Economics 9708/32 May/June 2024: question paper and mark scheme

Question

The table shows the total utility gained by a consumer from the consumption of water. quantity total consumed utility / bottles 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.

Question

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. 10 product X 0 0 20 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

Question

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

Question

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

Question

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

Question

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 total cost total revenue units $ $ 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

Question

The diagram shows the costs and benefits of producing steel in a free market. MSC cost, benefit MPC R X T Y Z U S MPB = MSB O M N output Which area measures the deadweight loss of economic welfare? A RTS B RUS C TUS D YTUS

Question

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

Question

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

Question

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

Question

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

Question

The table shows the annual percentage change in the output per worker employed for four nationalised industries before and after privatisation. before after nationalised privatisation privatisation industry % % 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.

Question

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

Question

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

Question

The diagram shows the labour market for farm workers in New Zealand. wage supply of rate F labour G K J demand for labour O H quantity of labour Which areas represent the economic rent and transfer earnings of the farm workers? economic transfer rent earnings A GFK GHOJ B GHOJ GJK C GJK GJF D GJK GHOJ

Question

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

Question

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.

Question

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.

Question

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

Question

The diagrams show the performance of an economy using different measures. LRAS trend GDP goods price real level GDP X X AD O services O X O year real output 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.

Question

Which row correctly identifies the characteristics of an economy experiencing the liquidity trap? rate of rate of rate of economic inflation interest growth A high high low B low high low C low low low D low low high

Question

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

Question

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

Question

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

Question

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. current account change in GDP country balance currency units % change % of GDP 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.

Question

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

Question

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

Question

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

Question

The table gives information about the population of three countries in a given year. birth rate death rate infant mortality % of population per 1000 per 1000 rate per 1000 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.

Question

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