Cambridge A Level Economics 9708 — 2017 May/June Paper 3 · Variant 3
9708/33/M/J/17 · 30 questions · 30 marks · ≈34 min
The question paper and its mark scheme, free to read here and free to download. This is Cambridge’s own paper, exactly as it was sat.
Question paper12 pages
Mark scheme3 pages
Answers below. Sit the paper first if you are practising.
Questions as text
Q1 · When will an economic activity create an external cost?
1 When will an economic activity create an external cost? A when its social cost minus its private cost is negative B when its social cost minus its private cost is positive C when its social cost minus its social benefit is negative D when its social cost minus its social benefit is positive
Mark scheme: B
More questions on Private costs and benefits, externalities and social costs and benefits
Q2 · A government is planning to intervene in a free market to fix output at the level that…
2 A government is planning to intervene in a free market to fix output at the level that maximises the economic welfare of society. MSC = MPC costs, benefits Y T X S MSB MPB O W R output To achieve its objective, what should the government introduce? A a subsidy of TS B a subsidy of YX C a tax of TS D a tax of YX
Mark scheme: A
Q3 · In a two-person economy, X has an income of $100, whereas Y has an income of $50
3 In a two-person economy, X has an income of $100, whereas Y has an income of $50. According to the Pareto criterion, which income change would constitute a definite increase in the economic welfare? X’s income Y’s income ($) ($) A 75 75 B 85 70 C 95 100 D 130 50
Mark scheme: D
Q4 · The diagram shows three budget lines, QR, QT and SR
4 The diagram shows three budget lines, QR, QT and SR. QR is a consumer’s initial budget line. good Y Q S O R T good X Which combination of changes could cause the budget line to shift to SR? price of consumer’s good X income A decrease decrease B decrease increase C increase decrease D increase increase
Mark scheme: A
Q5 · When a firm increases all its inputs by 100%, its output increases by 50%
5 When a firm increases all its inputs by 100%, its output increases by 50%. What does this illustrate? A decreasing returns to scale B economies of scale C the law of diminishing returns D the law of variable proportions
Mark scheme: A
More questions on Types of cost, revenue and profit, short-run and long-run production
Q6 · The demand curve for a good has unit price elasticity throughout its length
6 The demand curve for a good has unit price elasticity throughout its length. Which statement about marginal revenue is correct? A It always has a negative value. B It decreases continuously as price decreases. C It is always zero. D It always has a constant positive value.
Mark scheme: C
More questions on Price elasticity, income elasticity and cross elasticity of demand
Q7 · What is true about the average fixed costs of a firm?
7 What is true about the average fixed costs of a firm? A They fall as output rises at first, but then rise. B They fall continuously as output rises. C They increase continuously as output rises. D They remain unchanged at all output levels.
Mark scheme: B
More questions on Types of cost, revenue and profit, short-run and long-run production
Q8 · In the diagram MC = marginal cost; AC = average cost; MR = marginal revenue; AR = average…
8 In the diagram MC = marginal cost; AC = average cost; MR = marginal revenue; AR = average revenue. MC MR cost, revenue AC AR O W X Y Z output What will be the output of a profit-maximising firm whose cost and revenue functions are shown above? A OW B OX C OY D OZ
Mark scheme: A
Q9 · The diagram shows a firm’s total revenue curve
9 The diagram shows a firm’s total revenue curve. revenue TR O output At the curve’s highest point A marginal revenue is equal to marginal cost. B average revenue is equal to average cost. C marginal revenue is equal to average revenue. D marginal revenue is zero.
Mark scheme: D
More questions on Types of cost, revenue and profit, short-run and long-run production
Q10 · The diagram shows two indifference curves for a consumer
10 The diagram shows two indifference curves for a consumer. good Y IC2 IC1 O good X What necessarily differs between IC1 and IC2? A level of income B level of satisfaction C price of good X D price of good Y
Mark scheme: B
Q11 · Firms in a market advertise their products with different brand names
11 Firms in a market advertise their products with different brand names. Some make more profit than others in the short run but all make normal profit in the long run. Which market structure is this? A perfect competition B monopolistic competition C oligopoly D monopoly
Mark scheme: B
Q12 · Which feature of an oligopoly can be explained by the kinked demand curve model?
12 Which feature of an oligopoly can be explained by the kinked demand curve model? A collusion between firms in the determination of the industry price B price leadership by one firm in the industry C the ability of firms to earn abnormal profits in the long run D the reluctance of firms to alter prices
Mark scheme: D
Q13 · The table shows percentage (%) market share of smartphone operating systems (OS) for…
13 The table shows percentage (%) market share of smartphone operating systems (OS) for Great Britain (GB) and the United States (US) in January 2012 and July 2015. OS system GB 2012 (%) GB 2015 (%) US 2012 (%) US 2015 (%) V 49.3 54.3 43.0 65.6 W 15.7 1.0 3.3 0.4 X 29.3 32.7 50.6 30.1 Y 2.4 12.0 2.1 3.8 Z 3.3 0.0 1.0 0.1 What can be concluded from the table about changes between 2012 and 2015? A The dominant firm in each country increased its market power. B The firms counted in the three-firm concentration ratio remained the same in both countries. C The three-firm concentration ratio decreased in both countries. D The three-firm concentration ratio showed the same trend in both countries.
Mark scheme: D
Q14 · The diagram shows a Lorenz curve, with two areas, X and Y, identified
14 The diagram shows a Lorenz curve, with two areas, X and Y, identified. 100 cumulative line of % of income perfect equality X Y Lorenz curve 0 100 cumulative % of households How is the corresponding Gini coefficient calculated? A X divided by (X plus Y) B X plus Y divided by X C X plus Y divided by Y D Y divided by (X plus Y)
Mark scheme: A
More questions on Equity and redistribution of income and wealth
Q15 · The government of a country wants to achieve a more equitable distribution of income
15 The government of a country wants to achieve a more equitable distribution of income. Which combination of measures is likely to be most effective in achieving this aim? tax-free income allowance welfare benefits A decrease reduce means-tested benefits B decrease reduce universal benefits C increase increase means-tested benefits D increase increase universal benefits
Mark scheme: C
More questions on Equity and redistribution of income and wealth
Q16 · A shopkeeper earns $75 per week, but he would be willing to carry on working in his shop…
16 A shopkeeper earns $75 per week, but he would be willing to carry on working in his shop for up to $25 per week less. Therefore, $50 is his level of A marginal revenue product. B producer’s surplus. C economic rent. D transfer earnings.
Mark scheme: D
More questions on Labour market forces and government intervention
Q17 · The diagram shows the supply and demand for labour in an industry
17 The diagram shows the supply and demand for labour in an industry. S wage rate W D O L M N employment Initially the industry’s labour market is in equilibrium. What effect will the introduction of a minimum wage OW have on the level of employment in the industry? A It will decrease by LM. B It will decrease by LN. C It will increase by LN. D It will increase by MN.
Mark scheme: A
More questions on Labour market forces and government intervention
Q18 · Immigrants are awarded entry points according to their ability to fulfil criteria set by…
18 Immigrants are awarded entry points according to their ability to fulfil criteria set by the Canadian Government. A new Express Entry system for the immigration of skilled workers was introduced. The diagram shows the change in the relative importance or weighting given to these criteria between the old and new systems. Criteria weighting (%) for skilled worker immigration skill transferability 100 work experience % adaptability 80 age 60 education 40 language 20 job offer 0 old Express system Entry system What can be concluded from the diagram? A Canada intended to maintain the same level of skilled immigrants under both systems. B Canada wanted a smaller number of highly educated skilled immigrants. C Certainty of employment for skilled immigrants was made the main criterion. D Skilled immigrants needed to have fewer years of work experience than previously.
Mark scheme: C
More questions on Labour market forces and government intervention
Q19 · It has been observed that increased growth in consumer spending results in an increase in…
19 It has been observed that increased growth in consumer spending results in an increase in investment by firms. Which principle of macroeconomic theory explains this relationship? A the accelerator B the liquidity trap C the marginal efficiency of capital D the multiplier
Mark scheme: A
Q20 · What is the value of the multiplier in an economy with no government where the marginal…
20 What is the value of the multiplier in an economy with no government where the marginal propensity to save is 6 1 and the marginal propensity to import is 3 1 ? A 1 B 1 2 1 C 2 D 3 2
Mark scheme: C
Q21 · The table refers to an open economy with a government sector
21 The table refers to an open economy with a government sector. In which situation is the economy in disequilibrium? C I S G T X M A 400 150 80 150 200 120 100 B 450 150 100 150 230 120 90 C 480 150 110 150 210 120 100 D 520 150 120 150 210 120 90
Mark scheme: A
Q22 · How do commercial banks create money?
22 How do commercial banks create money? A by cashing cheques for their customers B by increasing their reserves at the central bank C by making loans to customers D by charging customers for banking services
Mark scheme: C
Q23 · What are the variables identified on the axes of a Kuznets curve diagram?
23 What are the variables identified on the axes of a Kuznets curve diagram? vertical (Y) axis variable horizontal (X) axis variable A cumulative % of income cumulative % of families B measure of inequality income per capita C measure of standard of living economic growth rate D tax revenue tax rate
Mark scheme: B
More questions on Characteristics of countries at different levels of development
Q24 · A developing country experiences economic growth
24 A developing country experiences economic growth. The economic growth is most likely to lead to economic development when it A causes rapid rural to urban migration. B is based on the extraction of mineral raw materials. C mainly rewards the country’s entrepreneurs. D results from the expansion of labour-intensive industries.
Mark scheme: D
Q25 · Between 2014 and 2015 the Polish economy expanded at a rate of 3.3%
25 Between 2014 and 2015 the Polish economy expanded at a rate of 3.3%. What necessarily follows from this statement? A The cost of living rose by 3.3%. B The output of the industrial sector rose by 3.3%. C There was increased demand which caused inflation. D There was positive economic growth.
Mark scheme: D
Q26 · The graphs indicate economic performance in a country between 2011 and 2014
26 The graphs indicate economic performance in a country between 2011 and 2014. annual % increase in annual % increase annual % increase industrial production in consumer prices in GDP 12 6 16 % % % 8 12 4 8 4 2 4 0 0 0 11 12 13 14 11 12 13 14 11 12 13 14 year year year Which conclusion may be drawn from the graphs? A Between 2011 and 2012 industrial production and GDP fell but prices rose. B Between 2012 and 2013 the rates of growth of industrial production, GDP and prices all increased. C GDP and industrial production were at their lowest in 2012. D At no time between 2011 and 2014 did industrial production, GDP or prices fall.
Mark scheme: D
Q27 · What will result in the short run from rising unemployment in an economy?
27 What will result in the short run from rising unemployment in an economy? A The government’s budget deficit will fall. B Any existing inflationary pressure will be reduced. C Potential output will fall. D The economy’s production possibility curve will move inwards.
Mark scheme: B
Q28 · In 2015 a political party proposed a policy of quantitative easing (the creation of money…
28 In 2015 a political party proposed a policy of quantitative easing (the creation of money by the central bank). When would such a policy be least likely to destabilise the macro economy in the short run? A when the economy was experiencing a high level of inflation B when the economy had price stability but there was full employment of the labour force C when there existed a deep recession with high levels of unemployment D when there was full employment and a current account balance of payments deficit
Mark scheme: C
Q29 · In 1979 in the UK the marginal rate of income tax imposed on the highest earners was 83%…
29 In 1979 in the UK the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. By 1989 the highest marginal rate was reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially. Which theoretical concept illustrates this relationship between tax rates and tax revenue? A the J curve B the Laffer curve C the Marshall-Lerner condition D the Phillips curve
Mark scheme: B
Q30 · Which factor has been least associated with the rapid growth of many economies recently?
30 Which factor has been least associated with the rapid growth of many economies recently? A high savings rates as a percentage of national income B more efficient mechanisms for transmitting funds from savers to investors C more emphasis on detailed government planning D more openness to foreign trade and investment
Mark scheme: C
What was in this paper
The subtopics covered by these 30 questions, and how many questions each got. Open one in a new tab to see every Cambridge question on it.
4Labour market forces and government intervention3The circular flow of income3Types of cost, revenue and profit, short-run and long-run production3Economic development2Economic growth2Equity and redistribution of income and wealth2Indifference curves and budget lines2Characteristics of countries at different levels of development1Efficiency and market failure1Fiscal policy1Government policies to achieve efficient resource allocation and correct market failure1Monetary policy1Money and banking1Price elasticity, income elasticity and cross elasticity of demand1Private costs and benefits, externalities and social costs and benefits1Unemployment1What you needed in this session
Cambridge’s own grade thresholds for 2017 May/June, Paper 3 · Variant 3. A higher threshold means an easier paper — the bar moves with how the cohort did.