Cambridge A Level Economics 9708 — 2022 May/June Paper 1 · Variant 1

Question 1

1 The diagram shows a production possibility curve for an economy that is producing at point P. 150 good Y P 100 50 0 0 50 100 150 good X Which quantity of X is given up to produce the quantity of Y shown? A 40 B 50 C 100 D 110

Accepted Answer

B

Question 2

2 The Indian government operates a pension scheme. Which statement about this scheme would be classed as normative? A To be eligible, individuals must be above the age of 60 and live below the poverty line. B In January 2020, eligible individuals aged over 70 received 500 rupees per month. C In 2018, the Supreme Court said the government must review pension payments because they are unrealistic. D In January 2020, the Indian government announced that it might increase the payment to 1000 rupees per month.

Accepted Answer

C

Question 3

3 Economics students have to fill in the gaps in the following passage. ‘The three basic questions arising from the economic problem of scarcity are ......1...... to produce, ......2...... to produce, and ......3...... to produce.’ Which combination is correct? 1 2 3 A how when where B how where for whom C what how for whom D what when where

Accepted Answer

C

Question 4

4 What is not a function of money? A It is a medium of exchange. B It is a store of value. C It is a unit of account. D It is a measure of satisfaction.

Accepted Answer

D

Question 5

5 The producer of a good with a price-elastic demand observes that a rise in its price is accompanied by a rise in total revenue. What might explain this? A The good is an inferior good. B The rise in price was due to an increase in demand for the good. C The supply of the good was inadequate to meet the demand. D The supply of the good was price-inelastic.

Accepted Answer

B

Question 6

6 What will increase the producer surplus of farmers that grow carrots? A a decrease in the demand for carrots B a decrease in the price of carrot seed C a decrease in the price of cabbage D a decrease in the subsidy on carrots

Accepted Answer

B

Question 7

7 A popular band is due to perform at a music concert in a venue that has a 5000-seat capacity. Recent appearances and the release of a new album have made the band even more popular. D1 and S represent the original demand and supply curves for concert tickets and D2 the new demand curve. Which diagram best represents the likely outcome on the market for concert tickets? A B S D1 D2 S price price D2 D1 O 5000 O 5000 quantity quantity C D D1 D2 S D1 D2 price price S O 5000 O 5000 quantity quantity

Accepted Answer

C

Question 8

8 Why does an individual’s demand curve generally slope downwards to the right? A The additional satisfaction an individual gets from consuming most goods decreases as consumption increases. B The additional satisfaction an individual gets from consumption decreases as income rises. C The individual has finite income which is used to attempt to satisfy many wants. D For most goods the price charged by producers falls as the quantity purchased increases.

Accepted Answer

A

Question 9

9 What is price elasticity of supply? A the change in the quantity supplied when a price changes B the change in the quantity supplied when demand changes C the comparison of the proportionate change in supply to the proportionate change in demand D the comparison of the proportionate change in supply to the proportionate change in price

Accepted Answer

D

Question 10

10 What is necessary for consumer surplus to be zero? A Demand is perfectly elastic. B Demand is perfectly inelastic. C Supply is perfectly elastic. D Supply is perfectly inelastic.

Accepted Answer

A

Question 11

11 When will the price mechanism not function as a system for allocating goods? A when the government bans advertising B when the government maintains an effective maximum price C when there is a limited supply of the good D when there is a powerful company able to set the market price

Accepted Answer

B

Question 12

12 The price of a product is above the market equilibrium price. Which combination of changes is certain to result as the market adjusts towards equilibrium? quantity demanded quantity supplied A falls falls B falls rises C rises falls D rises rises

Accepted Answer

C

Question 13

13 What can be concluded about a good with a positive cross-price elasticity of demand? A Its price will be sensitive to changes in prices of close substitutes. B Its price will be sensitive to changes in quantity demanded of close substitutes. C The quantity demanded for this good will be sensitive to changes in prices of close substitutes. D The quantity demanded for this good will be sensitive to changes in quantity demanded of close substitutes.

Accepted Answer

C

Question 14

14 Which row shows the effect of the maximum and minimum prices described in the headings of the table? maximum price maximum price minimum price above below above equilibrium price equilibrium price equilibrium price A excess demand no effect no effect B excess supply no effect no effect C no effect excess demand excess supply D no effect excess supply excess demand

Accepted Answer

C

Question 15

15 A government decides to introduce tolls (charges) to drive on all major roads. What is most likely to happen to the number of journeys made on major roads and on minor roads? journeys on journeys on major roads minor roads A reduce increase B reduce no change C no change increase D no change no change

Accepted Answer

A

Question 16

16 The table shows data from a bus company that was privatised in 2013. passenger journeys revenue year percentage change $000 from previous year (%) 2012 470 +5 2013 495 +2 2014 430 –2 2015 440 –1 What is the most likely conclusion that can be made from the data? A Average prices were higher in 2012 than 2015. B Average prices were higher in 2015 than 2014. C The number of passenger journeys remained the same since privatisation. D Profits have increased since privatisation.

Accepted Answer

B

Question 17

17 The diagram shows the market for electricity in a country that has a fixed supply of electricity and introduces a maximum price to make it affordable for poorer households. S price of electricity market price maximum price D O quantity of electricity What will be the effect of this? A It will encourage producers to build more power stations in the future. B It will encourage the development of renewable sources of electricity. C It will increase producer surplus. D It will increase the probability of power cuts.

Accepted Answer

D

Question 18

18 What is an example of a transfer payment? A government spending on hospitals B government spending on motorways C minimum wage D welfare benefits

Accepted Answer

D

Question 19

19 Turkey can produce a good but also imports some of the good from Egypt. The Turkish currency depreciates against the Egyptian currency. How is this most likely to affect production of this good in Egypt and in Turkey? production in Egypt production in Turkey A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

B

Question 20

20 The table shows a country’s total output and its average price in each of three years. output price year (millions) ($) 1 10 20 2 12 24 3 13 26 What can be concluded about output? A Nominal output and real output increased at the same rate. B Nominal output rose at a faster rate than real output. C Nominal output rose at an increasing rate. D Real output rose at a constant rate.

Accepted Answer

B

Question 21

21 The diagram shows the change in the supply curve of imports, S–S1 to curve S–S2, after the introduction by the government of a trade protection measure. S2 price of imports S S1 O quantity of imports What is the form of protection? A an ad valorem tariff B an embargo C a quota D a specific tariff

Accepted Answer

C

Question 22

22 The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in equilibrium at X. In this economy, a severe shortage of raw materials causes a large rise in their price. The effect of this change is shown by a move to which point? AD3 AS2 AD1 general AD2 AS1 price level C B D A X O real national income

Accepted Answer

B

Question 23

23 Why might a country’s government impose a tax on fuel exports? A to encourage domestic refineries to increase production B to improve the country’s trade balance C to reduce fuel prices for domestic consumers D to reduce the government’s budget surplus

Accepted Answer

C

Question 24

24 What leads to a fall in a country’s terms of trade? A a fall in the price of exports relative to the price of imports B a fall in the price of imports relative to the price of exports C a fall in the quantity of exports relative to the quantity of imports D a fall in the quantity of imports relative to the quantity of exports

Accepted Answer

A

Question 25

25 The diagram has three lines that show the values of an economy’s exports, imports and trade balance between 2011 and 2019. $m + 1 2 3 0 – 2011 2015 2019 year How should the lines be labelled? line 1 line 2 line 3 A exports imports trade balance B exports trade balance imports C imports exports trade balance D imports trade balance exports

Accepted Answer

B

Question 26

26 What would be the best policy to increase the value of a currency? A Impose tariffs on imported goods with price-inelastic demand. B Increase interest rates. C Reduce income tax. D Sell the currency on the foreign exchange markets.

Accepted Answer

B

Question 27

27 The central bank of an economy decides to raise interest rates in order to attract capital inflows and improve the financial account of the balance of payments. When is the central bank’s decision least likely to be effective? A when the currency of the economy is expected to lose its value B when the economy is politically and economically stable C when the interest rate of the economy is higher than that of other countries D when the reserves of foreign currencies held by the central bank are high and rising

Accepted Answer

A

Question 28

28 What could be described as an expansionary fiscal policy? A a decrease in the budget deficit B a decrease in the budget surplus C a decrease in the exchange rate D a decrease in the money supply

Accepted Answer

B

Question 29

29 Why will a contractionary monetary policy reduce inflation? A Banks will lend more. B Consumers will have higher disposable income. C Consumers will pay more tax. D Consumers will save more.

Accepted Answer

D

Question 30

30 The government of a country is worried about a large deficit on the current account of its balance of payments and an increasing rate of inflation. The country has a fixed exchange rate for its currency. Which policy measure is most likely to help the government to reduce the current account deficit and lower the rate of inflation? A devaluation of the currency B increasing government spending C decreasing the direct taxes D increasing the interest rate

Accepted Answer

D

Cambridge A Level Economics 9708 — 2022 May/June Paper 1 · Variant 1

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · The diagram shows a production possibility curve for an economy that is producing at…

Q2 · The Indian government operates a pension scheme

Q3 · Economics students have to fill in the gaps in the following passage

Q4 · What is not a function of money?

Q5 · The producer of a good with a price-elastic demand observes that a rise in its price is…

Q6 · What will increase the producer surplus of farmers that grow carrots?

Q7 · A popular band is due to perform at a music concert in a venue that has a 5000-seat…

Q8 · Why does an individual’s demand curve generally slope downwards to the right?

Q9 · What is price elasticity of supply?

Q10 · What is necessary for consumer surplus to be zero?

Q11 · When will the price mechanism not function as a system for allocating goods?

Q12 · The price of a product is above the market equilibrium price

Q13 · What can be concluded about a good with a positive cross-price elasticity of demand?

Q14 · Which row shows the effect of the maximum and minimum prices described in the headings of…

Q15 · A government decides to introduce tolls (charges) to drive on all major roads

Q16 · The table shows data from a bus company that was privatised in 2013

Q17 · The diagram shows the market for electricity in a country that has a fixed supply of…

Q18 · What is an example of a transfer payment?

Q19 · Turkey can produce a good but also imports some of the good from Egypt

Q20 · The table shows a country’s total output and its average price in each of three years

Q21 · The diagram shows the change in the supply curve of imports, S–S1 to curve S–S2, after…

Q22 · The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in…

Q23 · Why might a country’s government impose a tax on fuel exports?

Q24 · What leads to a fall in a country’s terms of trade?

Q25 · The diagram has three lines that show the values of an economy’s exports, imports and…

Q26 · What would be the best policy to increase the value of a currency?

Q27 · The central bank of an economy decides to raise interest rates in order to attract…

Q28 · What could be described as an expansionary fiscal policy?

Q29 · Why will a contractionary monetary policy reduce inflation?

Q30 · The government of a country is worried about a large deficit on the current account of…

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