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

This document has 12 pages. 06_9708_33_2025_1.0 © UCLES 2025 [Turn over *2590003831* Cambridge International AS & A Level ECONOMICS 9708/33 Paper 3 A Level Multiple Choice May/June 2025 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.

What is the equi-marginal principle? 1 As consumption of a product increases, the satisfaction from consumption of the product decreases by an equal amount. A Consumers maximise utility where their marginal valuation for each product consumed is the same. B The total satisfaction received by consumers from consumption of a product is constant. C The marginal utility derived by consumers from the consumption of one more unit of a product is constant. D The diagram shows the cost and revenue curves for a natural monopoly. 2 price quantity O P1 P2 P3 Q1 Q2 Q3 AC MC AR MR Which statement is correct? P2 and Q2 will achieve both allocative efficiency and productive efficiency. A P2 and Q1 will achieve productive efficiency but not allocative efficiency. B P3 and Q3 will achieve allocative efficiency but not productive efficiency. C P3 and Q3 will achieve both allocative efficiency and productive efficiency. D What would not affect the budget line of an individual consumer? 3 the individual’s preference for various goods A the level of income tax B the money prices of goods C the incomes earned by the individual D 06_9708_33_2025_1.0 © UCLES 2025 2

The diagram shows the marginal private costs (MPC) and marginal private benefits (MPB) of a product. Consumers initially estimate that marginal private costs are at MPC1 and marginal private benefits are at MPB1. 4 MPB2 MPC2 MPB1 O MPC1 P3 P2 Q2 Q3 Q4 Q1 P1 P4 $ quantity What is the impact on the market demand for the product if the consumer realises they have underestimated the MPC of buying the product but not the MPB? The consumer underconsumes the product by Q1Q2. A The consumer underconsumes the product by Q1Q3. B The consumer overconsumes the product by Q1Q3. C The consumer overconsumes the product by Q1Q4. D What is an internal economy of scale? 5 efficient local transport networks A improved access to spare parts as a result of industry growth B lower risks from supplying a wider range of customers C the training of skilled labour at a college financed by local firms D [Turn over 06_9708_33_2025_1.0 © UCLES 2025 3

The diagram shows the costs and revenue for a monopoly. Which level of output would produce only a normal profit? 6 $ O MC AC AR MR A B C D B quantity Which combination of statements about small firms and large firms is most likely to be correct? 7 large firms small firms face high barriers to exit are more common in manufacturing than in services A do not experience diseconomies of scale are more numerous than large firms B may arise from internal growth or mergers can do well when each item produced is different C cannot earn supernormal profits cannot have any monopoly power D 06_9708_33_2025_1.0 © UCLES 2025 4

Good X is a popular product that creates a negative externality when it is consumed. The government wants to reduce the consumption of good X significantly. Under which circumstances is the government most likely to meet its aim? 8 price elasticity of demand for good X government policy more than 1 subsidy A less than 1 subsidy B more than 1 indirect tax C less than 1 indirect tax D A government introduces tradeable pollution permits to reduce pollution. What is an advantage of this scheme? 9 It allows consumers to determine the optimum pollution level. A It can provide rewards for firms that reduce pollution. B It enables the government to raise revenue from the resale of permits. C It uses the market system with no administrative costs. D To reduce traffic congestion, a government built a new highway. A majority of the citizens were opposed to this. Some citizens responded by switching from public transport to private cars. This caused car journeys to take even longer. What can be concluded about government failure in this case? 10 It occurred because the government‘s opportunity costs were not considered. A It occurred because the wishes of the majority of citizens were ignored. B It occurred because the result was unintended. C It occurred from over-reliance on the market system. D What could result in an individual being caught in the poverty trap if their income increases? 11 national minimum wage is changed A benefits payments are means-tested B subsidised housing payments for low-income earners are increased C the income level at which income tax is first paid is increased D [Turn over 06_9708_33_2025_1.0 © UCLES 2025 5

The diagram shows the impact on the labour market of the introduction of a national minimum wage (MW). 12 wage rate MW X Y Z supply demand labour O What do the distances XY and YZ represent? YZ XY existing workers made redundant increase in employed workers A unemployed new entrants existing workers made redundant B increase in employed workers existing workers made redundant C existing workers made redundant unemployed new entrants D 13 What is an example of ‘nudge’ theory as applied to the prevention of tax evasion? employing an extensive administration to ensure detection of evasion A imposing heavy penalties on those who do evade tax B providing information to taxpayers about the undesirable effects of tax evasion C requiring employers to inform the tax authorities of workers’ pay D 06_9708_33_2025_1.0 © UCLES 2025 6

The diagrams show the demand for and supply of labour. 14 quantity of labour O wage rate S D quantity of labour O wage rate S D quantity of labour O wage rate S D 1 2 3 4 Which two areas represent economic rent? 2 and 4 D 2 and 3 C 1 and 4 B 1 and 3 A In an economy with no government sector or foreign trade, the marginal propensity to consume is 0.6. If the equilibrium level of national income is $10000 million and the full employment level of national income is $15000 million, by how much would investment have to increase to achieve full employment? 15 $1666 million A $2000 million B $3012 million C $5000 million D What is a definition of hysteresis unemployment? 16 A B C people who become temporarily unemployed because it takes a short period of time to find a job after they leave school people who become unemployed when there is a recession but who will find employment as the economy comes out of recession people who become unemployed for a long period of time due to a loss of job skills and work experience while unemployed people who become unemployed when established firms close and new firms are created as technology advances D [Turn over 06_9708_33_2025_1.0 © UCLES 2025 7

An economy has a positive output gap. What is happening to economic growth and the general price level? 17 general price level economic growth falling above trend growth rate A rising above trend growth rate B falling below trend growth rate C rising below trend growth rate D What is a factor affecting the occupational mobility of labour? 18 education and training A immigration controls B price of housing C transport infrastructure D A country’s government decides to set artificially low interest rates. What describes a negative consequence to this country of this policy? 19 a higher rate of consumer price inflation A a rapid growth in gross domestic product B an increase in investment by manufacturers and real estate developers C a reduction in borrowing by consumers D According to the quantity theory of money, which combination would result in the general level of prices remaining unchanged? 20 velocity of circulation total number of transactions money supply rises by 3% remains unchanged remains unchanged A rises by 3% remains unchanged rises by 3% B remains unchanged rises by 3% rises by 3% C rises by 3% rises by 3% rises by 3% D 06_9708_33_2025_1.0 © UCLES 2025 8

A government increases its inflation rate target from 3% to 5%. What is a likely reason for this? 21 to increase economic sustainability A to increase saving B to reduce a balance of payments deficit C to reduce unemployment D What would be a macroeconomic policy objective for a government in a developed economy? 22 to improve sustainability A to provide public goods B to reduce the power of trade unions C to subsidise the electricity supply industry D An economy is at its natural rate of unemployment. Under which circumstances will an increase in government spending aimed at reducing unemployment be most likely to conflict with a government’s objective of low inflation? 23 if inflationary expectations are unchanged A if inflationary expectations fall B if labour productivity increases C if labour supply increases D An economy imports a large proportion of its raw materials. Its exchange rate depreciates. What is the impact on the external and internal value of money? 24 internal value of money external value of money rises rises A falls rises B rises falls C falls falls D [Turn over 06_9708_33_2025_1.0 © UCLES 2025 9

A country’s government imposes a tariff on steel imports. What is the likely impact of this tariff on this country’s economy? 25 It will make this country’s steel exports more price competitive. A It will lead to productive inefficiency in this country’s steel industry. B There will be an improvement in this country’s terms of trade. C There will be a decrease in producer surplus for this country’s steel producers. D Which measurement is not included in the calculation of the Human Development Index? 26 average years of schooling A Gross National Income per capita B infant mortality rate C life expectancy at birth D 06_9708_33_2025_1.0 © UCLES 2025 10

The diagram shows the impact of a revaluation of a country’s exchange rate on the current account of the balance of payments. 27 O current account of the balance of payments time The table gives the price elasticity of demand for imports, PEDM, and the price elasticity of demand for exports, PEDX, in both the short run and the long run. Which combination of short run and long run elasticities will give the shape shown in the diagram? long run short run PEDX PEDM PEDX PEDM 0.4 0.4 0.2 0.2 A 0.8 0.8 0.4 0.4 B 1.2 1.2 0.8 0.8 C 1.6 1.6 1.2 1.2 D What is not a function of the International Monetary Fund (IMF)? 28 to encourage exchange rate stability A to provide financial assistance for a country with failed economic policies B to provide funds for a water purifying plant in a developing country C to provide loans for countries following a natural disaster D [Turn over 06_9708_33_2025_1.0 © UCLES 2025 11

The diagram shows the effect of trade creation if a tariff is removed. 29 O P1 P2 Q4 Q2 Q1 Q3 domestic demand domestic supply world supply (with tariff) world supply (without tariff) price quantity v w x y Which areas show the total net gain to the domestic economy? v, w, x and y A v, w and x only B w and x only C w and y only D What is most likely to prevent a developing country from achieving economic development? 30 increased allocation of resources to production of goods that have a high income elasticity of demand A increased government legislation for the protection of employment B increased tax allowances on firms investing in research and development C the decision of developed countries to increase quotas for goods produced by developing countries D 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 2025 06_9708_33_2025_1.0

This document consists of 3 printed pages. © Cambridge University Press & Assessment 2025 [Turn over Cambridge International AS & A Level ECONOMICS 9708/33 Paper 3 A Level Multiple Choice May/June 2025 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 2025 series for most Cambridge IGCSE, Cambridge International A and AS Level components, and some Cambridge O Level components.

9708/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2025 © Cambridge University Press & Assessment 2025 Page 2 of 3 Question Answer Marks 1 B 1 2 C 1 3 A 1 4 C 1 5 C 1 6 D 1 7 C 1 8 C 1 9 B 1 10 C 1 11 B 1 12 B 1 13 C 1 14 B 1 15 B 1 16 C 1 17 B 1 18 A 1 19 A 1 20 C 1 21 D 1 22 A 1 23 A 1 24 D 1 25 B 1 26 C 1 27 B 1 28 C 1

9708/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2025 © Cambridge University Press & Assessment 2025 Page 3 of 3 Question Answer Marks 29 D 1 30 B 1