Cambridge A Level Economics 9708 — 2022 Oct/Nov Paper 1 · Variant 1

Question 1

1 An economy is changing from a planned economy to a market economy. Which action would be expected during this change? A the replacement of fiscal policy by monetary policy B the replacement of multinational companies by national companies C the replacement of nationalisation by privatisation D the replacement of private property rights by common ownership

Accepted Answer

C

Question 2

2 A local council provides a tap for drinking water in a town. Would this make drinking water a free good? A No, because it is possible to exclude some people from using the tap. B No, because it requires the use of scarce resources. C Yes, because it is available to all passers-by. D Yes, because it is impossible to charge for it.

Accepted Answer

B

Question 3

3 Food prices in a country increased by 20% in three months due to an infectious virus. Which statement about the cause of this rise in food prices is normative? A Consumers were scared of running out of food. B Farm workers demanded higher wages to cover extra hours worked. C Supply of foreign food was reduced because of closed borders. D Transport costs increased by 10%.

Accepted Answer

A

Question 4

4 A doctor has very long working hours and a high level of stress. She can become a teacher instead of continuing as a doctor. What is the opportunity cost of choosing to continue as a doctor? A the risk of mistakes caused by tiredness B the possible costs of illness caused by high stress levels C the potential salary as a teacher D the retraining costs of becoming a teacher

Accepted Answer

C

Question 5

5 When will the demand curve for motorcycles shift to the left? A when the price of cars falls B when the price of motorcycles falls C when the tax on motorcycles rises D when the price of public transport rises

Accepted Answer

A

Question 6

6 The diagram shows the demand curve for housing. price D O quantity What is not assumed to remain constant when drawing this curve? A consumer incomes B expectations about future house prices C the price of houses D the rate of interest charged on loans for house purchase

Accepted Answer

C

Question 7

7 Which statement defines the price elasticity of supply? A It is a measure of how the price of a good responds to a change in the quantity supplied. B It is a measure of how the quantity supplied of a good responds to a change in its price. C It is a measure of how the supply of a good responds to a change in its cost of production. D It is a measure of how the supply of good X responds to a change in the price of good Y.

Accepted Answer

B

Question 8

8 Which products are likely to have a positive cross-elasticity of demand with tea? A biscuits and cakes B coffee and hot chocolate C cups and saucers D sugar and milk

Accepted Answer

B

Question 9

9 What does not cause a shift in the supply curve of cars? A a change in the car producers’ costs of production B a change in the price of fuel used by car owners C a change in the rate of sales tax on cars D a change in the wage rate of workers in the car industry

Accepted Answer

B

Question 10

10 The diagram shows the market for pineapples. X is the original equilibrium point. Pineapple producers benefit from improved technology. At the same time, a new diet book suggests that eating pineapples helps weight loss. Which point is the new equilibrium? price S2 A S1 B S3 X C D D2 D1 D3 O quantity of pineapples

Accepted Answer

C

Question 11

11 The diagram shows the impact of a fall in the price of oil that will lead to a fall in energy costs for many manufacturers. S1 price S2 L J M K G H D1 O E F quantity What will be the impact of this change on consumer and producer surplus? consumer producer surplus surplus A falls falls B falls rises C rises falls D rises rises

Accepted Answer

D

Question 12

12 When is the supply curve for a car manufacturing firm most likely to be price elastic? A when the firm finds it difficult to recruit new labour B when the firm has a large quantity of stock C when the firm is operating in the short run D when the firm is operating near to full capacity

Accepted Answer

B

Question 13

13 The diagram shows the market for electric steel-plated switches used in new houses. S1 price Y X D2 D1 O quantity What could not have caused the market equilibrium position to have changed from X to Y? A increasing the availability of loans for buying houses B granting a subsidy for producers of bricks C removing sales tax on electric switches D removing tariffs on imports of wood

Accepted Answer

C

Question 14

14 In mixed economies, what explains why the provision of certain goods and services will remain under government control? A The market system fails to provide public goods. B Management ideas are hampered by excessive bureaucracy. C Ownership of companies depends on the ease of buying shares. D The profit motive tends to improve efficiency in organisations.

Accepted Answer

A

Question 15

15 The diagram shows the percentages of those on low pay and those on extremely low pay in a country from 1976 to 2012. A national minimum wage was introduced in 1999. 25 % low paid 20 15 introduction of minimum wage 10 extremely low paid 5 0 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 year Which conclusion is consistent with the diagram? A The minimum wage helped the low paid more than the extremely low paid. B The minimum wage reduced the numbers of both low paid and extremely low paid. C The minimum wage reversed the trend in low pay of the previous 20 years. D The minimum wage was responsible for the largest reduction of low pay in the period.

Accepted Answer

C

Question 16

16 The government has decided to guarantee manufacturers a price OPa for a product and to provide a subsidy to ensure that the market clears. In the diagram, QePe was the original equilibrium before the policy changes. S U price Pa W V Pe X Pb Y Z D O Qe Qa quantity Which area represents the total cost to the government of this subsidy? A PaUZPb B PaWYPb C PeXYPb D VWYZ

Accepted Answer

B

Question 17

17 A concert arena has a fixed capacity that allows it to sell 10 000 tickets for a concert. The current equilibrium price for a ticket is $10. The owners of the arena decide to set a minimum price for a ticket. Under which conditions will there be the most unsold tickets? minimum ticket price elasticity of price ($) demand for tickets A 11 inelastic B 11 elastic C 12 inelastic D 12 elastic

Accepted Answer

D

Question 18

18 A government announces its intention to reduce the level of transfer payments in the economy. Which statement made by the government is consistent with this intention? A There need to be more incentives for unemployed workers to seek jobs. B State pensions need to be increased. C The level of income tax needs to be raised. D The level of government expenditure needs to be increased.

Accepted Answer

A

Question 19

19 Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull inflation and on cost-push inflation in an oil-importing country of an increase in the world price of oil? effect on demand-pull effect on cost-push inflation inflation A increase increase B increase reduce C reduce increase D reduce reduce

Accepted Answer

C

Question 20

20 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 S2 (in US$) 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 21

21 The diagram shows the demand and supply curves for solar panels in the US. In 2018, the US put a tariff on imported solar panels. price of solar domestic supply panels Pt world supply and tariff Pe world supply domestic demand O M N X P R quantity of solar panels What is the quantity of imported solar panels after the imposition of the tariff? A MN B MX C NP D XP

Accepted Answer

C

Question 22

22 The diagrams show initial equilibrium positions at Y1P1. Which diagram reflects the impact on an economy of higher unit wage costs and an improvement in the balance of trade? A B SRAS2 SRAS2 price price level level SRAS1 P2 SRAS1 P2 P1 AD1 AD2 P1 AD AD2 AD2 AD AD2 AD1 O Y2 Y1 O Y2 Y1 real real GDP GDP C D SRAS1 SRAS1 price price SRAS2 level level P1 SRAS2 P1 P2 AD2 AD1 P2 AD1 AD AD2 AD AD2 AD2 O Y1 Y2 O Y1 Y2 real real GDP GDP

Accepted Answer

B

Question 23

23 The table shows information from the current account of the balance of payments for Canada and Singapore in 2019. Canada Singapore (US$ million) (US$ million) exports of goods 448 360 440 800 imports of goods 462 105 342 805 exports of services 100 350 204 810 imports of services 115 270 119 050 primary income balance –3 475 –34 340 secondary income balance –2 060 –6 280 What can be concluded from the table? A Canada exported more goods than Singapore. B Canada and Singapore had current account deficits. C Singapore had a surplus on its trade in goods and services. D Singapore imported cheaper goods than Canada.

Accepted Answer

C

Question 24

24 What is a measure of a country’s terms of trade index? price index of exports A × 100 price index of imports price index of imports B × 100 price index of exports total value of exports C × 100 total value of imports D total value of exports – total value of imports

Accepted Answer

A

Question 25

25 What is likely to cause an increase in the exchange rate of an economy? A an increase in demand-pull inflation B an increase in national income C a decision of the central bank to raise money supply D a discovery of a natural resource that replaces imports

Accepted Answer

D

Question 26

26 What is likely to explain an increase in the deficit on a country’s current account of the balance of payments? A an increase in government foreign aid to countries abroad B an increase in government tax rates C an increase in other countries’ exchange rates D an increase in the proportion of income saved by the country’s residents

Accepted Answer

A

Question 27

27 What does the Marshall–Lerner condition state must be present for a depreciation of a currency to cause an improvement in the current account balance? A The price elasticity of demand for exports and the price elasticity of demand for imports are both greater than one. B The price elasticity of demand for exports and the price elasticity of demand for imports are both less than one. C The sum of the price elasticity of demand for exports and the price elasticity of demand for imports is greater than one. D The sum of the price elasticity of demand for exports and the price elasticity of demand for imports is less than one.

Accepted Answer

C

Question 28

28 To encourage people to work, a government increases the minimum income level at which
people start to pay income tax.

Which types of macroeconomic policy are being followed?

fiscal monetary supply side
policy policy policy

A J x J

B x J J

Cc J J J

D J J x

Accepted Answer

A

Question 29

29 Raising interest rates is proposed to reduce a balance of payments deficit. Which justification for this action is not valid? A It will attract more foreign currency inflows. B It will encourage exporters to find new foreign markets. C It will lower the level of imported consumer goods. D It will put downward pressure on the exchange rate.

Accepted Answer

D

Question 30

30 Which combination of changes is most likely to result in a fall in a country’s inflation rate? exchange interest money rate rate supply A lower higher higher B higher higher lower C higher lower lower D lower lower higher

Accepted Answer

B

Cambridge A Level Economics 9708 — 2022 Oct/Nov Paper 1 · Variant 1

Question paper16 pages

Mark scheme3 pages

Questions as text

Q1 · An economy is changing from a planned economy to a market economy

Q2 · A local council provides a tap for drinking water in a town

Q3 · Food prices in a country increased by 20% in three months due to an infectious virus

Q4 · A doctor has very long working hours and a high level of stress

Q5 · When will the demand curve for motorcycles shift to the left?

Q6 · The diagram shows the demand curve for housing

Q7 · Which statement defines the price elasticity of supply?

Q8 · Which products are likely to have a positive cross-elasticity of demand with tea?

Q9 · What does not cause a shift in the supply curve of cars?

Q10 · The diagram shows the market for pineapples

Q11 · The diagram shows the impact of a fall in the price of oil that will lead to a fall in…

Q12 · When is the supply curve for a car manufacturing firm most likely to be price elastic?

Q13 · The diagram shows the market for electric steel-plated switches used in new houses

Q14 · In mixed economies, what explains why the provision of certain goods and services will…

Q15 · The diagram shows the percentages of those on low pay and those on extremely low pay in a…

Q16 · The government has decided to guarantee manufacturers a price OPa for a product and to…

Q17 · A concert arena has a fixed capacity that allows it to sell 10 000 tickets for a concert

Q18 · A government announces its intention to reduce the level of transfer payments in the…

Q19 · Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull…

Q20 · Assume the Chinese monetary authorities are committed to maintaining the exchange rate of…

Q21 · The diagram shows the demand and supply curves for solar panels in the US

Q22 · The diagrams show initial equilibrium positions at Y1P1

Q23 · The table shows information from the current account of the balance of payments for…

Q24 · What is a measure of a country’s terms of trade index?

Q25 · What is likely to cause an increase in the exchange rate of an economy?

Q26 · What is likely to explain an increase in the deficit on a country’s current account of…

Q27 · What does the Marshall–Lerner condition state must be present for a depreciation of a…

Q28 · To encourage people to work, a government increases the minimum income level at which…

Q29 · Raising interest rates is proposed to reduce a balance of payments deficit

Q30 · Which combination of changes is most likely to result in a fall in a country’s inflation…

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