Economics 9708/12 October/November 2022: question paper and mark scheme

Question

What is a function of money? A to act as a medium of exchange B to be divisible into small units C to enable bartering to take place D to maintain its value when inflation is high

Question

In a planned economy, what will determine the allocation of scarce resources? A a mixture of private and central decision making B the decisions of central government C the forces of demand and supply D the revenue generated from direct and indirect taxes

Question

A key concept in classifying goods is whether a good is rival or non-rival. Which good is rival in consumption? A an ice cream B street lighting C a radio broadcast D the internet

Question

What is a normative statement? A A firm receiving a government subsidy will increase the supply of a good. B Negative externalities are the most serious market failure. C A rise in incomes will lead to a rise in demand for normal goods. D A rise in the additional rate of income tax will decrease the incentive to work.

Question

The diagram shows an economy’s production possibility curve (PPC). The economy has moved from X to Y. capital Y goods P X Q O R S consumer goods What can be deduced from the diagram? A Current living standards have fallen. B The economy has become more efficient. C There has been a rise in unemployment. D There has been an opportunity cost of OR consumer goods.

Question

An indirect tax is imposed on a product, causing total expenditure by consumers to increase. Which row identifies this situation? price price elasticity A decreases elastic B decreases inelastic C increases elastic D increases inelastic

Question

The price elasticity of the supply of yoghurt is +1.5. If the demand for yoghurt rises and price rises by 20%, how much more will be supplied to the market? A 0.3% B 3.0% C 13.3% D 30%

Question

The diagram shows the market demand for and supply of a good. D1 S1 price U V P1 W P2 Y X P3 D1 S1 O quantity Which statement is not valid? A At price OP1, UV represents the market surplus. B At price OP3, P3X represents the quantity that consumers are able and willing to buy. C If price were to fall from OP1 to OP3, the extra quantity demanded would be equal to the extra quantity supplied. D Price OP2 is the market equilibrium price.

Question

The diagram shows two linear supply curves labelled S1 and S2, where S2 is a 45° line. S1 S2 price O quantity Which statement about the price elasticity of supply is correct? A The price elasticity of supply is different at every point along both S1 and S2. B The price elasticity of supply of S1 is elastic and S2 is unit elastic. C The price elasticity of supply of S1 is inelastic and S2 is unit elastic. D The price elasticity of supply is unit elastic at every point along both S1 and S2.

Question

A country has health care provided by the free market. This is replaced by the government provision of Sg free health care. D Sg price $ S 1 p 2 3 4 5 O quantity What is the change in consumer surplus? A from 1 to (1 + 2) B from 1 to (1 + 2 + 3 + 4) C from (1 + 2) to (1 + 2 + 3) D from (1 + 2) to (2 + 3 + 4 + 5)

Question

What is an example of a product in joint demand with a smartphone? A an alternative brand of smartphone B a personal computer (PC) C headphones that can be used with a smartphone D the metals used in the manufacture of a smartphone

Question

A product has a high price elasticity of supply. What might explain this? A It has a high opportunity cost. B It has a non-perishable nature. C It is classed as an inferior good. D It is classed as a luxury good.

Question

What is likely to affect the position of the demand curve for tickets to pop concerts but not the position of the supply curve? A a change in incomes of potential customers B a change in price of tickets to the concerts C a change in rents charged by venue owners D a change in seating capacity of concert venues

Question

The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and cinema tickets. Lee Yim restaurant meals –1.2 –0.8 cinema tickets –0.7 –0.3 There is a rise in the price of both products. What can definitely be concluded after these price changes? A Restaurant owners will receive more income. B Lee will spend more money on both products. C Yim will spend more money on both products. D Cinema owners will receive less income.

Question

A government fixes a maximum price for a product in order to increase its consumption. What would be the likely outcome of such a policy? A Consumption will fall if the maximum price is above the current equilibrium price. B Consumption will rise if the maximum price is below the current equilibrium price. C Production will fall if the maximum price is above the current equilibrium price. D Production will fall if the maximum price is below the current equilibrium price.

Question

The diagram shows demand and supply curves for a good. S1 is the original supply curve, S2 is supply after a tax is added. S2 16 price S1 ($) 8 6 D 0 0 20 28 quantity How much tax revenue is earned by the government? A $40 B $160 C $200 D $320

Question

What is a transfer payment? A the advertising expenditure of a firm B the allowance given by a parent to their child while at school C the rent paid to a land owner by a tenant farmer D the wage paid to a worker in the government service

Question

What best illustrates the process of privatisation? A a single private shareholder acquires complete control of an organisation B the purchase of government bonds by private sector commercial organisations C the purchase of shares in a private company D the transfer of public sector assets to the private sector

Question

What defines a progressive tax? A Low-income earners pay the same proportion of income in taxes as high-income earners. B Low-income earners pay a lower proportion of income in taxes than high-income earners. C Low-income earners pay less in taxes than high-income earners. D Low-income earners pay more in taxes than high-income earners.

Question

An increase in what will shift the aggregate demand curve in an economy to the right? A budget deficit B consumer savings C general price level D interest rate

Question

Which effect of inflation is described as redistributive? A the improvement in the terms of trade B the deterioration in the balance of trade C the inconvenience of frequently changing prices D the loss of purchasing power for people on fixed incomes

Question

In which situation will a country’s terms of trade improve? A Its total value of imports rises less than its total value of exports. B Its volume of imports rises less than its volume of exports. C The prices of its imports rise by less than the prices of its exports. D The value of its external payments rises by less than the value of its external receipts.

Question

Country X joins a customs union with country Y and will remove the tariff on its imports of good M from country Y. Under which conditions will trade creation in country X be the largest? existing size of price elasticity country X’s tariff on of demand for imports of good M good M in country X A large –0.8 B large –1.4 C small –0.8 D small –1.4

Question

What is likely to happen if there is a fall in the international value of a country’s currency? A a rise in the foreign currency price of its exports B a rise in the volume of its exports C a fall in the domestic currency price of its imports D a fall in the domestic price level

Question

From the same quantity of factors of production, country X and country Y each produce the following units of output. country sugar textiles X 30 20 Y 40 10 Which statement is correct? A Country X has absolute advantage in the production of both goods. B Country X has comparative advantage in the production of sugar. C Country Y has absolute advantage in the production of textiles. D Country Y has comparative advantage in the production of sugar.

Question

Following a 10% depreciation in the $ value of the £ sterling, a UK exporter leaves the $ price of the goods it sells in the US market unchanged. Other things being equal, what will be the effect on the revenue measured in sterling obtained by the manufacturer from its sales in the US? A It will increase. B It will decrease. C It will be unchanged. D It will depend on the elasticity of demand for the manufacturer’s good in the US.

Question

The diagram shows the effect of introducing a tariff on a product. price domestic supply P2 world supply plus tariff P1 world supply domestic demand O quantity What determines the producer surplus that the tariff generates for domestic producers? A the price elasticities of domestic supply and demand B the tariff rate and the price elasticities of both domestic demand and supply C the tariff rate and the price elasticity of domestic demand D the tariff rate and the price elasticity of domestic supply

Question

Which government policy is most likely to cause expenditure switching that will benefit a country’s current account? A increasing import quotas B increasing income tax allowances C increasing spending on unemployment benefits D increasing subsidies to domestic firms

Question

Which type of economic policy is likely to be considered the most effective by a government that has greater income equality as its primary aim? A fiscal policy B international trade policy C monetary policy D supply side policy

Question

The diagram shows four possible aggregate supply curves and an equilibrium point X. A government employs deflationary fiscal policy in order to reduce the rate of inflation in its economy. This shifts aggregate demand to AD2. With which AS curve would this policy be most effective? A B C price D level X AD1 AD2 O national income