Cambridge A Level Economics 9708 — 2017 Oct/Nov Paper 1 · Variant 2

Question 1

1 To overcome the problem of scarcity, countries with few natural resources need to concentrate on the quality of human resources. Which set of policies would be most appropriate? natural resources policy human resources policy A develop renewable energy supplies improve education and training B plan the allocation of resources discourage automation C protect land resources protect jobs in manufacturing D restrict imports of raw materials restrict influx of skilled migrants

Accepted Answer

A

Question 2

2 A government decides to subsidise farms producing milk in its country. Which question about this decision is a normative question rather than a positive question? A How much will milk production increase? B How should essential products, such as milk, be produced? C How will employment in the milk industry change? D How will milk prices change?

Accepted Answer

B

Question 3

3 Economy X uses its resources in the labour-intensive production of wheat and wooden furniture as shown by the production possibility curve FW. With the help of new strains of wheat seeds, X increased yields and shifted to a new production possibility curve. Which diagram depicts this change? A B furniture furniture F F O W O W wheat wheat C D furniture furniture F F O W O W wheat wheat

Accepted Answer

C

Question 4

4 What is most likely to severely affect the ability of money to act as a medium of exchange? A a devaluation of a country’s rate of exchange for foreign currency B an increase in the money supply C a very high rate of inflation D a very high rate of interest

Accepted Answer

C

Question 5

5 What would not affect the position of the demand curve for wigs? A an increase in incomes B a reduction in the price of hairdressing C an increase in wigs worn by television celebrities D a reduction in the price of wigs

Accepted Answer

D

Question 6

6 In which situation is the demand for a product said to be price elastic? A The quantity demanded responds to a change in price. B An increase in price brings about a decrease in the quantity demanded. C An increase in price induces consumers to spend more on the product. D A decrease in price brings about an increase in revenue.

Accepted Answer

D

Question 7

7 In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola curve. D1 D2 price M D2 N D1 O quantity Which statement is correct? A D2D2 is more elastic than D1D1 at point M. B D2D2 is more elastic than D1D1 at point N. C The elasticity of demand increases on moving down both curves. D The elasticity of demand is inelastic at point M on both curves.

Accepted Answer

B

Question 8

8 Over a four year period, as the price of new houses increases, the price elasticity of supply for new houses falls, as shown. All new houses were sold. supply of new price of new price elasticity houses houses ($) of supply year 1 10 000 100 000 – year 2 10 250 110 000 0.25 year 3 10 450 125 000 0.13 year 4 10 600 140 000 0.12 What shows price elasticity of supply became more inelastic from year to year? A Dollar revenues to house builders declined each year. B Each year, the government released more land for house building. C The proportionate price change was greater than the proportionate supply change. D The proportionate price change was the same as the proportionate supply change.

Accepted Answer

C

Question 9

9 Prices of gold, silver and copper fell considerably in 2011 and again in 2015. The fall in 2011 was said to be because miners increased production. The fall in 2015 was because demand, especially from China, decreased. Assuming that the equilibrium before 2011 was X, how would these movements in 2011 and subsequently in 2015 be shown on the demand and supply diagram? price X T Q S R O quantity initial 2011 2015 equilibrium equilibrium equilibrium A X Q R B X R Q C X S R D X T S

Accepted Answer

A

Question 10

10 Consumer X is the largest of five consumers and buys 50% of sales. The table shows the quantity of the good demanded by consumer X and the market supply of the good. price demand from market supply $ consumer X 4 20 28 6 16 32 8 12 40 10 10 45 What would be the market equilibrium price? A $4 B $6 C $8 D $10

Accepted Answer

B

Question 11

11 What does not happen when price acts as a means to allocate resources? A Price determines the supply of public goods. B Price operates in the markets for both goods and factors of production. C Price recognises consumers’ ability to pay rather than consumers’ needs. D Price signals to producers which goods are most profitable.

Accepted Answer

A

Question 12

12 What is meant by consumer surplus? A the amount of money that remains after consumers have made their purchases B the difference between how much a consumer is willing to pay for a good and the amount paid C the difference between the amount of a good that’s bought by a consumer and the amount consumed D the difference between the price paid for a good and the cost of producing it

Accepted Answer

B

Question 13

13 In the diagram, S1 is the original supply curve and D is the original demand curve. S2 W price S1 V T R P Q D O M N quantity If supply shifts to S2, which area represents the change in consumer surplus? A PQVT B PQW C PRVT D TVW

Accepted Answer

A

Question 14

14 After a series of poor harvests, a government imposes an effective maximum price on cereals. What would be a consequence of this policy? A Both rich and poor people would satisfy their demands equally. B Illegal buying and selling through a black market would be prevented. C Rationing would be necessary to ensure a fair distribution of cereals. D The market would fail to clear leaving a surplus of cereals.

Accepted Answer

C

Question 15

15 The diagram shows the demand and supply curves of a commodity before and after a specific tax is removed. S S 12 price 10 8 6 4 2 D 0 quantity What is the tax per unit of output and what is the price after the removal of the tax? price after the tax per unit removal of the tax A 6 6 B 6 8 C 4 6 D 4 8

Accepted Answer

A

Question 16

16 The diagram shows the market for heating oil. S price D O quantity If the government introduces a production subsidy, how will the financial benefit be shared between consumers and producers? A It will be shared equally between producer and consumer. B It will go entirely to the producer. C The majority will go to the consumer. D The majority will go to the producer.

Accepted Answer

D

Question 17

17 The diagrams show UK Government total spending and welfare spending in £ billions between 2005 and 2014. total spending United Kingdom welfare spending United Kingdom 800 120 100 600 £ billion £ billion 80 400 60 40 200 20 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 What can be concluded from the diagrams about UK Government spending during the period 2005 to 2014? A Both forms of spending were cut in 2014. B Both total and welfare spending have risen continuously. C In 2005 welfare spending made up a quarter of total spending. D Non-welfare spending has always exceeded welfare spending.

Accepted Answer

D

Question 18

18 Health services in an economy are provided by private clinics that charge high fees. The government decides health services should be provided for everyone, not based on ability to pay. Which direct action should it take? A Build government clinics to compete in the market. B Close private clinics where provision by the market is inadequate. C Increase the taxes on profits made by private clinics. D Nationalise private clinics and remove charging.

Accepted Answer

D

Question 19

19 In its recent budget a government reduced total expenditure while increasing the amount spent on training to increase the productivity of the workforce. The initial equilibrium point is shown by X on the aggregate demand (AD) and aggregate supply (AS) diagram. What would be the equilibrium point after these changes? AS3 AS1 price level C AS2 X B D A AD3 AD1 AD2 O real output

Accepted Answer

A

Question 20

20 The table shows the retail prices index for four countries for years 2 and 3. (Year 1 index = 100 for all countries.) Which country had a higher rate of inflation in year 2 than year 3? country year 2 index year 3 index A 100 115 B 110 132 C 120 144 D 130 150

Accepted Answer

D

Question 21

21 What does the current account of the balance of payments include? A government reserves and foreign aid B government revenue and government spending C imports and exports of goods and services D inflows and outflows of trade and capital

Accepted Answer

C

Question 22

22 Assume the Chinese monetary authorities are committed to maintaining the exchange rate of China’s currency, the Yuan, against the US$ between P1 and P2 on the diagram. S1 price of Yuan (in US$) S2 P2 P1 D O quantity of Yuan What might they do if supply changed from S1 to S2? A introduce controls on Chinese investment overseas B lower interest rates C remove tariffs on imports from USA D sell Yuan on the foreign exchange markets

Accepted Answer

A

Question 23

23 In the UK in July 2014, £1 = US $1.71. By the end of August 2014, £1 = US $1.65. What is most likely to explain this? A an increase in UK exports B an increase in UK interest rates C increasing profitability of UK companies D increasing size of UK national debt

Accepted Answer

D

Question 24

24 Which formula is used to calculate a country’s terms of trade? A index of export prices − index of import prices B index of import prices – index of export prices index of export prices C × 100 index of import prices index of import prices D × 100 index of export prices

Accepted Answer

C

Question 25

25 Country X forms a customs union with country Y. X then ceases to produce its own cars and instead imports cars from Y. Country Y diverts some of its car exports to X from country Z. How is this likely to affect car prices in X and Z? country X country Z A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

B

Question 26

26 The table shows the ability of two countries to produce two commodities when they use all of their resources for that product. maximum output maximum output country of rice of wheat X 2000 2000 Y 4000 2000 Which statement is correct? A Country X has an absolute advantage in wheat. B Country Y has an absolute advantage in wheat. C Country X has a comparative advantage in wheat. D Country Y has a comparative advantage in wheat.

Accepted Answer

C

Question 27

27 In 2014, Poland was the world’s largest exporter of apples. 55% of the crop went to Russia. Then Russia banned the imports. What would not have prevented the revenue of the Polish apple farmers falling dramatically? A The apple farmers found new markets in other countries. B The apple farmers were able to store the harvest for sale later. C The Polish Government placed a ban on imports of food from Russia. D The Polish Government established a scheme to buy apples and supply them to charities.

Accepted Answer

C

Question 28

28 Monetary policy can be used to increase the level of business activity. Which action illustrates this? A curbing consumption through controls on credit B lowering reserve requirements of banks to increase lending C reducing government spending to achieve a budget surplus D stimulating company investments by increasing interest rates

Accepted Answer

B

Question 29

29 When will a country’s balance of payments current account deficit be reduced? A when it lowers tariffs on its imports B when it raises its rate of income tax C when it removes export subsidies D when it revalues its currency

Accepted Answer

B

Question 30

30 The diagram shows four possible aggregate supply curves and an equilibrium point X. A government employs deflationary fiscal policy in order to reduce the rate of inflation in its economy. This shifts aggregate demand to AD2. With which AS curve would this policy be most effective? A B C price D level X AD1 AD2 O national income

Accepted Answer

A

Cambridge A Level Economics 9708 — 2017 Oct/Nov Paper 1 · Variant 2

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · To overcome the problem of scarcity, countries with few natural resources need to…

Q2 · A government decides to subsidise farms producing milk in its country

Q3 · Economy X uses its resources in the labour-intensive production of wheat and wooden…

Q4 · What is most likely to severely affect the ability of money to act as a medium of…

Q5 · What would not affect the position of the demand curve for wigs?

Q6 · In which situation is the demand for a product said to be price elastic?

Q7 · In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola…

Q8 · Over a four year period, as the price of new houses increases, the price elasticity of…

Q9 · Prices of gold, silver and copper fell considerably in 2011 and again in 2015

Q10 · Consumer X is the largest of five consumers and buys 50% of sales

Q11 · What does not happen when price acts as a means to allocate resources?

Q12 · What is meant by consumer surplus?

Q13 · In the diagram, S1 is the original supply curve and D is the original demand curve

Q14 · After a series of poor harvests, a government imposes an effective maximum price on…

Q15 · The diagram shows the demand and supply curves of a commodity before and after a specific…

Q16 · The diagram shows the market for heating oil

Q17 · The diagrams show UK Government total spending and welfare spending in £ billions between…

Q18 · Health services in an economy are provided by private clinics that charge high fees

Q19 · In its recent budget a government reduced total expenditure while increasing the amount…

Q20 · The table shows the retail prices index for four countries for years 2 and 3

Q21 · What does the current account of the balance of payments include?

Q22 · Assume the Chinese monetary authorities are committed to maintaining the exchange rate of…

Q23 · In the UK in July 2014, £1 = US $1.71

Q24 · Which formula is used to calculate a country’s terms of trade?

Q25 · Country X forms a customs union with country Y

Q26 · The table shows the ability of two countries to produce two commodities when they use all…

Q27 · In 2014, Poland was the world’s largest exporter of apples

Q28 · Monetary policy can be used to increase the level of business activity

Q29 · When will a country’s balance of payments current account deficit be reduced?

Q30 · The diagram shows four possible aggregate supply curves and an equilibrium point X

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