Methods and effects of government intervention in markets — Paper 3 · A Level Economics 9708

8 A product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit. Price elasticity of demand is 1.5 over the relevant range. The government imposes a tax of 10 %. What will be the government’s weekly tax revenue? A $15 B $85 C $100 D $150

1 marks

Answer: B

This question in 9708/31 May/June 2011

12 A government imposes a maximum price for electricity. Which statement justifying this measure might be considered valid on economic grounds? A It will encourage electricity suppliers to invest in additional capacity. B It will increase the incentive for consumers to conserve energy. C It will prevent the monopolistic exploitation of consumers. D It will prevent the rationing of electricity through power cuts.

1 marks

Answer: C

This question in 9708/31 May/June 2011

7 A product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit. Price elasticity of demand is 1.5 over the relevant range. The government imposes a tax of 10 %. What will be the government’s weekly tax revenue? A $15 B $85 C $100 D $150

1 marks

Answer: B

This question in 9708/33 May/June 2011

11 A government imposes a maximum price for electricity. Which statement justifying this measure might be considered valid on economic grounds? A It will encourage electricity suppliers to invest in additional capacity. B It will increase the incentive for consumers to conserve energy. C It will prevent the monopolistic exploitation of consumers. D It will prevent the rationing of electricity through power cuts.

1 marks

Answer: C

This question in 9708/33 May/June 2011

12 The Chinese government is increasing the role of market forces in its economy. However, in 2008 it imposed temporary maximum price controls on energy and transport. Why might a government, committed to reducing central planning, introduce price controls? A to increase allocative efficiency B to increase the incentive for producers to raise supply C to reduce consumer demand D to reduce expectations of inflation

1 marks

Answer: D

This question in 9708/31 Oct/Nov 2011

3 To prevent a surplus of milk, each milk producer is given a production quota which specifies the volume of milk he is allowed to supply. Initially the quotas are not tradable, but then trade in quotas is allowed. Who would gain or lose when trade in quotas takes place? purchasers of sellers of quotas quotas A gain gain B gain lose C lose gain D lose lose

1 marks

Answer: A

This question in 9708/32 Oct/Nov 2011

11 The Chinese government is increasing the role of market forces in its economy. However, in 2008 it imposed temporary maximum price controls on energy and transport. Why might a government, committed to reducing central planning, introduce price controls? A to increase allocative efficiency B to increase the incentive for producers to raise supply C to reduce consumer demand D to reduce expectations of inflation

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2011

14 In the diagram the imposition of a tax on a commodity causes its supply curve to shift from S1 to S2. D S2 S1 P2 J price P1 K N M O Q2 Q1 quantity Which area measures the resulting deadweight loss? A P1P2JK B JKQ1Q2 C JKM D JKN

1 marks

Answer: C

This question in 9708/31 May/June 2012

14 In the diagram the imposition of a tax on a commodity causes its supply curve to shift from S1 to S2. D S2 S1 P2 J price P1 K N M O Q2 Q1 quantity Which area measures the resulting deadweight loss? A P1P2JK B JKQ1Q2 C JKM D JKN

1 marks

Answer: C

This question in 9708/32 May/June 2012

7 What would be the effect of imposing a specific tax on each item produced by a profit maximising monopolist? A Average revenue falls by the amount of the tax. B Marginal costs rise by the amount of the tax. C Price increases by the amount of the tax. D There will be no change in price or output.

1 marks

Answer: B

This question in 9708/32 Oct/Nov 2012

16 The diagram shows the market supply and demand curves for corn. D S P2 P1 price O K L R output What should a government do if it is to maintain a minimum price of OP2? A buy quantity KR B buy quantity LR C sell quantity KL D sell quantity OL

1 marks

Answer: A

This question in 9708/32 May/June 2013

14 The table compares some of the properties of universal benefits and means tested benefits. Which pairing is correct? universal benefits means tested benefits A greater disincentive effects targeted at those most in need B higher take-up rate more expensive C more expensive greater disincentive effects D targeted at those most in need higher take-up rate

1 marks

Answer: C

This question in 9708/33 Oct/Nov 2013

12 In the diagram, MC and AC are a profit-maximising monopolist’s marginal and average cost curves, and MR and AR, its initial marginal and average revenue curves. AC MC cost, P revenue AR MR O J K L M output Which distance will measure excess demand if the government sets a maximum price of P? A JK B KL C KM D LM

1 marks

Answer: C

This question in 9708/33 Oct/Nov 2014

15 In the diagram, DD is the demand curve for an agricultural commodity, S1 is the supply curve in period 1 and S2 is the supply curve in period 2. The broken curve XY is a rectangular hyperbola. X S1 D S2 P1 price P2 D Y O J K L M quantity The government operates a buffer stock scheme designed to keep farm revenue unchanged. In period 1 the price is fixed at P1. What action will the government need to take in period 2 to fix the price at P2? A add quantity JK to the buffer stock B add quantity KL to the buffer stock C release quantity KL from the buffer stock D release quantity KM from the buffer stock

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2014

30 A government is increasing the role of market forces in its economy. However, it imposed temporary maximum price controls. Why might a government, committed to reducing central planning, introduce price controls? A to increase allocative efficiency B to increase the incentive for producers to raise supply C to reduce consumer demand D to reduce expectations of inflation

1 marks

Answer: D

This question in 9708/31 May/June 2021

15 To control the cost of living, governments have sometimes imposed a maximum price on certain goods that is below the free market price. What is often an undesirable side effect of such a policy? A accelerating general inflation B an increase in profits above normal profits C an increase in the stocks of unsold goods held by firms D shortages of the good

1 marks

Answer: D

This question in 9708/33 Oct/Nov 2023

11 A government introduced a tax on soft drinks containing sugar. It was forecast that the tax would raise £520m per year for the government. However, the tax received was £240m. What is the most likely reason why the tax collected was lower than forecast? A a specific tax instead of an ad valorem tax was introduced B fewer drinks than originally forecast contained sugar C most retailers did not increase the price of soft drinks D the demand for soft drinks was price inelastic

1 marks

Answer: B

This question in 9708/32 Feb/March 2025