Cambridge A Level Economics 9708 — 2015 Oct/Nov Paper 1 · Variant 2

Question 1

1 Which question does not directly refer to the basic economic problem? A What goods and services should a firm produce? B What price should a firm charge? C What production methods should a firm use? D Who should receive the goods and services that a firm produces?

Accepted Answer

B

Question 2

2 The diagram shows the change in an economy’s production possibility curve as it grows in the long run. Which movement from point X is most likely to show the highest potential for growth? A B consumer C X goods D O capital goods

Accepted Answer

C

Question 3

3 The diagrams show the change in a country’s production possibility curve between Year 1 and Year 2. Year 1 Year 2 150 consumer consumer goods 100 goods 0 50 0 80 services services What can be concluded from the diagrams? A Future growth prospects have been harmed. B The level of unemployment has fallen. C The opportunity cost of consumer goods has risen. D The proportionate growth in production is greater in consumer goods.

Accepted Answer

C

Question 4

4 What term is used by economists for the income received by the factor of production enterprise? A capital B interest C profit D revenue

Accepted Answer

C

Question 5

5 The diagram shows the demand curve for housing. price D O quantity What is not assumed to remain constant when drawing this curve? A consumer incomes B expectations about future house prices C the price of houses D the rate of interest charged on loans for house purchase

Accepted Answer

C

Question 6

6 What does not cause the demand curve for cars to shift to the right? A a fall in the price of petrol (gas) B a fall in the price of public transport C an advertising campaign by car manufacturers D an economy-wide increase in incomes

Accepted Answer

B

Question 7

7 An individual reacts to a 5% increase in the price of good X by increasing the proportion of his income that he spends on good X from 2% to 3%. If there are no other changes, what can be concluded from this about the individual’s demand for good X? A It is income-elastic. B It is income-inelastic. C It is price-elastic. D It is price-inelastic.

Accepted Answer

D

Question 8

8 The cross-elasticity of demand for good X with respect to good Y is –0.5. What can be concluded from this? A Goods X and Y are complementary goods. B Goods X and Y are substitute goods. C Good X is an inferior good. D Good Y is an inferior good.

Accepted Answer

A

Question 9

9 The diagram shows a supply curve for beef. S price O quantity What explains why the supply curve for beef slopes upwards? A An increase in the demand for beef will bring about an increase in supply. B Farmers’ productivity rises as the price rises. C Increased production leads to a reduction in costs. D The cost of additional beef production rises as output increases.

Accepted Answer

D

Question 10

10 Which business is likely to be the slowest to alter its output in response to a sustained increase in demand for its product? A a fast-food restaurant B a household cleaning service C a newspaper printer D an oil exploration company

Accepted Answer

D

Question 11

11 In a particular year, 12 000 units of a good are sold at $1 per unit. In a later year, 14 000 units are sold at $1.20 per unit. If consumer tastes have remained constant, what could account for the change between the two years? A a decrease in the price of raw materials used by producers B an increase in the price of a substitute good C an increase in the rate of tax imposed on producers D the formation of a monopoly in the production of the good

Accepted Answer

B

Question 12

12 The diagram shows demand and supply curves for petrol (gas). The initial equilibrium is at X. What could be the new equilibrium if there were a large fall in the price of cars? S2 A S S1 B price X D C D1 D D2 O quantity

Accepted Answer

B

Question 13

13 The diagram shows an individual’s demand curve for a commodity. price x P z y D O Q quantity The supplier of the commodity charges a unit price of OP but consumers are currently required to purchase a minimum quantity, OQ. Which area(s) in the diagram measure the net gain in consumer surplus from the removal of the minimum purchase requirement? A x + y B x – z C y only D z only

Accepted Answer

D

Question 14

14 In 2011, the Health Ministry in a country encouraged parents to have their children vaccinated against measles. The parents did not have to use the vaccine and did not have to pay for it. The government cancelled other projects to fund the programme from taxation because research concluded that the vaccine benefited the community by preventing the spread of a serious illness. Which concepts are implied in the above statement? A external benefit, public sector, opportunity cost B market mechanism, fiscal policy, public good C merit good, normative statement, regulatory control D private cost, social benefit, monetary policy

Accepted Answer

A

Question 15

15 A gardener plants bamboo to create an attractive environment along the roadside. The bamboo grows into the garden of his neighbour, who removes the bamboo with a chemical spray. What cannot be concluded about the outcome of the planting? A It increases external cost and external benefit. B It increases private cost and private benefit. C It increases social cost and social benefit. D It increases social cost more than social benefit.

Accepted Answer

D

Question 16

16 A cost-benefit analysis of a proposed underground railway produced the following statistics. annual costs and benefits $ million annual capital cost 10 operating and maintenance costs 3 fare revenue 6 savings to private travellers 5 savings to business 10 other economic benefits 7 What can be concluded from the statistics? A If undertaken by the private sector there would be a loss of $13 million. B If undertaken by the private sector there would be a profit of $3 million. C If undertaken by the public sector there would be a net social benefit of $15 million. D If undertaken by the public sector there would be a net social cost of $1 million.

Accepted Answer

C

Question 17

17 What is the best example of what was once a public good becoming a private good? A education B medical care C postal services D television broadcasts

Accepted Answer

D

Question 18

18 The diagram shows the market for onions in equilibrium at point X. The government has a stock of onions and wants to establish a new equilibrium at point Y. supply Z X price Y demand O quantity Which actions should the government take? A It should buy an amount equal to XY and subsidise producers by a sum equal to YZ. B It should buy an amount equal to XY and tax producers by a sum equal to YZ. C It should sell an amount equal to XY and subsidise producers by a sum equal to YZ. D It should sell an amount equal to XY and tax producers by a sum equal to YZ.

Accepted Answer

A

Question 19

19 The diagram illustrates the production possibility curves for countries S and T producing goods X and Y. country S country T 400 400 300 300 good X 200 good X 200 100 100 0 0 0 50 100 150 200 0 50 100 150 200 good Y good Y Countries S and T specialise in the product for which they have the lower opportunity cost. They trade with each other at the rate of two good X for one good Y. What is a possible combination of goods for country S to consume after specialisation and trade have taken place? good X good Y A 100 50 B 150 75 C 200 100 D 300 150

Accepted Answer

A

Question 20

20 What is the most likely reason why Pakistan might reduce its trade barriers on imports? A to help Pakistan increase its gain from comparative advantage B to help Pakistan invest more abroad C to raise its foreign exchange rate D to reduce government borrowing and international debt

Accepted Answer

A

Question 21

21 A particular good in the Barbados market could be supplied by domestic producers, or producers in Trinidad & Tobago, or producers in the USA, at the prices shown in US dollars. origin of production price Barbados $1.00 Trinidad & Tobago $0.85 USA $0.75 Originally, Barbados had a 20% ad valorem duty on imports from Trinidad & Tobago and the USA. Barbados then formed a customs union with Trinidad & Tobago, with a common external tariff, also of 20%. From which countries would Barbados import the good, before the formation of the customs union and after the formation of the customs union? before after A neither Trinidad & Tobago B neither USA C USA Trinidad & Tobago D USA USA

Accepted Answer

C

Question 22

22 A Japanese car manufacturer established a successful factory in France. How would this be shown in the Japanese balance of payments? investment in the factory dividends and profits from the factory A negative entry in the financial account positive entry in the current account B negative entry in the current account positive entry in the financial account C positive entry in the financial account negative entry in the current account D positive entry in the current account negative entry in the financial account

Accepted Answer

A

Question 23

23 The graph shows changes in the unemployment rates in countries X, Y and Z over the period 2000 to 2010. All three countries faced recession between 2008 and 2010. 10 8 X Y unemployment 6 rate Z % 4 2 0 2000 2005 2008 2010 year Which conclusion can be drawn from the graph about the period 2000 to 2010? A All three countries experienced an upward trend in unemployment over the period. B Country X had the highest number out of work in 2010. C In terms of unemployment, the country least harmed by the recession was country Y. D The total number out of work in the three countries was higher in 2010 than in 2000.

Accepted Answer

C

Question 24

24 Which supply-side measure is most likely to produce short-run growth in a country’s aggregate supply? A easing of controls on immigration of workers B expenditure on primary education C expenditure on research and development D privatisation of public utilities

Accepted Answer

A

Question 25

25 An economy is experiencing accelerating cost-push inflation. Which group is likely to be least concerned by this? A borrowers B consumers C creditors D exporters

Accepted Answer

A

Question 26

26 The table shows the Consumer Price Index (CPI) for a country. year CPI 2008 100 2009 104 2010 102 2011 105 2012 108 2013 111 Which statement about the period 2008 to 2013 is correct? A Prices increased each year. B Prices increased fastest in 2011. C The rate of inflation was 2% in 2010. D The smallest rise in prices was in 2013.

Accepted Answer

D

Question 27

27 At a time when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas resources. What overall impact would this have on the balance of payments of Bolivia? A definitely favourable, as Bolivia could increase its exports of gas and oil B definitely unfavourable, as the foreign companies would transfer profits out of the country C uncertain, as there would be inflows and outflows of currency D zero, as Bolivia itself would use the gas and oil produced

Accepted Answer

C

Question 28

28 An economy with a fixed exchange rate experiences an increased deficit on the current account of the balance of payments. What is most likely to increase as a consequence? A employment B interest rates C investment D national output

Accepted Answer

B

Question 29

29 The diagram shows the number of US dollars ($) and Euros (€) which exchanged for one pound sterling (£) between 2002 and 2004. 1.8 $ per £ 1.7 1.6 1.5 1.4 € per £ 1.3 2002 2003 2004 What happened to the exchange rate of the $ against the £ and € during this period? $ exchange rate $ exchange rate against £ against € A appreciated appreciated B appreciated depreciated C depreciated appreciated D depreciated depreciated

Accepted Answer

D

Question 30

30 In a time of recession, a government decided to sell a loss-making state-owned industry to a foreign private company. What is the most likely immediate result? A an improvement in the financial account of the balance of payments B an improvement in the level of unemployment C an improvement in the rate of inflation D an improvement in the trade account of the balance of payments

Accepted Answer

A

Cambridge A Level Economics 9708 — 2015 Oct/Nov Paper 1 · Variant 2

Question paper16 pages

Mark scheme2 pages

Questions as text

Q1 · Which question does not directly refer to the basic economic problem?

Q2 · The diagram shows the change in an economy’s production possibility curve as it grows in…

Q3 · The diagrams show the change in a country’s production possibility curve between Year 1…

Q4 · What term is used by economists for the income received by the factor of production…

Q5 · The diagram shows the demand curve for housing

Q6 · What does not cause the demand curve for cars to shift to the right?

Q7 · An individual reacts to a 5% increase in the price of good X by increasing the proportion…

Q8 · The cross-elasticity of demand for good X with respect to good Y is –0.5

Q9 · The diagram shows a supply curve for beef

Q10 · Which business is likely to be the slowest to alter its output in response to a sustained…

Q11 · In a particular year, 12 000 units of a good are sold at $1 per unit

Q12 · The diagram shows demand and supply curves for petrol (gas)

Q13 · The diagram shows an individual’s demand curve for a commodity

Q14 · In 2011, the Health Ministry in a country encouraged parents to have their children…

Q15 · A gardener plants bamboo to create an attractive environment along the roadside

Q16 · A cost-benefit analysis of a proposed underground railway produced the following…

Q17 · What is the best example of what was once a public good becoming a private good?

Q18 · The diagram shows the market for onions in equilibrium at point X

Q19 · The diagram illustrates the production possibility curves for countries S and T producing…

Q20 · What is the most likely reason why Pakistan might reduce its trade barriers on imports?

Q21 · A particular good in the Barbados market could be supplied by domestic producers, or…

Q22 · A Japanese car manufacturer established a successful factory in France

Q23 · The graph shows changes in the unemployment rates in countries X, Y and Z over the period…

Q24 · Which supply-side measure is most likely to produce short-run growth in a country’s…

Q25 · An economy is experiencing accelerating cost-push inflation

Q26 · The table shows the Consumer Price Index (CPI) for a country

Q27 · At a time when international demand for oil was high, Bolivia encouraged investment by…

Q28 · An economy with a fixed exchange rate experiences an increased deficit on the current…

Q29 · The diagram shows the number of US dollars ($) and Euros (€) which exchanged for one…

Q30 · In a time of recession, a government decided to sell a loss-making state-owned industry…

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