Cambridge A Level Economics 9708 — 2025 May/June Paper 1 · Variant 3

Question 1

1 A tourist visits a government-owned tropical beach. She pays $10 to enter but finds it overcrowded. Which type of good is the beach? A a free good B an inferior good C a public good D a private good

Accepted Answer

D

Question 2

2 The diagram shows a country’s production possibilities. Points K, L, M, N, R and S represent different combinations of capital goods and consumer goods. Point K cannot be achieved unless there is economic growth. Point M lies on the country’s production possibility curve. K consumer L M N goods S R O capital goods Which two points must be on opposite sides of the country’s production possibility curve? A K and N B L and R C N and R D R and S

Accepted Answer

C

Question 3

3 A firm produces 100 units of good Y and 200 units of good X with a fixed amount of resources. This firm wants to increase production of good Y to 120 units and as a result it can now only produce 170 units of good X. What is the opportunity cost of producing the extra 20 units of good Y? A 20 units of good X B 30 units of good X C 120 units of good X D 170 units of good X

Accepted Answer

B

Question 4

4 What is the most likely benefit of specialisation to a firm? A increase in motivation of employees B increase in imports from other countries C increase in the number of employees D increase in the level of output

Accepted Answer

D

Question 5

5 Which row correctly identifies goods that would be expected to be produced in a mixed economy? goods that are goods that are goods that have private excludable and rival non-excludable and and external benefits in consumption non-rival in consumption A ✓ ✓ ✓ B ✓ ✓ ✗ C ✓ ✗ ✓ D ✗ ✗ ✓

Accepted Answer

A

Question 6

6 A theatre has a fixed number of tickets to sell for each performance. What is the price elasticity of supply? A perfectly elastic B perfectly inelastic C unit elastic and negative D unit elastic and positive

Accepted Answer

B

Question 7

7 The diagram shows the market for computers in a country. W supply price Y X demand O Z quantity Which area represents consumer surplus? A WYX B XYO C WYO D OYZ

Accepted Answer

A

Question 8

8 The diagram shows the market demand for and supply of foodstuffs for an economy. This economy has faced a decrease in the supply of foodstuffs and, at the same time, an increase in demand for foodstuffs by consumers. Which point represents the market equilibrium following these changes? price S2 S1 B A C D D2 D1 O quantity

Accepted Answer

B

Question 9

9 What is true for income elasticity of demand but not for price elasticity of demand? A It helps firms differentiate between goods with elastic and inelastic demand. B It helps firms differentiate between normal and inferior goods. C It helps firms predict the changes in the quantity demanded. D It helps firms predict the changes in sales revenues.

Accepted Answer

B

Question 10

10 The table shows the supply and demand for avocados in kilograms (kg). price per quantity demanded quantity supplied kg ($) per day (kg) per day (kg) 45 170 230 40 190 190 35 210 150 30 230 110 As a result of lower transport costs, supply rises by 60kg at all prices. What is the new equilibrium price? A $45 B $40 C $35 D $30

Accepted Answer

C

Question 11

11 A construction firm estimates that the price elasticity of supply in building a nuclear power plant is +0.1. What might explain this? A The firm can easily find new land as required. B The firm is competing with many other construction firms. C The firm needs time to hire the highly skilled labour required. D There is a lack of close substitutes for nuclear power.

Accepted Answer

C

Question 12

12 Which statement about maximum and minimum prices is correct? A With an effective maximum price for a product, a shortage will develop. B With an effective maximum price for a product, the market price will rise. C With an effective minimum price for a product, rationing will be necessary. D With an effective minimum price for a product, the market price will fall.

Accepted Answer

A

Question 13

13 A flood-control dam is an example of a good provided directly by a government. Which statement relating to the direct provision of a flood-control dam is not correct? A It allows the government to tackle the failure to provide public goods. B It forces the government to incur an opportunity cost. C It involves the supply of a merit good. D It is an example of government allocation of resources.

Accepted Answer

C

Question 14

14 A country depends heavily on the production of an agricultural product, good X. It decides to introduce a buffer stock scheme for good X. The government allocates a fixed amount of money for setting up and running the scheme. In which situation is the scheme least likely to run out of money? ability of new cost of storing global demand farmers to start good X for good X growing good X A easy high constant B easy low rising C difficult high constant D difficult low rising

Accepted Answer

D

Question 15

15 The graph shows an individual’s income before and after the deduction of income tax. 45° 175 income after tax ($) 100 0 0 100 200 income before tax ($) Which change to this income tax system is most progressive? A B 45° 45° 175 175 income income 150 after tax after tax ($) ($) 100 100 50 0 0 0 100 150 200 0 50 100 200 income income before tax ($) before tax ($) C D 45° 45° 175 175 income income after tax after tax ($) ($) 100 100 50 0 0 0 50 100 200 0 100 200 income income before tax ($) before tax ($)

Accepted Answer

C

Question 16

16 Which source of income is not included in measuring real GDP? A pension paid to retired people B profits made by firms C rent paid to landlords D wages paid to nurses

Accepted Answer

A

Question 17

17 The table shows some labour market statistics. million number of people of working age 45 number of people unemployed 2 number of people in the labour force 40 number of people in the population 80 What is the unemployment rate? A 2.5% B 5% C 6.25% D 12.5%

Accepted Answer

B

Question 18

18 The diagram shows aggregate demand (AD) and aggregate supply (AS) where the initial equilibrium is at point X. The central bank forecasts a rise in raw material costs. The government plans to increase spending on health. What would be the new equilibrium in the short run if the forecasts prove to be accurate and the government plans are implemented? AS1 general AS2 C AS price level D X B A AD AD2 AD1 O real output

Accepted Answer

C

Question 19

19 An economy is experiencing a period of deflation. What must be happening? A The average price level is falling. B The output of the economy is falling. C The rate of inflation is falling. D The real value of money is falling.

Accepted Answer

A

Question 20

20 What is the most likely consequence of economic growth? A a fall in the price of raw materials B a rise in youth unemployment C a worsening current account balance D reduced demand-pull inflationary pressures

Accepted Answer

C

Question 21

21 A government wants to operate a tighter monetary policy. What would it increase? A budget surplus B interest rate C money supply D rates of taxation

Accepted Answer

B

Question 22

22 Which action is classified as a fiscal policy measure? A fixing a currency to another country’s currency B tightening credit regulations on banks C providing guidance to industry and the public D managing changes in the level of government debt

Accepted Answer

D

Question 23

23 The table shows government spending and revenue over a three-year period. government government year spending revenue ($bn) ($bn) 1 90 100 2 110 110 3 130 115 What can be concluded from the data? A A budget surplus becomes a budget deficit in year 3. B National debt is likely to be falling by the end of year 3. C The current account balance is in equilibrium in year 2. D The economy is at full employment equilibrium in year 2.

Accepted Answer

A

Question 24

24 Which statement about supply-side policies is correct? A They solve the problem of demand deficient unemployment. B They do not involve an opportunity cost. C They reduce unemployment but do not affect the price level. D They may reduce regional unemployment.

Accepted Answer

D

Question 25

25 A government has a target to reduce the rate of inflation. Why might it not want to raise interest rates to achieve this target? A aggregate demand may fall B aggregate supply may fall C saving may fall D the exchange rate may fall

Accepted Answer

B

Question 26

26 Which argument in favour of protectionism is not generally regarded as economically valid? A Once the protected industry becomes established, it will produce efficiently. B It prevents heavily subsidised imports from competing unfairly against domestic goods. C It provides time for the protected industry’s workers to be retrained for other work. D It increases the standard of living of the population in general.

Accepted Answer

D

Question 27

27 A country has a deficit on the current account of the balance of payments. What would be expected to increase the deficit? A an appreciation of the exchange rate B an increase in domestic productivity C an introduction of import quotas D a rise in subsidies to domestic firms

Accepted Answer

A

Question 28

28 A government increases the import quota of cars. What is the likely effect of this? A jobs will be created in the domestic car industry B prices of cars will fall for domestic consumers C specialisation is reduced D trading partners will retaliate

Accepted Answer

B

Question 29

29 The table gives the terms of trade index for a country over three years. year 1 year 2 year 3 terms of trade 100 105 112 What is the most likely impact of this change? A there will be a decrease in cost-push inflation B there will be a decrease in living standards C there will be an increase in the budget surplus D there will be an increase in the volume of exports

Accepted Answer

A

Question 30

30 Country X and country Y use the same amount of resources to produce mobile phones and televisions. The table shows how much of each product can be produced if all resources are used to produce that product. mobile phones televisions country X 500 400 country Y 100 200 What can be deduced about absolute advantage and comparative advantage? Country X has an absolute advantage in producing mobile phones and a comparative advantage A in producing televisions. Country X has an absolute advantage in producing televisions and a comparative advantage in B producing mobile phones. Country Y has an absolute advantage in producing mobile phones and a comparative advantage C in producing televisions. Country Y has an absolute advantage in producing televisions and a comparative advantage in D producing mobile phones.

Accepted Answer

B

Cambridge A Level Economics 9708 — 2025 May/June Paper 1 · Variant 3

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · A tourist visits a government-owned tropical beach

Q2 · The diagram shows a country’s production possibilities

Q3 · A firm produces 100 units of good Y and 200 units of good X with a fixed amount of…

Q4 · What is the most likely benefit of specialisation to a firm?

Q5 · Which row correctly identifies goods that would be expected to be produced in a mixed…

Q6 · A theatre has a fixed number of tickets to sell for each performance

Q7 · The diagram shows the market for computers in a country

Q8 · The diagram shows the market demand for and supply of foodstuffs for an economy

Q9 · What is true for income elasticity of demand but not for price elasticity of demand?

Q10 · The table shows the supply and demand for avocados in kilograms (kg)

Q11 · A construction firm estimates that the price elasticity of supply in building a nuclear…

Q12 · Which statement about maximum and minimum prices is correct?

Q13 · A flood-control dam is an example of a good provided directly by a government

Q14 · A country depends heavily on the production of an agricultural product, good X

Q15 · The graph shows an individual’s income before and after the deduction of income tax

Q16 · Which source of income is not included in measuring real GDP?

Q17 · The table shows some labour market statistics

Q18 · The diagram shows aggregate demand (AD) and aggregate supply (AS) where the initial…

Q19 · An economy is experiencing a period of deflation

Q20 · What is the most likely consequence of economic growth?

Q21 · A government wants to operate a tighter monetary policy

Q22 · Which action is classified as a fiscal policy measure?

Q23 · The table shows government spending and revenue over a three-year period

Q24 · Which statement about supply-side policies is correct?

Q25 · A government has a target to reduce the rate of inflation

Q26 · Which argument in favour of protectionism is not generally regarded as economically valid?

Q27 · A country has a deficit on the current account of the balance of payments

Q28 · A government increases the import quota of cars

Q29 · The table gives the terms of trade index for a country over three years

Q30 · Country X and country Y use the same amount of resources to produce mobile phones and…

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