Cambridge A Level Economics 9708 — 2019 May/June Paper 3 · Variant 3

This document consists of 12 printed pages. IB19 06_9708_33/FP © UCLES 2019 [Turn over *7705407253* Cambridge Assessment International Education Cambridge International Advanced Subsidiary and Advanced Level ECONOMICS 9708/33 Paper 3 Multiple Choice May/June 2019 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 2019 9708/33/M/J/19 1 When can an economy be said to be economically inefficient? A when it is possible to make some people better off without making other people worse off B when the distribution of income is socially unacceptable C when the government sector is growing at the expense of the private sector D when wage rates rise faster than production 2 The diagram shows cost and benefit curves for a good in a free market. cost, benefit ($) O quantity MPC MSC MSB MPB P4 P2 P3 P1 Q2 Q4 Q1 Q3 Which combination is correct? actual output social optimal level of output A P1Q1 P3Q3 B P2Q2 P3Q3 C P2Q2 P4Q4 D P3Q3 P4Q4 3 A food processing firm discharges waste water into the lake next to its factory. What would reduce the difference between the private cost and the social cost of the firm’s actions? A Local residents are given the right to buy the firm’s food at a discount. B The government subsidises the food processing firm. C The lake is bought by the food processing firm. D The waste water flows from the lake into the sea.

3 © UCLES 2019 9708/33/M/J/19 [Turn over 4 The diagram shows attainable indifference curves, I1 and I2, for good X and good Y. Which point represents the highest level of satisfaction currently attainable? O good Y good X I2 I1 A B D C 5 The table shows the substitution effect and income effect for a Giffen good and an inferior good as the price of the good changes. Which combination is correct? type of good price change demand change from substitution effect demand change from income effect A Giffen fall positive negative B Giffen rise positive positive C inferior fall negative negative D inferior rise negative negative

4 © UCLES 2019 9708/33/M/J/19 6 A consumer demands two goods, X and Y. The indifference curve diagram shows the effect of a change in the price of one of these goods on the consumer’s equilibrium. good Y good X O I2 I1 Which demand curve is consistent with the diagram? A price of good Y quantity of good Y O O B price of good Y quantity of good Y C price of good X quantity of good X O D price of good X quantity of good X O 7 In many developed economies, large and small firms often exist side by side in the same industry. What is most likely to explain the survival of the small firms? A They each offer a much wider range of products. B They have a higher minimum efficient scale. C They pay much higher wages to their staff. D They provide a more personal level of consumer service.

5 © UCLES 2019 9708/33/M/J/19 [Turn over 8 The diagram shows short-run (SRAC) and long-run (LRAC) cost curves for a firm. price, cost output Q O SRAC1 SRAC2 SRAC3 LRAC Which statement is correct? A When each of the three SRAC curves is U-shaped it shows the existence of economies of scale. B When the LRAC curve is upward-sloping beyond output OQ it shows the existence of diseconomies of scale. C When the minimum point of SRAC2 is below that of SRAC1 it shows the existence of the law of variable proportions. D When the minimum point of SRAC2 is below that of SRAC3 it shows the existence of economies of scale. 9 What is most likely to rise as a firm expands? A energy costs per unit of output B the cost of components C the cost of monitoring workers D the rate of interest paid on borrowing 10 In the long run, what is a feature of monopolistic competition, but not of perfect competition? A a small number of buyers B product differentiation C the existence of abnormal profits D the existence of barriers to entry

6 © UCLES 2019 9708/33/M/J/19 11 A small European airline currently produces at point X on its long-run average cost curve. It wants a bigger share of the European airline market and proposes to merge with another small European airline. The newly merged firm would produce at point Y on the long-run average cost curve, as shown. O costs output LRAC X Y Why might the newly merged firm be able to produce at point Y? A The new airline can negotiate discounts when buying fuel. B The new airline has many layers of management. C The new airline is unable to hire enough pilots. D The workforce of the new airline lacks morale and is demotivated. 12 A firm sells its product to consumers in two separate markets, M and N. Under which conditions will a policy of price discrimination between the two markets be most profitable for the firm? price elasticity of demand in market M price elasticity of demand in market N geographical distance between markets M and N A 1.2 1.2 large B 1.2 1.2 small C 1.8 1.2 large D 1.8 1.2 small

7 © UCLES 2019 9708/33/M/J/19 [Turn over 13 A community relies on a private company to supply electricity using a coal-fired power station. The power station causes air pollution which imposes an external cost shown in the diagram. costs, revenue electricity output O MSC MPC MPB = MSB W Z Y X The government decides to impose a tax on the electricity company to correct market failure. What represents the tax? A WX B WY C XY D YZ 14 Some workers in a low-paid job decide to work longer hours to increase their disposable income. However, this decision reduces state-provided benefits, leaving them no better off. What does this describe? A debt trap B liquidity trap C poverty trap D unemployment trap 15 Which policy is likely to be the least effective means of producing a more equal distribution of income amongst households? A the imposition of minimum wage levels below the levels produced by the market B the introduction of progressive personal income taxes C the payment of child benefits to low income households D the removal of sales taxes on food consumed by lower income households

8 © UCLES 2019 9708/33/M/J/19 16 The table shows the main characteristics of employment in two occupations. occupation X occupation Y average annual wage $100 000 $60 000 number of weeks annual leave 5 weeks 10 weeks average length of working week 48 hours 44 hours job security low high length of training course to obtain job qualification 1 year 2 years What can definitely be deduced from the table? A Those employed in occupation Y attach greater importance to job security. B Those employed in occupation X attach less importance to leisure activities. C There will be more competition for places on training courses to enter occupation X than occupation Y. D Occupation Y has more non-pecuniary advantages than occupation X. 17 The table shows a firm that has four possible methods of production to make its desired output. Each method has a different cost and causes a different amount of pollution. The government rules that polluting firms must buy pollution permits that cost $90 each. Each permit allows the firm to emit 1 tonne of pollution. No pollution can be emitted without a permit. Which method of production has least total cost? cost of production ($ per day) pollution caused (tonnes per day) A 320 3 B 380 2 C 480 1 D 700 0 18 How can GDP at market prices be calculated if GDP at factor cost is known? A add taxes, add subsidies B add taxes, subtract subsidies C subtract taxes, add subsidies D subtract taxes, subtract subsidies

9 © UCLES 2019 9708/33/M/J/19 [Turn over 19 Which characteristics of the population, the size of the informal economy and the rate of inflation would mean that Gross Domestic Product (GDP) is likely to be relatively accurate as a comparison of the standard of living over time? population size of informal economy rate of inflation A rising large rising B rising small stable C stable large rising D stable small stable 20 The table gives the percentage of employment in the primary, secondary and tertiary sectors in four countries. Which country is most likely to be a developed country? primary sector % secondary sector % tertiary sector % A 15 40 45 B 30 40 30 C 35 45 20 D 45 35 20 21 The diagram shows unemployed persons (in millions) for the years 2000 to 2016 for the European Union. 26 24 22 20 18 16 14 12 10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 year unemployment (millions) During which period was the highest rate of increase in unemployment experienced? A 2006 to 2008 B 2008 to 2010 C 2010 to 2012 D 2012 to 2014

10 © UCLES 2019 9708/33/M/J/19 22 A large coal mine is forced to close because of falling demand for coal as consumers switch to less-polluting fuels. The government organises retraining courses and recruitment events for the coal mine workers. Which type of unemployment is the government trying to reduce? A cyclical B seasonal C structural D technological 23 Economists have proposed that the best policy to promote development is ‘trade not aid’. What is implied by this proposal? A Developing countries should become self-sufficient. B Developing countries should be given greater access to markets in developed countries. C Developing countries should use foreign aid to invest in their export industries. D Developing countries should use trade barriers to promote import substitution. 24 The table shows the values of selected macroeconomic variables over a period. year 1 ($m) year 2 ($m) investment 200 220 saving 180 190 exports 100 110 imports 120 140 government expenditure 150 160 taxation 150 160 equilibrium national income 1800 2000 What is the value of the multiplier? A 2 B 4 C 5 D 10 25 What is most likely to increase if an economy enters a negative output gap? A business confidence B economic growth rate C inflation rate D unemployment rate

11 © UCLES 2019 9708/33/M/J/19 [Turn over 26 Under which conditions will a Keynesian expansionary fiscal policy be most likely to take an economy out of a recession without too much inflation? demand for money wage flexibility aggregate supply curve A interest elastic high price elastic B interest inelastic high price inelastic C interest elastic low price elastic D interest inelastic low price inelastic 27 What would cause an increase in the transactions demand for money? A a fall in the price of bonds B an increase in nominal national income C an increase in the rate of interest D an increase in unemployment 28 What may lead to a reduction in bank lending in a country? A an increase in commercial banks’ balances with the central bank B an increase in the liquidity ratios operated by the country’s commercial banks C an increase in the monetary base of the country D an increase in the volume of liquid assets held by the country’s commercial banks

12 Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cambridgeinternational.org after the live examination series. Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge. © UCLES 2019 9708/33/M/J/19 29 The table gives details of the inflation and unemployment rates for different countries in 2008 and 2011. country inflation rate (% per annum) unemployment rate (% of workforce) 2008 2011 2008 2011 Canada 2.38 2.89 6.15 7.47 France 3.16 2.29 7.81 9.68 Germany 2.75 2.48 7.60 5.98 Japan 1.37 –0.28 3.99 4.55 Which country or countries experienced a trade-off between their inflation and unemployment rates? A Canada and Germany B Canada only C France and Japan D France only 30 The government decides to raise the rate of Value Added Tax (General Sales Tax). What does this suggest is the government’s main macroeconomic objective? A to reduce the budget deficit B to reduce the inequality of income distribution C to reduce the level of unemployment D to reduce the rate of inflation

This document consists of 3 printed pages. © UCLES 2019 [Turn over Cambridge Assessment International Education Cambridge International Advanced Subsidiary and Advanced Level ECONOMICS 9708/33 Paper 3 Multiple Choice May/June 2019 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 May/June 2019 series for most Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and some Cambridge O Level components.

9708/33 Cambridge International AS/A Level – Mark Scheme PUBLISHED May/June 2019 © UCLES 2019 Page 2 of 3 Question Answer Marks 1 A 1 2 B 1 3 C 1 4 D 1 5 A 1 6 A 1 7 D 1 8 B 1 9 C 1 10 B 1 11 A 1 12 C 1 13 C 1 14 C 1 15 A 1 16 D 1 17 B 1 18 B 1 19 D 1 20 A 1 21 B 1 22 C 1 23 B 1 24 C 1 25 D 1 26 C 1 27 B 1 28 B 1

9708/33 Cambridge International AS/A Level – Mark Scheme PUBLISHED May/June 2019 © UCLES 2019 Page 3 of 3 Question Answer Marks 29 C 1 30 A 1