Cambridge A Level Economics 9708 — 2017 May/June Paper 1 · Variant 2

Question 1

1 Scarcity means that goods need to be rationed between competing consumers. Which basis for rationing is the most likely to result in the most equal distribution of goods? A consumer preference B market price C political decision D seller preference

Accepted Answer

C

Question 2

2 In which aspect is the planned economy likely to offer more than the market economy? A competition B incentive C innovation D security

Accepted Answer

D

Question 3

3 Line XX is the production possibility curve (PPC) of a worker picking peas and beans in a 10 hour working day. Y quantity of peas picked per day X Y X O quantity of beans picked per day What would cause the worker’s PPC to shift to the line YY? A a machine that increases the worker’s pea picking productivity only B a new work schedule where the worker spends 6 hours per day picking peas and only 4 hours picking beans C a reduction in working hours to 8 per day and a machine that increases the worker’s pea picking productivity D a reduction in working hours to 8 per day only

Accepted Answer

C

Question 4

4 Four students are given the following list of assets. ● a three bedroom house ● banknotes and coins in a purse ● money in a bank savings account ● shares in a public limited company The students are asked to order the assets from the most liquid to the least liquid and the table shows their choices. Which student is correct? most liquid least liquid A notes and coins savings account shares house B notes and coins savings account house shares C notes and coins shares savings account house D savings account notes and coins shares house

Accepted Answer

A

Question 5

5 How would an economist establish the market demand curve for a private good? A by adding consumer surplus to total expenditure B by combining individual demand curves horizontally C by combining the price elasticity of individual demands D by multiplying price by quantity demanded

Accepted Answer

B

Question 6

6 D1 and S1 are the initial demand and supply curves for a normal product. They then change to D2 and S2. price of good X2 D2 X1 D1 S1 S2 O quantity of good Which pair of changes would result in the market equilibrium for the product changing from X1 to X2? A a fall in the price of a raw material used in the manufacturing and a decrease in the price of a complementary good B an increase in average consumer incomes and an increase in the level of an indirect tax imposed C an increase in the price elasticity of demand for the product and a fall in its price elasticity of supply D a rise in the population and an increase in the price of labour used in manufacturing

Accepted Answer

A

Question 7

7 The table gives a set of price and cross-price elasticities for four commodities, W, X, Y and Z. elasticity of demand with respect for commodity to price of W X Y Z W –0.3 –0.5 +0.7 –1.3 X –0.7 –1.2 +0.8 +1.6 Y +1.3 +1.7 –3.6 +0.8 Z –2.7 +2.6 +1.7 –0.7 Which pairs of commodities are complements? A W and X; W and Z B W and Y; X and Y C W and Z; X and Z D X and Y; X and Z

Accepted Answer

A

Question 8

8 The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between total expenditure on the product and its price? A total B expenditure C D O price

Accepted Answer

C

Question 9

9 A bottle making business announced it had introduced a new production system. As a result the quantity produced per week could be increased or reduced much more easily when the price of bottles changed. What term describes this change? A a less elastic demand B a less elastic supply C a more elastic demand D a more elastic supply

Accepted Answer

D

Question 10

10 The supply function for a good can be written as Q = 2P + 10, where Q is the quantity supplied in kilos and P is the price per kilo in dollars. The price falls from $15 to $10 per kilo. The value of price elasticity of supply for this price change lies in a range from A 1  to 4 1 . B 3  to 2 1 . C 2  to 4 3 . D 1 4 1  to 1 2 1 . 6 8 3

Accepted Answer

C

Question 11

11 A local government is deciding whether to increase parking charges and provide more lanes for bus use only. One official said that the increase in parking charges should cause more bus travel. A second official said that an increase in the frequency of bus services will not cause demand for bus travel to rise. Are these official statements correct or incorrect? first statement second statement A correct correct B correct incorrect C incorrect correct D incorrect incorrect

Accepted Answer

B

Question 12

12 What would prevent the operation of the market mechanism’s rationing function? A falling prices B price controls C rising profits D self interest

Accepted Answer

B

Question 13

13 The diagram shows the demand and supply curves for a good during a certain period. The market price is shown by P and the quantity traded by point M. supply price A X P B demand O M quantity Which area indicates producer surplus? A AXB B AXMO C AXP D PXB

Accepted Answer

D

Question 14

14 A specific tax is placed on the sale of bottles of lemonade. In the diagram, SS is the supply curve before imposition of the tax and StSt is the supply curve after tax. St price D W S U X St D T S O quantity Which distance represents the specific tax on each bottle? A UT B WT C WU D WX

Accepted Answer

B

Question 15

15 A market is in equilibrium at point X. The government then subsidises both consumers and producers by direct payments. What will be the new equilibrium position? S2 S1 S3 price A B X C D D1 D2 O quantity

Accepted Answer

C

Question 16

16 Which is a transfer payment? A an annual allowance paid by an individual to a grandchild B a one-off bonus paid to an employee for a special contribution to a firm’s profits C a payment made by a parent to a regular child-minder D the monthly salary of an employee of a local authority

Accepted Answer

A

Question 17

17 What is an example of direct public provision of goods and services? A a charity hospital funded by public donations that offers free treatment to the rural poor B a mobile government library that travels to rural villages offering access to books C a pharmacy in a local shopping centre that provides treatment direct to the public D a private school that offers free places to children of low income families

Accepted Answer

B

Question 18

18 What would supporters of a nationalised public transport service expect to be the most likely outcome from the privatisation of train and bus services? A fewer destinations served by trains and buses B lower fares C more frequent services to all destinations D more people employed in public transport services

Accepted Answer

A

Question 19

19 The diagram shows a shift in the aggregate demand curve of an economy from AD1 to AD2. price level AD2 AD1 O real national income What could have caused this shift? A an increase in expenditure on imports B an increase in government tax rates C an increase in the international trade deficit D an increase in the money supply

Accepted Answer

D

Question 20

20 Which statement about changing price levels is correct? A Anyone on a fixed income has rising real income during deflation. B Government revenue from indirect taxes falls during inflation. C Producers prefer deflation to inflation. D Savers prefer index-linked savings when there is deflation rather than inflation.

Accepted Answer

A

Question 21

21 Which combination of events is most likely to cause inflation? exchange rate direct taxes money supply A falling falling falling B falling falling rising C rising rising rising D rising rising falling

Accepted Answer

B

Question 22

22 The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade agreement. The values are given both in Singapore dollars (S$) and New Zealand dollars (NZ$). percentage change S$ m NZ$ m from 2000 Singapore exports to New Zealand 508 618 +20% Singapore imports from New Zealand 331 403 –17% What can be concluded from the table? A New Zealand gained more than Singapore from the trade agreement. B New Zealand’s trade position with Singapore improved in 2001. C Singapore had a trade surplus with New Zealand in 2001. D The exchange rate in 2001 was approximately NZ$ 1 = S$ 1.2.

Accepted Answer

C

Question 23

23 Country X conducts 60% of its trade with country Y and 40% of its trade with country Z. The initial value of the trade weighted exchange rate index of country X is 100. What will be its new trade weighted exchange rate index value if its currency rises in value by 20% against the currency of Y and falls by 10% against the currency of Z? A 84 B 92 C 108 D 116

Accepted Answer

C

Question 24

24 In the diagram D1 and S1 are the initial supply and demand curves of the pound sterling (£) on the foreign exchange markets. D1 D2 S2 price of S1 £ (in $) O quantity of £ What will cause the demand curve to shift to D2 and the supply curve to S2? A a depreciation of the pound sterling B a decrease in UK interest rates C an increase in the price levels of other countries D an increase in the level of UK import tariffs

Accepted Answer

C

Question 25

25 A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its exports has increased by 20%. What has been the change in the average price it has paid for its imports? A –25% B –20% C +20% D +25%

Accepted Answer

B

Question 26

26 The table shows the ability of two countries, P and Q, to produce two goods, Y and Z. production of good Y production of good Z per person per person country P 1800 2800 country Q 1500 2000 Which statement is correct? A P has an absolute advantage in Y and Q has an absolute advantage in Z. B P has an absolute advantage in Z and Q has a comparative advantage in Y. C P has a comparative advantage in Y and Q has a comparative advantage in Z. D P has a comparative advantage in Z and Q has an absolute advantage in Y.

Accepted Answer

B

Question 27

27 Which government policy could be considered as a protectionist policy? A an imposition of controls on capital outflows from the economy B foreign exchange intervention to prevent a devaluation of the country’s currency C pollution charges imposed on domestic producers D subsidies paid to domestic producers of a tradeable good

Accepted Answer

D

Question 28

28 The government of a country plans to raise income tax rates. The initial equilibrium for the country is represented by point X on the diagram. Which new equilibrium point would an economist predict as the result? price AS1 level A AS2 X B D AD3 C AD1 AD2 O real national income

Accepted Answer

D

Question 29

29 What is an example of an expenditure-dampening policy? A an increase in income tax rates B an increase in the level of import tariffs C an upward revaluation of the exchange rate D the introduction of import quotas

Accepted Answer

A

Question 30

30 An economy is currently operating close to its full employment level of national income. Which combination of macro-economic policies would be most likely to have net deflationary effects? A a 10% cut in the standard rate of income tax and a 5% devaluation of the currency B a 10% cut in the standard rate of income tax and a 5% revaluation of the currency C a 10% rise in the standard rate of income tax and a 5% devaluation of the currency D a 10% rise in the standard rate of income tax and a 5% revaluation of the currency

Accepted Answer

D

Cambridge A Level Economics 9708 — 2017 May/June Paper 1 · Variant 2

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · Scarcity means that goods need to be rationed between competing consumers

Q2 · In which aspect is the planned economy likely to offer more than the market economy?

Q3 · Line XX is the production possibility curve (PPC) of a worker picking peas and beans in a…

Q4 · Four students are given the following list of assets

Q5 · How would an economist establish the market demand curve for a private good?

Q6 · D1 and S1 are the initial demand and supply curves for a normal product

Q7 · The table gives a set of price and cross-price elasticities for four commodities, W, X, Y…

Q8 · The price elasticity of demand for a product is constant and equal to unity

Q9 · A bottle making business announced it had introduced a new production system

Q10 · The supply function for a good can be written as Q = 2P + 10, where Q is the quantity…

Q11 · A local government is deciding whether to increase parking charges and provide more lanes…

Q12 · What would prevent the operation of the market mechanism’s rationing function?

Q13 · The diagram shows the demand and supply curves for a good during a certain period

Q14 · A specific tax is placed on the sale of bottles of lemonade

Q15 · A market is in equilibrium at point X

Q16 · Which is a transfer payment?

Q17 · What is an example of direct public provision of goods and services?

Q18 · What would supporters of a nationalised public transport service expect to be the most…

Q19 · The diagram shows a shift in the aggregate demand curve of an economy from AD1 to AD2

Q20 · Which statement about changing price levels is correct?

Q21 · Which combination of events is most likely to cause inflation?

Q22 · The table gives information about the trade between Singapore and New Zealand during…

Q23 · Country X conducts 60% of its trade with country Y and 40% of its trade with country Z

Q24 · In the diagram D1 and S1 are the initial supply and demand curves of the pound sterling…

Q25 · A country’s terms of trade currently stands at 150 (base year 2000 = 100)

Q26 · The table shows the ability of two countries, P and Q, to produce two goods, Y and Z

Q27 · Which government policy could be considered as a protectionist policy?

Q28 · The government of a country plans to raise income tax rates

Q29 · What is an example of an expenditure-dampening policy?

Q30 · An economy is currently operating close to its full employment level of national income

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