Cambridge A Level Economics 9708 — 2023 May/June Paper 1 · Variant 2

Question 1

1 Which factor of production is needed first in order to set up a new business? A capital B enterprise C labour D land

Accepted Answer

B

Question 2

2 Assuming nothing else changes, which change in an economy’s labour market will cause the production possibility curve to shift to the left? A an increase in worker immigration B an increase in the retirement age C an increase in labour productivity D an increase in the school leaving age

Accepted Answer

D

Question 3

3 What is not a characteristic of a mixed economy? A The government has no role in setting prices. B The government manages taxation rights. C The government prevents firms from earning excessive profits. D The government provides services not provided by the private sector.

Accepted Answer

A

Question 4

4 What is not likely to result from the use of division of labour? A a decrease in average costs B an increase in motivation C an increase in productivity D an improvement in quality of the final product

Accepted Answer

B

Question 5

5 Price plays a number of functions in the allocation of resources. Which statement best illustrates the function that relies upon consumer choice (sometimes known as the incentivising function)? A A price fall can show consumers that a good is becoming less popular. B A price fall tends to persuade some producers not to stay in the market for the good. C A price rise means consumers cannot afford to buy so much of a good. D A price rise tends to reduce competitiveness in the market for a good.

Accepted Answer

B

Question 6

6 Which pair of products are substitutes both in consumption and production? A barley and cotton B gold and silver C soap and toothpaste D spinach and cabbage

Accepted Answer

D

Question 7

7 There is a worldwide shortage of oil. The diagram shows the consumption and production of oil (billion tonnes) for selected countries. United States key Japan consumption production Russia Britain 0 0.2 0.4 0.6 0.8 1.0 billion tonnes What can be concluded from the diagram? A In Britain, oil has zero opportunity cost. B In Japan, there is self-sufficiency in oil. C In Russia, there is no shortage of oil. D In the United States, rationing is the only solution to oil shortage.

Accepted Answer

C

Question 8

8 The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus fares caused the demand for rail travel to rise by 10%. Which change in bus fares would have caused this? from to (cents) (cents) A 20 21 B 30 33 C 40 45 D 50 60

Accepted Answer

A

Question 9

9 A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direction of price change for this to be certain to happen? nature of good price change A inferior fall B inferior rise C normal fall D normal rise

Accepted Answer

C

Question 10

10 A specific tax is placed upon each bottle of perfume sold. In the diagram, S is the supply curve before tax, St is the supply curve after tax. St price S W R U Q X P T D O Y Z quantity Which area represents that part of the tax revenue paid by producers? A ORWY B PQUT C PRWT D QRWU

Accepted Answer

B

Question 11

11 The diagram shows the supply curve of a firm. price S O quantity Which statement about the price elasticity of supply (PES) along this curve is correct? A PES is greater than unity at all points along the supply curve. B PES is the same at all points along the supply curve. C PES is elastic when the price is low and becomes more inelastic when the price rises. D PES rises when the supply rises.

Accepted Answer

D

Question 12

12 The diagram shows the market for electric cars with X as the initial equilibrium. What will be the new equilibrium when the price of electric car batteries falls and consumers become more environmentally aware? D1 D D2 price $ S1 A S B X S2 C D O electric cars

Accepted Answer

C

Question 13

13 What would cause a market disequilibrium? A when a decrease in the demand for a product leads to a price fall that results in some producers leaving the market B when a decrease in the demand for a product leads to some producers being unable to sell products at the current price C when a decrease in the supply of a product leads to a price rise that results in the market for the product clearing D when a decrease in the supply of a product leads to a price rise that makes it too expensive for some poorer households

Accepted Answer

B

Question 14

14 In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. price P1 M1 M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of demand if the price is halved from P1 to P2? A –1 B –0.5 C zero D infinity

Accepted Answer

A

Question 15

15 The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 000: $24 000: good amount spent amount spent on good on good ($) ($) W 100 96 X 100 100 Y 200 224 Z 200 248 Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of demand greater than 1.0? A W, Y and Z B W and Z only C W only D Z only

Accepted Answer

D

Question 16

16 Which combination of government measures is most likely to increase the consumption of a merit good? A setting an effective maximum price on the product and paying producers a subsidy B setting an effective maximum price on the product and imposing an indirect tax on producers C setting an effective minimum price on the product and paying producers a subsidy D setting an effective minimum price on the product and imposing an indirect tax on producers

Accepted Answer

A

Question 17

17 The table contains some figures from the balance of payments account of the United States (US) for a given year. US$ million exports of goods 1 632 639 balance of trade in goods –741 462 imports of services 477 428 balance of trade in services 233 138 What cannot be concluded about US trade from the table? A Exported services were valued at over US$477 428. B Imported goods were valued at over US$1 632 639. C The value of exported services was less than the value of exported goods. D There was an overall current account deficit.

Accepted Answer

D

Question 18

18 Which change is shown directly by the use of aggregate demand and aggregate supply analysis? A the nominal income level B the price level C the unemployment level D the wage level

Accepted Answer

B

Question 19

19 Why might aggregate demand increase when a country’s price level falls? A Domestic interest rates will tend to fall. B Imports become more price competitive. C Real incomes fall. D The purchasing power of savings falls.

Accepted Answer

A

Question 20

20 What is used to convert nominal GDP to real GDP? A exchange rates B changes in the price level C interest rates D taxation

Accepted Answer

B

Question 21

21 The diagram shows a basic two-sector circular flow of income. factor market firms households product market What can be concluded about the direction of flows? A Consumer expenditure flows anticlockwise. B Goods and services flow clockwise. C Incomes flow anticlockwise. D Resources flow anticlockwise.

Accepted Answer

D

Question 22

22 The table shows the types of unemployment and their possible solutions. Which combination is not correct? type of possible solution unemployment A technological introduce minimum wage legislation B cyclical raise government spending C frictional increase advertising of job vacancies D structural retrain workers

Accepted Answer

A

Question 23

23 Which combination of policies would be most effective in reducing a balance of payments current account surplus? a decrease in a devaluation of the an expansionary tariffs on imports exchange rate monetary policy A no yes no B no no yes C yes no yes D yes yes no

Accepted Answer

C

Question 24

24 If a country is experiencing a period of high inflation, which groups will benefit the most from this? companies that fixed income those with export the majority earners high debts of their output A yes yes no B no yes yes C yes no no D no no yes

Accepted Answer

D

Question 25

25 What will definitely change a country’s terms of trade? 1 when the price of imported raw materials increases 2 a change in inflation rates 3 an appreciation of the exchange rate A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Accepted Answer

C

Question 26

26 The world consists of two countries, M and N. The graphs show their production possibilities for wheat and rice. country M country N 100 rice rice 75 0 0 0 100 0 50 wheat wheat Countries M and N operate on their production possibility curves and, before specialisation, country M produces 60 units of wheat and country N produces 30 units of wheat. What will be the change in the world output of rice if both countries decide to specialise according to comparative advantage? A It will fall by 5 units. B It will fall by 30 units. C It will rise by 5 units. D It will rise by 30 units.

Accepted Answer

C

Question 27

27 The diagram shows the current equilibrium of an economy. The government introduces a contractionary monetary policy. AS price level AD O output What is the most likely outcome? A a fall in investment and a fall in inflation B a fall in investment and a rise in inflation C a rise in investment and a fall in inflation D a rise in investment and a rise in inflation

Accepted Answer

A

Question 28

28 A government wishes to reduce the deficit on the secondary income section of its current account. Which policy would be most effective? A an increase in subsidies to exporters B an increase in the tariffs on imports C a reduction in the number of migrant workers allowed into the country D a reduction in overseas aid donations

Accepted Answer

D

Question 29

29 Supply-side policies can be used to correct cost-push inflation. Which policy would best achieve this aim in the long run? A allowing trade unions to maintain work practices irrespective of productivity B encouraging workers to work extra hours for extra pay C increasing total labour supply by employing more unskilled workers D supporting the replacement of labour-manned machines by the use of robots

Accepted Answer

D

Question 30

30 Economic growth leads to increased levels of income and consumption per capita for the adult population. Which circumstances are needed for this to happen in an economy? A a change in technology that maintains the same level of output B an increase in economic efficiency through higher productivity of factor inputs C a policy of progressive taxation to reduce inequalities D a rise in the size of the working population due to immigration

Accepted Answer

B

Cambridge A Level Economics 9708 — 2023 May/June Paper 1 · Variant 2

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · Which factor of production is needed first in order to set up a new business?

Q2 · Assuming nothing else changes, which change in an economy’s labour market will cause the…

Q3 · What is not a characteristic of a mixed economy?

Q4 · What is not likely to result from the use of division of labour?

Q5 · Price plays a number of functions in the allocation of resources

Q6 · Which pair of products are substitutes both in consumption and production?

Q7 · There is a worldwide shortage of oil

Q8 · The cross elasticity of demand between bus travel and rail travel is +2

Q9 · A change in the price of a good causes an increase in the quantity of the good demanded

Q10 · A specific tax is placed upon each bottle of perfume sold

Q11 · The diagram shows the supply curve of a firm

Q12 · The diagram shows the market for electric cars with X as the initial equilibrium

Q13 · What would cause a market disequilibrium?

Q14 · In the diagram, area OP1M1Q1 is equal to area OP2M2Q2

Q15 · The table shows changes in a consumer’s expenditure on various goods when her income…

Q16 · Which combination of government measures is most likely to increase the consumption of a…

Q17 · The table contains some figures from the balance of payments account of the United States…

Q18 · Which change is shown directly by the use of aggregate demand and aggregate supply…

Q19 · Why might aggregate demand increase when a country’s price level falls?

Q20 · What is used to convert nominal GDP to real GDP?

Q21 · The diagram shows a basic two-sector circular flow of income

Q22 · The table shows the types of unemployment and their possible solutions

Q23 · Which combination of policies would be most effective in reducing a balance of payments…

Q24 · If a country is experiencing a period of high inflation, which groups will benefit the…

Q25 · What will definitely change a country’s terms of trade?

Q26 · The world consists of two countries, M and N

Q27 · The diagram shows the current equilibrium of an economy

Q28 · A government wishes to reduce the deficit on the secondary income section of its current…

Q29 · Supply-side policies can be used to correct cost-push inflation

Q30 · Economic growth leads to increased levels of income and consumption per capita for the…

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