Cambridge A Level Economics 9708 — 2018 Oct/Nov Paper 3 · Variant 3

This document consists of 11 printed pages and 1 blank page. IB18 11_9708_33/RP © UCLES 2018 [Turn over *1153905680* Cambridge International Examinations Cambridge International Advanced Subsidiary and Advanced Level ECONOMICS 9708/33 Paper 3 Multiple Choice October/November 2018 1 hour 15 minutes Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. Do not use staples, paper clips, glue or correction fluid. Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. DO NOT WRITE IN ANY BARCODES. There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet.

2 © UCLES 2018 9708/33/O/N/18 1 Which condition must be met for economic efficiency to be achieved? A Marginal social benefits are at a maximum in the production of all goods. B Marginal social costs are at a minimum in the production of all goods. C Marginal social costs are zero in the production of all goods. D Marginal social costs equal marginal social benefits in the production of all goods. 2 What is a characteristic of a merit good? A free at the point of use B has zero marginal costs C non-competitive in use D possesses positive externality 3 Which statement is correct? A External benefit minus private benefit equals social benefit. B Private benefit minus external benefit equals social benefit. C Social benefit minus external benefit equals private benefit. D Social benefit plus private benefit equals external benefit. 4 When does a consumer achieve maximum total utility (TU), according to marginal utility (MU) theory for two goods, X and Y, with different prices (P)? A MUX = MUY B X X P MU = Y Y P MU C Y X P MU = X Y P MU D TUX = TUY

3 © UCLES 2018 9708/33/O/N/18 [Turn over 5 The diagram shows a change in a consumer’s budget line from RR to SS. O product Y product X R S R S What might explain why this occurred? A a decrease in income and a fall in the price of X B a decrease in income and a rise in the price of X C an increase in income and a fall in the price of X D an increase in income and a rise in the price of X 6 When shirts are produced, fixed costs are $100 and the variable cost is $5 per shirt. If the price is $10, which output would result in normal profit? A 10 shirts B 20 shirts C 25 shirts D 100 shirts

4 © UCLES 2018 9708/33/O/N/18 7 The table shows four market structures. Which characteristics could describe the market structure shown? market structure barriers to entry differentiated products A monopolistic competition low no B monopoly high yes C oligopoly low no D perfect competition high yes 8 A firm abandons its policy of horizontal expansion and switches to a policy of backward vertical growth. What does this suggest is most likely about the firm’s objectives? A It now prefers revenue maximisation to cost minimisation. B It now prefers sales maximisation to profit satisficing. C It now prefers security of sales to profit maximisation. D It now prefers security of supplies to growth of market share. 9 What identifies the output level required to meet the stated aim of the firm? aim of firm produce at output where A maximum efficiency marginal cost is at a minimum B profit maximising marginal cost is equal to average revenue C quantity of sales maximising average revenue is equal to average cost D revenue maximising marginal revenue is zero 10 What makes it likely that firms will collude in setting prices for a particular product? A a highly contestable market structure B a small number of firms with economies of scale C persistent shortages of the product being supplied D the existence of patent rights possessed by firms

5 © UCLES 2018 9708/33/O/N/18 [Turn over 11 The diagram shows a firm’s marginal and average cost curves. The firm enters a collusive agreement with other firms in the industry. It is agreed that each firm will charge a common price, OP, and will restrict the level of its output to a production quota set by the industry cartel. The firm is allocated a production quota, Oq. MC AC H G P K N J L M q quantity $ O The firm decides to cheat in order to maximise its profits. What is its short-run increase in profits? A PGKL B PHJL C PHJL minus PGNM D PGKL minus LKNM 12 The diagram shows a notice on a motorway near Cambridge. This road was recently cleared of 17 bags of litter. Clearing litter puts local authority road-workers’ lives at risk. What is this an example of? A government regulation B merit good C nudge theory D public good

6 © UCLES 2018 9708/33/O/N/18 13 A reason for government intervention in the workings of the economy is to attempt to correct for market failure. Sometimes, though, government failure may occur. What is not a possible reason for government failure? A Governments may have to make decisions on the basis of out-of-date information. B Governments may make decisions that reduce negative externalities. C The extent of the market failure may be difficult to judge. D When circumstances change a government may be unable to respond quickly. 14 Which policy combination will reduce income inequalities in a country? A impose a fixed amount tax on all people and reduce unemployment benefits B increase social welfare payments and impose a higher marginal income tax rate C increase transfer payments and impose higher indirect taxation D reduce rates of tax on higher incomes and increase welfare payments 15 The diagram shows an economy’s Lorenz curve (VW). 0 100 100 W V area Y area Z cumulative % of population cumulative % of income 45° How is the Gini coefficient for the economy calculated? A Z Y Y + B Z Y C Y Z D Z Y Z + 16 What will cause the supply curve of labour in a particular industry to shift to the left? A a fall in demand for the industry’s product B a greater use of machinery in the production of the industry’s output C a rise in wages paid in similar occupations in other industries D a weakening of trade union influence in the industry

7 © UCLES 2018 9708/33/O/N/18 [Turn over 17 The diagram shows the costs and revenue curves in the labour market for a firm in imperfect competition. O number of workers $ W4 W3 W2 W1 W Q R S MCL ACL ARPL MRPL Initially the firm is at an equilibrium in the factor market. What will happen to the wage rate and employment if a trade union negotiates a wage of W? wage rate employment A fall from W3 to W remain the same at OR B fall from W4 to W increase from OQ to OR C rise from W1 to W increase from OQ to OR D rise from W1 to W remain the same at OQ 18 A country has a population of 100 million. 60 million are of working age and 50 million are in the labour force. The country’s unemployment rate is 10%. How many people are employed? A 40 million B 45 million C 50 million D 54 million

8 © UCLES 2018 9708/33/O/N/18 19 The table shows the nominal GDP growth and inflation rate in four countries, W, X, Y and Z. nominal GDP growth rate (%) annual inflation rate (%) W 2.1 1.9 X –1.6 8.9 Y 4.1 5.8 Z –2.0 16.4 What can be concluded from the table? A W experienced the highest rate of real economic growth. B X and Z experienced deflation. C Y experienced the greatest rise in the standard of living. D Z experienced the greatest growth in public debt. 20 Which trade policy of a developed country is least likely to allow a developing country to experience increased growth? A a decrease in administrative restrictions on imports from developing countries B an increase in subsidies of capital goods exports to developing countries C a reduction in quotas on imports from developing countries D a reduction in tariffs on imports from developing countries 21 What is not included in National Income accounts? A a gift by a parent to her daughter as a deposit on an apartment B earnings of a part-time worker in a school dining room C interest earned on savings accounts intended for retirement D profits re-invested by a company to fund capital expenditure 22 A developing country relies heavily on the production of a primary product for its national income. Which change will make it more likely that the country will benefit from its participation in international trade? A an increase in income elasticity of demand for the primary product B an increase in tariffs imposed on the primary product by developed countries C an increase in the cost of international freight transport in real terms D an increase in the price of manufactured products relative to the primary product

9 © UCLES 2018 9708/33/O/N/18 [Turn over 23 What might cause a country to experience both a rise in the number of people unemployed and an increase in job vacancies? A a decrease in housing and transport costs B a decrease in unemployment benefit C an increase in the occupational immobility of labour D an increase in the skills of the labour force 24 In a two sector economy autonomous consumption expenditure increases by $100 billion, autonomous investment expenditure by $200 billion and the marginal propensity to consume is 0.5. What will be the increase in National Income? A $150 billion B $300 billion C $450 billion D $600 billion 25 The central bank in an open economy cuts the interest rate to avoid deflation. Under which conditions is this expansionary monetary policy most likely to be effective? asset prices consumption spending A rise rapidly interest elastic B rise rapidly interest inelastic C rise slowly interest elastic D rise slowly interest inelastic

10 © UCLES 2018 9708/33/O/N/18 26 The diagram shows that the elasticity of demand for money becomes infinite at a certain rate of interest. O quantity of money rate of interest demand for money Which statement explains this situation? A At low interest rates there is an infinite demand for bonds. B Other assets are close substitutes for money. C Some money is required for transactions balances. D There is a liquidity trap. 27 What would be most likely to result in an increase in unemployment? A a decrease in the level of bank loans B a decrease in the level of taxation C a decrease in the rate of interest D an increase in the money supply 28 Which macroeconomic indicator is least likely to identify a developing country? A real GDP per capita B the Gini coefficient C the Human Development Index D the Phillips curve 29 What would not help to achieve the macroeconomic objective of economic growth? A decreasing corporation tax B increasing income tax C reducing interest rates D spending on education and training

11 © UCLES 2018 9708/33/O/N/18 30 What is a reflationary fiscal measure? A increasing government spending B increasing taxes C increasing the money supply D reducing interest rates

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This document consists of 3 printed pages. © UCLES 2018 [Turn over Cambridge Assessment International Education Cambridge International Advanced Subsidiary and Advanced Level ECONOMICS 9708/33 Paper 3 Multiple Choice October/November 2018 MARK SCHEME Maximum Mark: 30 Published This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for Teachers. Cambridge International will not enter into discussions about these mark schemes. Cambridge International is publishing the mark schemes for the October/November 2018 series for most Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level components.

9708/33 Cambridge International AS/A Level – Mark Scheme PUBLISHED October/November 2018 © UCLES 2018 Page 2 of 3 Question Answer Marks 1 D 1 2 D 1 3 C 1 4 B 1 5 A 1 6 B 1 7 B 1 8 D 1 9 D 1 10 B 1 11 C 1 12 C 1 13 B 1 14 B 1 15 A 1 16 C 1 17 C 1 18 B 1 19 A 1 20 C 1 21 A 1 22 A 1 23 C 1 24 D 1 25 A 1 26 D 1 27 A 1 28 D 1

9708/33 Cambridge International AS/A Level – Mark Scheme PUBLISHED October/November 2018 © UCLES 2018 Page 3 of 3 Question Answer Marks 29 B 1 30 A 1