Cambridge A Level Economics 9708 — 2023 May/June Paper 1 · Variant 3

Question 1

1 People plant flowers in a local park. Which statement is correct? A Flowers in parks are a public good because people can enjoy them at no charge. B Flowers in parks are a public good because they are owned by local people and are not for profit. C Flowers in parks are not a public good if local people can limit the number of visitors to the parks. D Flowers in parks are not a public good if they are individual, not identical, in nature.

Accepted Answer

C

Question 2

2 A government decides that all non-essential businesses must close for three months due to a disease pandemic. What is an opportunity cost of this policy? A increased leisure time for employees B lives that are saved due to reduced disease levels C the production of goods by essential businesses D the loss of goods from the closed businesses

Accepted Answer

D

Question 3

3 The diagram shows an economy’s production possibility curve. The economy produces combinations of goods and services using all available resources. services O goods What does the production possibility curve indicate for goods and services? A constant returns to scale in the production of both goods and services B diminishing returns to scale in the production of both goods and services C increasing returns to scale in the production of both goods and services D infinite returns to scale in the production of both goods and services

Accepted Answer

A

Question 4

4 Which economic conditions are likely to encourage an increase in enterprise? consumer interest rates profit tax unemployment confidence A high high high high B high low low high C low low high low D low low low low

Accepted Answer

C

Question 5

5 When is the price elasticity of demand for a product most likely to be price elastic? A A large percentage of income is spent on the product. B It is measured in the short run. C It is a necessity product. D There are few substitutes available.

Accepted Answer

A

Question 6

6 What is most likely to cause a shift in the supply curve for rice? A a change in the price of the rice B a change in the price of meat C a change in the size of the rice industry D a change in tastes and preferences for rice

Accepted Answer

C

Question 7

7 A free market is in disequilibrium with a shortage of a product. As the market moves towards equilibrium, what will happen to the price, the quantity demanded and the quantity supplied? quantity quantity price demanded supplied A decrease decrease increase B decrease increase decrease C increase decrease increase D increase increase decrease

Accepted Answer

C

Question 8

8 What would not cause a shift in the demand curve for a good? A a change in the price of a complement B a change in the price of a substitute C a change in the price of the good itself D a change in consumers’ incomes

Accepted Answer

C

Question 9

9 What does joint supply mean? A A firm can choose between producing a range of different goods. B A good has multiple uses. C A good is a by-product of the production process of another good. D Consumers consider two goods as complements.

Accepted Answer

C

Question 10

10 When the price of a firm’s product falls by 5%, its total revenue also falls by 5%. What describes the product’s price elasticity of demand? A elastic B infinite C unitary D zero

Accepted Answer

D

Question 11

11 The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income biscuits coffee ($) (packs) (cups) 100 0 5 150 5 10 Which statement about the income elasticity of demand over the range of income shown is correct? A For biscuits it is greater than 1. B For biscuits it is zero. C For coffee it is less than 1. D For coffee it is unitary.

Accepted Answer

A

Question 12

12 The diagram shows four supply curves. W X price Y Z O quantity Which statement about the price elasticity of these supply curves is correct? A W has elasticity of 0 that will rise as price rises. B X has elasticity greater than 1 that will be constant as price rises. C Y has elasticity greater than 1 that will fall as price rises. D Z has elasticity of 0 that is constant as quantity rises.

Accepted Answer

C

Question 13

13 Product X has a price elasticity of supply (PES) of +2, whilst product Y has a PES of +0.2. Which statement about products X and Y is correct? A X has more substitutes than Y. B A 20% price fall would lead to a greater decrease in production of Y than of X. C After a price rise, it is more difficult to increase Y’s output than X’s. D After a price fall of 10%, more people would buy X than would buy Y.

Accepted Answer

C

Question 14

14 There are 10 000 tickets available to watch a sports final at a national stadium. The initial market equilibrium ticket price is $20. The government decides to fix an effective minimum price for the tickets. Under which conditions will the consumer surplus for the tickets decrease the most as a result of the minimum price? minimum price elasticity price level of demand $ for tickets A 18 –0.5 B 18 –1.5 C 22 –0.5 D 22 –1.5

Accepted Answer

C

Question 15

15 The diagram shows the impact of a government imposing a unit tax on a demerit good. S is the supply curve before the tax and S1 is the supply curve after the tax. price $ S1 S 50 40 30 20 D 0 0 5 10 quantity What is the after-tax revenue of the firm producing the demerit good? A $100 B $200 C $300 D $500

Accepted Answer

A

Question 16

16 A government has a policy aim of reducing income inequality. It considers three policies. Which combination of policies would be most effective? a subsidy on an increase in the an increase in the battery-powered marginal rate of tax minimum wage cars which cost from 40% to 50% over $40 000 A yes no no B yes yes no C yes no yes D no yes no

Accepted Answer

B

Question 17

17 A Bangladeshi citizen is employed as a construction worker in Qatar. He sends some of his wages to his family in Bangladesh. How will this be recorded on Qatar’s balance of payments? A as part of the balance of trade in services B as part of net primary income C as part of net secondary income D as part of the financial account

Accepted Answer

B

Question 18

18 The table gives data for an economy. 2010 2011 2012 2013 2014 Gross Domestic Product (GDP) 200 220 240 300 320 at current prices ($ billion) GDP deflator (price index) 100 109 125 149 154 In which year did real GDP decline compared with the previous year? A 2011 B 2012 C 2013 D 2014

Accepted Answer

B

Question 19

19 Which policy is most likely to help to correct an adverse balance on the current account of the balance of payments? A abolishing tariffs B depreciating the currency C reducing direct taxes D reducing indirect taxes

Accepted Answer

B

Question 20

20 In year 1, a country’s real GDP was $500 billion. In year 2, nominal GDP rose to $577.5 billion and the prices increased by 5%. What is the real GDP in year 2? A $4.76 billion B $5 billion C $476 billion D $550 billion

Accepted Answer

D

Question 21

21 The table gives details of national income statistics for an economy. US$bn consumption 2000 investment 500 government expenditure 600 net exports –100 net foreign factor income –200 depreciation 100 What is the net national income for this economy? A US$2700bn B US$2800bn C US$2900bn D US$3000bn

Accepted Answer

A

Question 22

22 The table shows the relative price of exports compared with imports expressed as an index number for an economy (2013 = 100). date index 2013 100 2014 97 2015 95 Which statement about the period 2013–2015 is correct? A Export prices have increased each year. B The general level of prices has fallen. C The terms of trade have deteriorated. D The volume of imports increasingly exceeds the volume of exports.

Accepted Answer

C

Question 23

23 Country X and country Y each allocate half of their resources towards the manufacturing of shoes, and the other half towards the manufacturing of t-shirts. Resources can be used equally effectively in the production of both products in both countries. The table shows the output of shoes and t-shirts produced by both countries using half their resources in each case, before specialisation. country shoes t-shirts X 4 000 12 000 Y 2 000 8 000 total 6 000 20 000 What can be concluded from the data? A The opportunity cost of country Y producing two shoes is four t-shirts. B The opportunity cost of country X producing one t-shirt is four shoes. C The total output of shoes and t-shirts after specialisation would be 24 000. D The total output of shoes and t-shirts after specialisation would be 28 000.

Accepted Answer

C

Question 24

24 Which government action is least likely to prevent a fall in economic growth? A additional controls on commercial banks’ lending B relaxation of rules for immigration of adult population C removal of trade barriers on import of raw materials D training and education of workforce

Accepted Answer

A

Question 25

25 What is the most likely cause of an outward shift of a country’s aggregate demand curve? A a decrease in the competitiveness of domestically produced products B a decrease in the general price level C a decrease in the money supply D a depreciation of the country’s exchange rate

Accepted Answer

D

Question 26

26 The diagram shows the macroeconomic equilibrium output and price level changing from Y and P to Y1 and P1. LRAS price level P P1 AD AD1 O Y1 Y real output What could have caused this change? A a decrease in exports B a decrease in labour productivity C an increase in the government’s spending D an increase in the money supply

Accepted Answer

A

Question 27

27 A country had a current account surplus of $141bn. Which policy may its government implement to reduce this surplus in the short run? A a decrease in direct taxes B a decrease in regulations to encourage more foreign firms to locate in this country C an increase of import duties D an increase in interest rates

Accepted Answer

A

Question 28

28 The diagram shows aggregate demand (AD) and aggregate supply in the short run (SRAS) and the long run (LRAS). LRAS LRAS1 price level W SRAS SRAS1 Y AD O real GDP Which row is correct in causing a shift in the short run aggregate supply from SRAS to SRAS1 and the long run aggregate supply from LRAS to LRAS1? shift from SRAS to SRAS1 shift from LRAS to LRAS1 A change in AD from W to Y increase in population B decrease in raw material costs improvements in the education of workers C decrease in wage rates decrease in immigration D increase in availability of labour increase in labour productivity

Accepted Answer

B

Question 29

29 The diagram shows that the imposition of a tariff raises a product’s world price from $10 to $14. domestic supply price $ 14 10 domestic demand 0 0 20 30 70 100 quantity (millions) By how much did domestic producers’ income increase as a result of the tariff? A $120 million B $160 million C $220 million D $280 million

Accepted Answer

C

Question 30

30 Which approach would a government be most likely to use to eliminate deflation? A an increase in direct taxes B an increase in interest rates C a reduction in indirect taxes D a reduction in its budget surplus

Accepted Answer

D

Cambridge A Level Economics 9708 — 2023 May/June Paper 1 · Variant 3

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · People plant flowers in a local park

Q2 · A government decides that all non-essential businesses must close for three months due to…

Q3 · The diagram shows an economy’s production possibility curve

Q4 · Which economic conditions are likely to encourage an increase in enterprise?

Q5 · When is the price elasticity of demand for a product most likely to be price elastic?

Q6 · What is most likely to cause a shift in the supply curve for rice?

Q7 · A free market is in disequilibrium with a shortage of a product

Q8 · What would not cause a shift in the demand curve for a good?

Q9 · What does joint supply mean?

Q10 · When the price of a firm’s product falls by 5%, its total revenue also falls by 5%

Q11 · The table shows how an individual’s weekly consumption of biscuits and coffee varies with…

Q12 · The diagram shows four supply curves

Q13 · Product X has a price elasticity of supply (PES) of +2, whilst product Y has a PES of +0.2

Q14 · There are 10 000 tickets available to watch a sports final at a national stadium

Q15 · The diagram shows the impact of a government imposing a unit tax on a demerit good

Q16 · A government has a policy aim of reducing income inequality

Q17 · A Bangladeshi citizen is employed as a construction worker in Qatar

Q18 · The table gives data for an economy

Q19 · Which policy is most likely to help to correct an adverse balance on the current account…

Q20 · In year 1, a country’s real GDP was $500 billion

Q21 · The table gives details of national income statistics for an economy

Q22 · The table shows the relative price of exports compared with imports expressed as an index…

Q23 · Country X and country Y each allocate half of their resources towards the manufacturing…

Q24 · Which government action is least likely to prevent a fall in economic growth?

Q25 · What is the most likely cause of an outward shift of a country’s aggregate demand curve?

Q26 · The diagram shows the macroeconomic equilibrium output and price level changing from Y…

Q27 · A country had a current account surplus of $141bn

Q28 · The diagram shows aggregate demand (AD) and aggregate supply in the short run (SRAS) and…

Q29 · The diagram shows that the imposition of a tariff raises a product’s world price from $10…

Q30 · Which approach would a government be most likely to use to eliminate deflation?

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