

3 The diagram shows the change in a country’s production possibility curve from PQ to PR. P public goods O Q R private goods What increases as a result of the change from PQ to PR? A the price of private goods B the price of public goods C the opportunity cost of private goods D the opportunity cost of public goods

Accepted Answer

D

Question 4

4 The diagram shows a production possibility curve for an economy. X consumer goods Y O capital goods Assuming that the production possibility curve remains unchanged, what is the most likely reason for the movement from point X to point Y? A a civil war causing a widespread loss of resources B a permanent fall in productivity in both capital and consumer goods C the exhaustion of a natural resource D the rise in unemployment due to a recession

Accepted Answer

D

Question 5

5 Buses currently run every two hours between X and Y. The bus company which operates the service decides to introduce an hourly service. How will this most likely affect the number of passengers carried per day and the number of passengers carried per journey? number of number of passengers per day passengers per journey A increase decrease B increase uncertain C unchanged decrease D unchanged uncertain

Accepted Answer

B

Question 6

6 The table refers to exports of sugar from Jamaica in 1999 and 2000. exports of sugar export earnings (tonnes) from sugar (US$ millions) 1999 177 522 95.79 2000 180 481 83.8 What can be concluded from the data? A The demand for sugar was price elastic. B The income elasticity of demand for sugar was negative. C The price of sugar in US$ fell between 1999 and 2000. D The supply of sugar was price elastic.

Accepted Answer

C

Question 7

7 The price elasticity of demand for grapes is –2.0. When the price is $15, quantity demanded is 5000 units. How much will be demanded when the price falls to $12? A 3000 units B 5500 units C 7000 units D 7500 units

Accepted Answer

C

Question 8

8 The Toyota Motor Corporation makes cars in response to customer orders rather than attempting to sell cars it has already built. If the company received a large increase in orders for its Prius model, what will be expected of its current supply curve on a demand and supply diagram? A It will be unchanged. B It will become flatter. C It will shift to the left. D It will shift to the right.

Accepted Answer

A

Question 9

9 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? A $1 B $2 C $3 D $4

Accepted Answer

C

Question 10

10 What is the likely nature of the price elasticity of supply of a crop such as rice? A highly elastic in both the short and the long run as rice is an essential product B highly elastic in the short run and more inelastic in the long run as production methods improve C highly inelastic in both the short and the long run as the land area of a country is fixed D highly inelastic in the short run and more elastic in the long run as it takes time to plant rice

Accepted Answer

D

Question 11

11 During a certain period, 10 000 units of a normal good are sold at a price of US$20. During a later period, 12 000 units are sold at a price of US$22. What could explain this change? A an increase in indirect taxation B an increase in the cost of raw materials C an increase in the price of a substitute commodity D an increase in the productivity of factors of production

Accepted Answer

C

Question 12

12 The final of a major sports event is held in a stadium which has a fixed capacity of 40 000 people. The price for a seat is set at PF but when the tickets go on sale all tickets are sold very quickly with many disappointed people unable to buy a ticket. Which diagram best represents this? A B S S PF price price PF D D O O 40 000 40 000 quantity quantity C D S S PF price price PF D D O O 40 000 40 000 quantity quantity

Accepted Answer

D

Question 13

13 In recent years, downloading music to computers and other electronic devices has become more popular replacing other ways of buying music, e.g. compact discs (CDs). What is likely to happen to the price and the amount of resources allocated to each of these markets? downloaded music market CD market resources resources price price allocated allocated A decrease decrease increase decrease B decrease increase increase increase C increase decrease decrease increase D increase increase decrease decrease

Accepted Answer

D

Question 14

14 James grows fruit trees in his garden. They attract butterflies and bees. What is not an externality of this situation? A Neighbours may be stung by the bees that pollinate the trees. B Neighbours may buy fruit more cheaply from James than from the local supermarket. C Neighbours may enjoy better air quality as the trees naturally improve the atmosphere. D Neighbours may like to watch the activity of the wildlife at no cost.

Accepted Answer

B

Question 15

15 Jaguar-Land Rover launched a car in 2013 that could run on electricity as well as gas (petrol). This would reduce harmful emissions by about 14% compared with the next most efficient car. However, it was more expensive to buy. What can be concluded if these cars are bought rather than the existing models? A Private benefits and external costs would rise. B Private costs would rise and external costs would fall. C Private costs and external costs would fall. D Social costs would rise.

Accepted Answer

B

Question 16

16 A government conducts a cost-benefit analysis into the construction of a new high-speed railway network. The analysis reveals the following information. US$ billion private benefits 120 external benefits 40 private costs 100 If it is to build the railway network, the government requires that the net social benefit is more than US$20 billion. What must the external costs be to satisfy the government? A under US$40 billion B over US$40 billion but below US$60 billion C over US$60 billion but below US$160 billion D over US$160 billion

Accepted Answer

A

Question 17

17 Prisoners are able to buy an upgrade on the type of prison cell they are allocated in some state- run prisons in California. What does this indicate? A Public goods can be made excludable. B Public goods use price as an allocative mechanism. C The market system is not only used for private enterprise. D The market system misallocates resources.

Accepted Answer

C

Question 18

18 The diagram shows the demand and supply curves of a good. S PM price D O X Y Z quantity If the government sets a maximum price of OPM, what will be the quantity bought by consumers and the quantity supplied by producers? quantity bought quantity supplied by consumers by producers A OX OX B OX OZ C OY OY D OY OZ

Accepted Answer

C

Question 19

19 A trading country can produce two goods, X and Y. It specialises completely in the production of good Y. What will be the opportunity cost to the country of consuming additional imports of good X? A the additional imports of good X B the increase in the resources required to produce good X C the reduction in the domestic consumption of good Y D the reduction in the resources available to produce good Y

Accepted Answer

C

Question 20

20 What will rise as a consequence of removing a tariff? A domestic consumer surplus B domestic price C domestic producer surplus D government revenue

Accepted Answer

A

Question 21

21 The table shows how much rice and wheat two countries, X and Y, can grow when each country divides its resources equally between growing rice and wheat. country X country Y rice (units) 900 million 100 million wheat (units) 300 million 50 million Assume that each country now specialises according to comparative advantage and trades with the other country. Which terms of trade would benefit both countries? A 1 wheat = 5 rice B 1 wheat = 3 rice C 1 wheat = 2.5 rice D 1 wheat = 2 rice

Accepted Answer

C

Question 22

22 The table gives details of the balance of trade in the US in 2011 and 2012. 2011 2012 value of goods exported (US$ millions) 1 496 000 1 561 000 value of goods imported (US$ millions) 2 240 000 2 303 000 balance of trade in goods (US$ millions) –744 000 –742 000 balance of trade in goods and services (US$ millions) –557 000 –535 000 What can be concluded about the US in 2012? A The balance of trade in goods worsened. B The balance of trade in services improved. C The prices of goods imported and exported increased. D The volumes of goods imported and exported increased.

Accepted Answer

B

Question 23

23 A country increases its labour productivity in the manufacturing industry. What is least likely to result from this? A higher economic growth B higher levels of exports of manufacturing C lower inflation D lower wage rates in manufacturing

Accepted Answer

D

Question 24

24 The diagram shows a shift in an economy’s aggregate demand curve from AD1 to AD2. general price level AD2 AD1 O real output What could not be a cause of the shift? A a decrease in income tax B a decrease in the price of goods C an increase in money wage rates D an increase in the money supply

Accepted Answer

B

Question 25

25 What will be the impact on demand-pull inflation and on cost-push inflation of an increase in indirect taxes? demand-pull cost-push inflation inflation A lower lower B lower raise C raise lower D raise raise

Accepted Answer

B

Question 26

26 At the start of 2009, a worker earned US$ 100 a week. In 2009, the Retail Price Index (RPI) rose by 4% and his average wage rose by 7%. In 2010, the RPI fell by 3% and his wage fell by 2%. What happened to his real wage between the start of 2009 and the end of 2010? A It fell by less than 5%. B It fell by more than 5%. C It rose by less than 5%. D It rose by more than 5%.

Accepted Answer

C

Question 27

27 A government has low reserves of foreign currency. When would it be most likely to consider a deficit on current account to be a serious problem? A when the country is experiencing a period of high, sustained growth B when the deficit alternates regularly with a surplus C when the deficit exceeds the sum of errors and omissions in the balance of payments account D when the level of international confidence in the country is low

Accepted Answer

D

Question 28

28 The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of year goods and services rate index exports index imports index ($) 1 100 100 100 zero 2 100 90 100 +500 million What is consistent with the above information? A There has been a fall in the price of exports. B There has been an improvement in the terms of trade. C There has been an increase in the level of real income per head. D There has been an increase in the price of imports.

Accepted Answer

B

Question 29

29 The graph shows the movement of the £ sterling against the US$ over a three-month period in 2013. £1 = US$1.6 price of £ (US$) £1 = US$1.48 July 2013 Sept 2013 What could explain this change? A an increase in confidence about the UK economy B an increase in productivity in the US C an increase in UK Government debt D an increase in US interest rates

Accepted Answer

A

Question 30

30 China had US$155 billion current account surplus in 2012. Which combination of policies might the Chinese Government use to restore equilibrium? A Decrease income tax and raise the value of the Chinese currency, the Yuan. B Increase income tax and lower the value of the Chinese currency, the Yuan. C Increase subsidies to Chinese firms and reduce income tax. D Increase tariffs on imports and increase income tax.

Accepted Answer

A

Cambridge A Level Economics 9708 — 2015 May/June Paper 1 · Variant 3

Question paper16 pages

Mark scheme2 pages

Questions as text

Q1 · What is the fundamental assumption of the economic problem?

Q2 · To improve their economic performance, Eastern European countries have switched from…

Q3 · The diagram shows the change in a country’s production possibility curve from PQ to PR

Q4 · The diagram shows a production possibility curve for an economy

Q5 · Buses currently run every two hours between X and Y

Q6 · The table refers to exports of sugar from Jamaica in 1999 and 2000

Q7 · The price elasticity of demand for grapes is –2.0

Q8 · The Toyota Motor Corporation makes cars in response to customer orders rather than…

Q9 · The table shows the demand and supply schedules for a good before and after the…

Q10 · What is the likely nature of the price elasticity of supply of a crop such as rice?

Q11 · During a certain period, 10 000 units of a normal good are sold at a price of US$20

Q12 · The final of a major sports event is held in a stadium which has a fixed capacity of 40…

Q13 · In recent years, downloading music to computers and other electronic devices has become…

Q14 · James grows fruit trees in his garden

Q15 · Jaguar-Land Rover launched a car in 2013 that could run on electricity as well as gas…

Q16 · A government conducts a cost-benefit analysis into the construction of a new high-speed…

Q17 · Prisoners are able to buy an upgrade on the type of prison cell they are allocated in…

Q18 · The diagram shows the demand and supply curves of a good

Q19 · A trading country can produce two goods, X and Y

Q20 · What will rise as a consequence of removing a tariff?

Q21 · The table shows how much rice and wheat two countries, X and Y, can grow when each…

Q22 · The table gives details of the balance of trade in the US in 2011 and 2012

Q23 · A country increases its labour productivity in the manufacturing industry

Q24 · The diagram shows a shift in an economy’s aggregate demand curve from AD1 to AD2

Q25 · What will be the impact on demand-pull inflation and on cost-push inflation of an…

Q26 · At the start of 2009, a worker earned US$ 100 a week

Q27 · A government has low reserves of foreign currency

Q28 · The table shows indicators of a country’s economic performance over a two-year period

Q29 · The graph shows the movement of the £ sterling against the US$ over a three-month period…

Q30 · China had US$155 billion current account surplus in 2012

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