Cambridge A Level Economics 9708 — 2021 Oct/Nov Paper 3 · Variant 3

This document has 12 pages. IB21 11_9708_33/2RP © UCLES 2021 [Turn over *1340708816* Cambridge International AS & A Level ECONOMICS 9708/33 Paper 3 Multiple Choice October/November 2021 1 hour 15 minutes You must answer on the multiple choice answer sheet. You will need: Multiple choice answer sheet Soft clean eraser Soft pencil (type B or HB is recommended) INSTRUCTIONS  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 multiple choice answer sheet.  Follow the instructions on the multiple choice answer sheet.  Write in soft pencil.  Write your name, centre number and candidate number on the multiple choice answer sheet in the spaces provided unless this has been done for you.  Do not use correction fluid.  Do not write on any bar codes.  You may use a calculator. INFORMATION  The total mark for this paper is 30.  Each correct answer will score one mark.  Any rough working should be done on this question paper.

2 © UCLES 2021 9708/33/O/N/21 1 The diagram shows the private and social marginal costs and benefits of a demerit good. What is the socially optimal level of output? MSC MPC MPB MSB O cost benefit output A B C D 2 Why are public goods an example of market failure? A Producers undervalue the benefits of a public good. B Public goods have high fixed costs of production. C The non-excludability of a public good leads to the free rider problem. D When a public good is consumed by one person, it is not available to others. 3 A government plans to build a new railway line. One proposed route will pass close to residential areas causing increased noise levels. An alternative shorter route will pass through a nature reserve causing environmental damage but saves travel time for rail users. In using cost–benefit analysis, which combination shows what should be included as private cost (PC) and what should be included as external costs (EC)? the cost of building the railway line the increased noise levels A EC PC B EC EC C PC EC D PC PC

3 © UCLES 2021 9708/33/O/N/21 [Turn over 4 What is held constant when deriving an individual consumer’s downward-sloping demand curve for a product? A marginal utility B the consumer’s income C the price of the product D total utility 5 The diagram shows an individual’s total utility curve as different quantities of a good are consumed. At which level of consumption does the individual’s marginal utility become zero? total utility units consumed O B A C D

4 © UCLES 2021 9708/33/O/N/21 6 The diagrams show changes in a consumer’s budget line (BL) for two goods. The government increases the price of both goods by imposing a sales tax of 25%. Which diagram shows the effect of this tax? good Y good X O A BL2 BL1 BL1 BL2 good Y good X O B BL2 BL1 good Y good X O C BL2 BL1 good Y good X O D

5 © UCLES 2021 9708/33/O/N/21 [Turn over 7 A consumer demands two goods, X and Y. The consumer’s initial equilibrium is at R and final equilibrium at T. The indifference curve diagram shows the effect of a fall in the price of good X and the resulting income and substitution effects. M M” O T R S N N” N’ I2 I1 good Y good X What can be concluded from the diagram about the nature of good X and the nature of its relationship with good Y? nature of good X relationship between good X and good Y A inferior complements B inferior substitutes C normal complements D normal substitutes 8 A perfectly competitive firm is producing a level of output where average cost is lower than marginal cost. What are the effects on these costs if output increases by one unit? average cost marginal cost A falls falls B falls rises C rises falls D rises rises

6 © UCLES 2021 9708/33/O/N/21 9 What is most likely to pose a threat to the survival of small local bread producers? A an increase in the cost per minute of television advertising B a switch in consumer preferences to cheaper mass-produced bread C diseconomies of scale in the process of bread production D increased congestion on road networks 10 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 11 The diagram shows the marginal cost (MC), marginal revenue (MR), average revenue (AR) and average total cost (ATC) curves of a profit-maximising firm in an oligopolistic market. O cost and price quantity MR AR ATC MC P C Q1 What is the reason why the oligopolist would not want to increase their price above P? A Demand is relatively elastic, meaning the firm would see a reduction in total revenue. B Demand is relatively elastic, meaning the firm would see an increase in total revenue. C Demand is relatively inelastic, meaning the firm would see a reduction in total revenue. D Demand is relatively inelastic, meaning the firm would see an increase in total revenue.

7 © UCLES 2021 9708/33/O/N/21 [Turn over 12 The diagram shows the cost and revenue curves for a firm in an imperfectly competitive market. What is the revenue maximising output of the firm? A B C D MR AR AC MC O quantity price $ 13 Governments introduce different policies to achieve a more efficient use of energy. Which policy is least likely to achieve this objective? A a limit to the amount by which energy prices can increase B an increase in the tax on energy usage C energy pricing policies that reflect the full social costs of energy use D subsidies to suppliers of products designed to save energy 14 A report in the UK suggests that means-tested benefits (benefits that are paid depending on income) should be introduced for benefit payments to the elderly and that any money saved should be used to pay means-tested benefits to young adults. This is because some elderly people now have high levels of real income. Which outcome is most likely? A Equality amongst young adults will decrease. B Equality amongst the elderly will decrease. C Intergenerational equality will increase. D There will be an increase in transfer payments.

8 © UCLES 2021 9708/33/O/N/21 15 What is defined as ‘the payment made to a factor of production over and above that necessary to keep the factor in its present use’? A economic rent B normal profit C opportunity cost D transfer earnings 16 As the number of workers employed by a firm increases, the marginal product of labour decreases but remains positive. What happens to the firm’s total output? A It stops increasing. B It increases at a constant rate. C It increases at a falling rate. D It increases at a rising rate. 17 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 18 What does an output gap show? A the difference between actual output and long-run potential output B the difference between actual output and output when labour is fully employed C the difference between the maximum output in a boom and the minimum output in a recession D the difference between the minimum output in a boom and the maximum output in a recession

9 © UCLES 2021 9708/33/O/N/21 [Turn over 19 GNP per head in a country has increased by 10% over the past 5 years. What is not a valid reason to doubt whether average living standards have also risen by the same amount? A The distribution of income may have changed considerably over the period. B The general price level is likely to have changed over the period. C The size of the population may have changed over the period. D The workforce may have produced greater output by working for more hours per week. 20 The Human Development Index is a measure of economic development. What is included in this index? child mortality per thousand population GNI per capita at $PPP life expectancy at birth mean years of schooling A     B     C     D     21 What would increase structural unemployment in the manufacturing sector of the US? A Asian exporters of manufactured goods to the US experience a fall in labour costs per unit of output. B Tariffs on Asian manufacturing imports increase. C The percentage of US manufacturing employees belonging to a trade union falls. D The US dollar's real effective exchange rate against the Asian currencies falls. 22 Governments have a range of policy options available to them to reduce unemployment. Which statement is correct? A A government cannot reduce seasonal unemployment. B Changing interest rates is the best way a government can reduce the natural rate of unemployment. C Changing the exchange rate will not reduce demand-deficient unemployment. D Supply-side policies can be used by a government to reduce frictional unemployment.

10 © UCLES 2021 9708/33/O/N/21 23 What is not considered to be an injection into the circular flow of income of an economy? A a rise in exports of financial services B firms investing in new production techniques C increased government spending on health services D spending on hotels and entertainment by tourists visiting another country 24 The table shows the nominal GDP growth rate and annual 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. 25 What identifies net injections into a country’s circular flow of income? I > S X < M G < T A yes no no B yes no yes C no yes no D no yes yes 26 In a closed economy with no government there is an equilibrium level of national income of $1000 billion. The households always spend 80% of the income they receive. If full employment occurs when national income is $1200 billion, by how much must aggregate demand initially change to close the economy’s deflationary gap? A –$200 billion B –$40 billion C +$40 billion D +$200 billion

11 © UCLES 2021 9708/33/O/N/21 [Turn over 27 According to Keynesians, the demand for money is negatively correlated with the interest rate. Which motive for holding money best accounts for this relationship? A income motive B precautionary motive C speculative motive D transactionary motive 28 The diagram shows aggregate demand (AD) and aggregate supply (AS). There is a change from AD1 to AD2 and from AS1 to AS2. price level O national income AD1 AD2 Y1Y2Y3Y4 AS1 AS2 As a result, the equilibrium level of national income changes from: A Y1 to Y3. B Y1 to Y4. C Y2 to Y3. D Y2 to Y4.

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 2021 9708/33/O/N/21 29 The table gives an economy’s unemployment rate and inflation rate for a five-year period. year unemployment rate % inflation rate % 2010 7.6 2.6 2011 6.2 1.6 2012 5.8 1.8 2013 5.9 2.0 2014 5.8 2.0 Which change between consecutive years was in agreement with the Phillips curve analysis? A 2010–2011 B 2011–2012 C 2012–2013 D 2013–2014 30 The Consumer Prices Index (CPI) fell by 3% in a year. Unemployment was regarded as unacceptably high. Which combination of policies would a government be most likely to adopt in such circumstances? A an appreciation of the currency, together with an increase in the rate of interest B increased government expenditure on education, together with an increase in taxes to pay for it C increased indirect taxes, together with a depreciation in the exchange rate D reduced income taxes, together with a cut in the rate of interest

This document consists of 3 printed pages. © UCLES 2021 [Turn over Cambridge International AS & A Level ECONOMICS 9708/33 Paper 3 Multiple Choice October/November 2021 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 2021 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 2021 © UCLES 2021 Page 2 of 3 Question Answer Marks 1 A 1 2 C 1 3 C 1 4 B 1 5 B 1 6 D 1 7 A 1 8 D 1 9 B 1 10 B 1 11 A 1 12 C 1 13 A 1 14 C 1 15 A 1 16 C 1 17 C 1 18 A 1 19 C 1 20 D 1 21 A 1 22 D 1 23 D 1 24 A 1 25 A 1 26 C 1 27 C 1 28 A 1

9708/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2021 © UCLES 2021 Page 3 of 3 Question Answer Marks 29 B 1 30 D 1