Cambridge A Level Economics 9708 — 2015 Oct/Nov Paper 1 · Variant 1

Question 1

1 Which feature of travelling by road would be seen in a mixed economy but not in a pure market economy? A bus services B petrol (gas) stations C streetlights D toll bridges

Accepted Answer

C

Question 2

2 The diagram shows a production possibility curve for an economy that produces only two goods, X and Y. 1000 good Y 500 0 0 500 1000 1500 2000 good X The economy produces 800 of good Y and produces on its production possibility curve. Which quantity of good X is given up? A 200 B 400 C 800 D 1600

Accepted Answer

D

Question 3

3 In the diagram, GH is an economy’s initial production possibility curve. G J good Y O K H good X What could cause the curve to shift to JK? A a decrease in net exports B an increase in the average price level C an increase in the unemployment rate D net outward migration

Accepted Answer

D

Question 4

4 Unemployment among young people in Spain was 56.1% in June 2013. Youth unemployment in Spain should be reduced. Which combination correctly describes these two statements? unemployment among youth unemployment in young people in Spain Spain should be reduced was 56.1% in June 2013 A normative statement normative statement B normative statement positive statement C positive statement normative statement D positive statement positive statement

Accepted Answer

C

Question 5

5 A government tried to increase the sales of cars by offering consumers $3000 if they scrapped any car over 10 years old and bought a new one. How would this be shown on a demand and supply diagram for new cars? A The demand curve would move to the left. B The demand curve would move to the right. C There would be a shift along the demand curve to the left. D There would be a shift along the demand curve to the right.

Accepted Answer

B

Question 6

6 Good X and good Y are in joint supply. When would an increase in the supply of good X not lead to a change in the price of good X? A Good X has a perfect price elasticity of demand. B Good X has a perfect price inelasticity of demand. C Good Y has a perfect price elasticity of demand. D Good Y has a perfect price inelasticity of demand.

Accepted Answer

A

Question 7

7 A businessman had intended to borrow $5000 at an interest rate of 8% per year. When the interest rate rose to 10% he decided to borrow only $4000. Within what range is his interest elasticity of demand for loans? A 0.0 to –0.3 B –0.4 to –0.7 C –0.8 to –1.2 D –1.3 to –1.7

Accepted Answer

C

Question 8

8 What is not held constant when aggregating individual firms’ supply curves to give the short-run market supply curve? A the number of firms in the industry B the price of the product C the prices of factors of production D the state of technology

Accepted Answer

B

Question 9

9 In the diagram, S1 is the initial market supply curve of good X. S1 S2 price O quantity What could cause the curve to shift to S2? A an increase in the price of a substitute good B an increase in the profitability of supplying good X C an increase in the wage rates paid by good X suppliers D the introduction of a specific tax on good X

Accepted Answer

B

Question 10

10 A competitive industry producing textbooks experiences an increase in demand for its product. Which diagram illustrates the effect on the industry of this increase in demand in the short-run? A B C D D1 D2 S S D1 S S price price price price D2 D1 D2 D1 D2 O quantity O quantity O quantity O quantity

Accepted Answer

A

Question 11

11 The table shows demand and supply schedules for red peppers. The equilibrium price is initially 15 cents per kilogram (kg). price per kg amount demanded amount supplied cents kg (thousands) kg (thousands) 30 11 22 25 12 19 20 13 17 15 15 15 10 17 13 5 20 11 The government pays a subsidy of 10 cents per kg to producers. What will be the new equilibrium price? A 5 cents B 10 cents C 15 cents D 20 cents

Accepted Answer

B

Question 12

12 An eighteenth century clockmaker made a total of 12 identical clocks. There are currently just three collectors of these clocks, X, Y and Z. The diagram shows their demand curves. 4 3 Dz Dy price 2 ($000) Dx 1 0 2 4 6 8 10 12 14 quantity X, Y and Z initially own 4 clocks each. They come together to trade between themselves. At the market clearing price (or equilibrium price), what is correct? buyer(s) seller(s) A X Y and Z B Y and Z X C X Z D Z X

Accepted Answer

D

Question 13

13 The diagram shows the European airline market. F S1 S2 M G price H N J K D O R T quantity New entrants have come into the market, shifting supply from S1 to S2. Which area represents the new producer surplus? A HNK B HNF C GMJ D KNTO

Accepted Answer

A

Question 14

14 What would be least likely to have an external benefit? A a new drug to prevent malaria in Nigeria B the granting of permission to develop a rural area in Bangladesh C the imposition of a quota on fishing in the Atlantic Ocean D the purchase of tickets to attend the Olympics in Brazil

Accepted Answer

D

Question 15

15 Which statement is correct? A External cost is the sum of social cost and private cost. B Private costs are usually larger than social costs. C Social costs are usually smaller than external costs. D Social cost is the sum of private cost and external cost.

Accepted Answer

D

Question 16

16 A government has sufficient funds to pay for two transport projects. It has to choose between four projects, all of which have the same social cost of $200 million. The table shows the benefits from the projects. project 1 project 2 project 3 project 4 private benefit ($ million) 100 110 120 150 external benefit ($ million) 120 100 90 80 Which two projects would the government choose? A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

Accepted Answer

B

Question 17

17 What will make it most likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public transport is zero. B Demand for car use is income-elastic. C Demand for car use is price-elastic. D Supply of public transport is price-inelastic.

Accepted Answer

C

Question 18

18 The diagram shows the demand curve for an agricultural commodity that has unitary elasticity. S1 is the supply curve if there is a bad harvest and S2 is the supply curve if there is a good harvest. S1 S2 price P D (unitary) O Q quantity What should the government do to keep the total revenue of farmers the same? A allow the price of the commodity to be determined by the market B fix the price paid to farmers at price OP C introduce a quota on production equal to OQ D provide subsidies in bad years and impose indirect taxes in good years

Accepted Answer

A

Question 19

19 An economy produces two goods, X and Y. In the diagram, the line ML is the economy’s production possibility curve and the line MN its trading possibility curve. M good Y O L N good X What does the diagram show? A The economy’s consumers prefer good X to good Y. B The economy’s consumers prefer good Y to good X. C The economy has a comparative advantage in the production of good X. D The economy has a comparative advantage in the production of good Y.

Accepted Answer

D

Question 20

20 A group of people in a country start a campaign for free trade because they believe that it will benefit the economy. Which argument in favour of free trade is not likely to appear in their campaign? A It encourages competition between producers in different countries. B It encourages global specialisation and better product quality. C It gives consumers a greater choice of products from other countries. D It lets countries dump cheap surplus products in other countries.

Accepted Answer

D

Question 21

21 The table refers to a particular country. index of import index of export year prices prices (2010 = 100) (2010 = 100) 2005 48.1 57.0 2015 122.4 120.8 Which statement about the period 2005 to 2015 is correct? A The balance of payments worsened. B The balance of trade improved. C The exchange rate appreciated. D The terms of trade worsened.

Accepted Answer

D

Question 22

22 A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of the UK? current account money flows component A current transfers inflow B current transfers outflow C trade in services inflow D trade in services outflow

Accepted Answer

C

Question 23

23 During a recession, when there was a large fall in national output, the increase in unemployment in an economy was much lower than expected. What might have accounted for this? A a decrease in labour productivity B a decrease in net outward migration C a decrease in part-time working D a decrease in the number of students

Accepted Answer

A

Question 24

24 The diagram shows an economy’s aggregate demand and aggregate supply curves. AS price level AD O output How are the curves likely to be affected by a natural disaster that destroys a large proportion of an economy’s resources? AD curve AS curve A shift to left shift to left B shift to left shift to right C shift to right shift to left D shift to right shift to right

Accepted Answer

A

Question 25

25 What is the most likely cause of cost-push inflation in an economy? A an increase in the exchange rate B an increase in the money supply C an increase in the prices of imports D an increase in the rate of income tax

Accepted Answer

C

Question 26

26 The table shows the consumer price index (CPI) for a country. year CPI 1 100 2 110 3 105 4 103 5 108 What can be concluded from the table? A Prices fell continuously from year 2 to year 5. B Prices rose between year 1 and year 5. C Prices rose only from year 1 to year 2. D Prices were at their highest in year 5.

Accepted Answer

B

Question 27

27 A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK’s balance of trade in goods and on its current account balance? balance of trade current account in goods balance A improve improve B improve uncertain C worsen improve D worsen uncertain

Accepted Answer

B

Question 28

28 In the diagram, the foreign exchange market is initially in equilibrium at X. What could be the new equilibrium position after a decrease in demand from US residents for European consumer goods? S2 S1 S3 B price A X of US$ D (in Euros) C D2 D1 O quantity of US$

Accepted Answer

B

Question 29

29 In the absence of offsetting changes, what would be likely to increase if a country’s exchange rate appreciates? A the cost of imported consumer goods B the level of domestic inflation C the rate of unemployment D the volume of manufacturing exports

Accepted Answer

C

Question 30

30 Tourism is seen as a good way of increasing net export earnings. Luxury tourism, such as wildlife safaris and cultural tours, is considered by an economy to have a very price-inelastic demand. If this is correct, which is most likely to increase export revenue earned by this economy from luxury tourism? A a depreciation of the economy’s currency B a reduction in the taxes levied on hotels C an appreciation of the economy’s currency D cheap government loans to increase the construction of hotels

Accepted Answer

C

Cambridge A Level Economics 9708 — 2015 Oct/Nov Paper 1 · Variant 1

Question paper16 pages

Mark scheme2 pages

Questions as text

Q1 · Which feature of travelling by road would be seen in a mixed economy but not in a pure…

Q2 · The diagram shows a production possibility curve for an economy that produces only two…

Q3 · In the diagram, GH is an economy’s initial production possibility curve

Q4 · Unemployment among young people in Spain was 56.1% in June 2013

Q5 · A government tried to increase the sales of cars by offering consumers $3000 if they…

Q6 · Good X and good Y are in joint supply

Q7 · A businessman had intended to borrow $5000 at an interest rate of 8% per year

Q8 · What is not held constant when aggregating individual firms’ supply curves to give the…

Q9 · In the diagram, S1 is the initial market supply curve of good X

Q10 · A competitive industry producing textbooks experiences an increase in demand for its…

Q11 · The table shows demand and supply schedules for red peppers

Q12 · An eighteenth century clockmaker made a total of 12 identical clocks

Q13 · The diagram shows the European airline market

Q14 · What would be least likely to have an external benefit?

Q15 · Which statement is correct?

Q16 · A government has sufficient funds to pay for two transport projects

Q17 · What will make it most likely that road tolls will reduce traffic congestion?

Q18 · The diagram shows the demand curve for an agricultural commodity that has unitary…

Q19 · An economy produces two goods, X and Y

Q20 · A group of people in a country start a campaign for free trade because they believe that…

Q21 · The table refers to a particular country

Q22 · A foreign government pays a UK university to educate its students

Q23 · During a recession, when there was a large fall in national output, the increase in…

Q24 · The diagram shows an economy’s aggregate demand and aggregate supply curves

Q25 · What is the most likely cause of cost-push inflation in an economy?

Q26 · The table shows the consumer price index (CPI) for a country

Q27 · A Japanese company builds a factory in the UK to supply both the UK market and the market…

Q28 · In the diagram, the foreign exchange market is initially in equilibrium at X

Q29 · In the absence of offsetting changes, what would be likely to increase if a country’s…

Q30 · Tourism is seen as a good way of increasing net export earnings

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