Cambridge A Level Economics 9708 — 2024 May/June Paper 3 · Variant 2

This document has 12 pages. Any blank pages are indicated. IB24 06_9708_32/3RP © UCLES 2024 [Turn over *8318944193* Cambridge International AS & A Level ECONOMICS 9708/32 Paper 3 A Level Multiple Choice May/June 2024 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 2024 9708/32/M/J/24 1 The table shows the total utility gained by a consumer from the consumption of water. quantity consumed / bottles total utility 0 0 1 30 2 40 3 48 4 54 5 58 What can be concluded from this table? A Marginal utility increases as consumption increases. B The consumer cannot switch expenditure to another product to increase total utility. C The marginal utility of the 3rd unit is 8. D The marginal utility of the 5th unit is 2. 2 A consumer has $100 to spend on two products, X and Y. The budget line shows the different possible combinations of products X and Y that can be purchased when all the consumer’s income is spent. 20 10 0 0 product X product Y If the price of product Y increases to $10, what will be the maximum number of units of product X and product Y that the consumer can now purchase? product X product Y A 5 10 B 5 20 C 10 10 D 20 10

3 © UCLES 2024 9708/32/M/J/24 [Turn over 3 Which combination of costs and benefits will lead to an increase in net social costs? private benefits external benefits private costs external costs A falls falls no change no change B no change increases falls no change C no change increases falls falls D increases increases no change falls 4 A firm increases its output, starting from zero. How will this affect its short-run marginal cost (MC), average total cost (ATC) and average fixed cost (AFC)? MC ATC AFC A fall then rise fall then rise fall B fall then rise rise then fall rise C rise then fall fall then rise fall D rise then fall rise then fall rise 5 Assuming the absence of price controls, in which industry is an individual firm least likely to be able to alter the price at which it sells its product? A air transportation B hairdressing C steel production D wheat farming

4 © UCLES 2024 9708/32/M/J/24 6 A firm has the choice between five levels of output. The table shows the total cost and total revenue of producing at each output level. The firm could sell whatever output it produces. output units total cost $ total revenue $ 1000 8 000 10 000 2000 12 000 18 000 3000 19 000 24 000 4000 23 000 28 000 5000 25 000 25 000 The firm decides to produce 4000 units. What is the firm’s aim? A to maximise profit B to maximise sales C to maximise revenue D to minimise average costs 7 The diagram shows the costs and benefits of producing steel in a free market. cost, benefit X Y Z M N O output MSC MPC MPB = MSB T R S U Which area measures the deadweight loss of economic welfare? A RTS B RUS C TUS D YTUS

5 © UCLES 2024 9708/32/M/J/24 [Turn over 8 What is likely to make it more difficult for a small firm to survive? A increased preference on the part of consumers for distinctive non-standardised products B reductions in the rate of interest charged by commercial banks C the absence of effective barriers to the entry of potential competitors D the existence of decreasing returns to scale 9 A market structure in which a small number of firms face competition from potential entrants. What does this describe? A a contestable market B a monopoly C monopolistic competition D perfect competition 10 What is an example of backward vertical integration? A a bakery buying a wheat farm B a car manufacturer buying a car showroom C a vineyard buying an apple orchard D two rival supermarkets joining together 11 A government wants to introduce a policy that will reduce the pollution caused by the production of a good. Which policy would not make use of market forces? A a quota to limit the production of the good B a regulation to ban the production of the good C a tax on the production of the good D a tradable pollution permit system for producers of the good

6 © UCLES 2024 9708/32/M/J/24 12 The table shows the annual percentage change in the output per worker employed for four nationalised industries before and after privatisation. nationalised industry before privatisation % after privatisation % railways –4 2 electricity supply 7 9 shipbuilding 4 –1 telecommunications 6 6 What can be concluded about the effect of privatisation? A Employment fell in the railway industry. B Employment was unchanged in the telecommunications industry. C Output was greatest in the electricity supply industry. D Workers became less efficient in the shipbuilding industry. 13 Most workers in a country are employed in the manufacturing sector where they are paid a fixed wage rate per hour. What will lead to an increase in the net advantage of workers currently employed in the manufacturing sector? A a reduction in working hours available B a shift in the country’s economy to the service sector C a subsidised lunch is made available D an increase in the number of jobs available 14 When will a profit-maximising firm employ the optimum number of workers? A when the average revenue product of labour equals the average cost of hiring workers B when the marginal revenue product of labour equals the average cost of hiring workers C when the marginal revenue product of labour equals the marginal cost of hiring workers D when the marginal revenue product of labour equals the trade union supplied cost of workers

7 © UCLES 2024 9708/32/M/J/24 [Turn over 15 The diagram shows the labour market for farm workers in New Zealand. O wage rate F supply of labour demand for labour J G H K quantity of labour Which areas represent the economic rent and transfer earnings of the farm workers? economic rent transfer earnings A GFK GHOJ B GHOJ GJK C GJK GJF D GJK GHOJ 16 What is not a function of a commercial bank? A to help firms raise finance B to hold cash on deposit for firms C to lend money to households D to provide savings accounts 17 In 2020 in a country, the unemployment rate of the 16–64 age group seeking work was 4.0%. The employment rate for this group in the same period was 76.6%. What can be concluded from this? A 19.4% of the economy is working illegally. B 23.4% of the age group is economically inactive. C 80.6% of the age group is economically active. D The data is inaccurate.

8 © UCLES 2024 9708/32/M/J/24 18 Which statement relating to unemployment benefits provided by a government is not valid? A They allow firms to dismiss workers as unemployment benefits provide support to unemployed workers. B They force firms to raise wages to encourage workers to work rather than relying on unemployment benefits. C They provide a safety net to workers which might reduce their efforts to find a suitable job. D They increase government spending and force it to raise taxes. 19 Country X has a marginal propensity to consume (MPC) of 0.7. Its marginal propensity to save (MPS), marginal rate of taxation (MRT) and marginal propensity to import (MPM) are each 0.1. What is likely to lead to the biggest increase in the national income multiplier? A a 5% increase in the MPC together with a 5% fall in the MRT B a 5% increase in the MPM together with a 5% fall in the MRT C a 5% increase in the MPS together with a 5% fall in the MPM D a 5% increase in the MRT together with a 5% fall in the MPS 20 The diagrams show the performance of an economy using different measures. O services goods X O year real GDP X O real output price level X LRAS AD trend GDP If an economy is currently at point X on each diagram, what is the most likely conclusion that can be made based on this evidence? A Prices will increase significantly as the economy grows in the near future. B Supply-side policies would be the best option to encourage economic growth. C The economy is currently experiencing a deflationary gap. D There are shortages of skilled labour throughout the economy.

9 © UCLES 2024 9708/32/M/J/24 [Turn over 21 Which row correctly identifies the characteristics of an economy experiencing the liquidity trap? rate of economic growth rate of inflation rate of interest A high high low B low high low C low low low D low low high 22 Which combination of policies would be most likely to bring a country out of recession? A expansionary fiscal and monetary policy as well as supply-side policies B expansionary fiscal policy and tight monetary policy C tight fiscal and monetary policy D supply-side policies alone 23 The inflation rate in a country increased. Which effect would this most likely have on the country’s balance of payments? A an improvement in the current account balance B an increase in price competitiveness C an increase in export revenue D an increase in import expenditure 24 A government uses monetary policy and fiscal policy to solve a problem of deflation. Which policy combination is likely to be the most successful? monetary policy fiscal policy A increasing interest rates contractionary B increasing interest rates expansionary C reducing interest rates contractionary D reducing interest rates expansionary

10 © UCLES 2024 9708/32/M/J/24 25 The table shows indicators for the macroeconomies of two South American countries over one year. During this year, both governments attempted to reduce unemployment by expanding aggregate demand. country GDP % change current account balance % of GDP change in currency units against US dollar Argentina 17.9 1.7 –18.9 Chile 17.2 –1.8 –13.3 Based on the information given, what is the most likely reason why Argentina achieved a higher % change in the unemployment rate than Chile? A Argentina had a greater % change in GDP growth. B Chile’s performance on the current account balance was worse. C Each country had a weak exchange rate against the US dollar. D Wage increases in each country were linked to their respective rates of inflation. 26 A measure encourages consumers to change spending on imports to spending on domestically produced goods. What does this describe? A an expenditure-reducing policy B an expenditure-switching policy C the law of comparative advantage D the Marshall–Lerner condition 27 The macroeconomic objective of a government is to move the current account of the balance of payments from deficit to surplus. To achieve this, it devalues the currency. Under which condition would a devaluation of the currency achieve this objective? A if the combined price elasticity of demand for exports and imports is greater than 1 B if the combined price elasticity of demand for exports and imports is less than 1 C if the income elasticity of demand is less than 1 D if other countries decide to impose tariffs on all imported goods and services

11 © UCLES 2024 9708/32/M/J/24 28 A multinational company (MNC) buys a manufacturing firm in a developing country that produces goods for the developing country’s domestic consumers. The MNC then exports machinery and raw materials that it needs to the developing country. What is the most likely consequence of this foreign direct investment (FDI) by the MNC on the balance of payments of the developing country? current account financial account A improves improves B improves worsens C worsens improves D worsens worsens 29 The table gives information about the population of three countries in a given year. birth rate per 1000 death rate per 1000 infant mortality rate per 1000 % of population under 16 Singapore 12 4 5 18 Hong Kong 15 6 8 20 China 20 9 28 38 Which conclusion can be drawn about the countries in the table in that year? A China had the highest percentage of children who died in infancy. B People in Hong Kong lived the longest. C Singapore had the largest number of people aged over 16. D The population of Singapore was expected to fall in the next five years. 30 During a certain period, a country with a constant population expands its output per head. It also experiences a significant increase in river and atmospheric pollution. In the absence of any other changes, which measure would show a decrease in living standards? A Gross Domestic Product per head B Gross National Product per head C Human Development Index D Measure of Economic Welfare

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 Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge. © UCLES 2024 9708/32/M/J/24 BLANK PAGE

This document consists of 3 printed pages. © Cambridge University Press & Assessment 2024 [Turn over Cambridge International AS & A Level ECONOMICS 9708/32 Paper 3 Multiple Choice May/June 2024 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 May/June 2024 series for most Cambridge IGCSE, Cambridge International A and AS Level and Cambridge Pre-U components, and some Cambridge O Level components.

9708/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 2 of 3 Question Answer Marks 1 C 1 2 C 1 3 A 1 4 A 1 5 D 1 6 C 1 7 A 1 8 C 1 9 A 1 10 A 1 11 B 1 12 D 1 13 C 1 14 C 1 15 D 1 16 A 1 17 C 1 18 B 1 19 A 1 20 C 1 21 C 1 22 A 1 23 D 1 24 D 1 25 A 1 26 B 1 27 A 1 28 C 1

9708/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 3 of 3 Question Answer Marks 29 A 1 30 D 1