Economics 9708/32 October/November 2024: question paper and mark scheme

Question

If consumers aim to maximise their utility, how will they arrange their spending? A to obtain the same total utility from each commodity B to obtain the same total utility per $ spent on each commodity C to obtain the same utility from the last unit of each commodity D to obtain the same utility from the last $ spent on each commodity

Question

Which feature of indifference curve theory is most likely to apply in reality? A The consumer can express preferences between all possible combinations of goods. B The consumer has a limited income to spend. C The consumer will always behave rationally. D The consumer will always get positive utility from having more of the goods.

Question

Diagrams 1 and 2 show different long-run average cost curves (LRAC). diagram 1 diagram 2 cost cost LRAC LRAC O output O output Which situations do the two diagrams show? diagram 1 diagram 2 A falling returns to scale average cost is greater than marginal cost B falling returns to scale rising returns to scale C unit cost falls as output increases falling average fixed costs D unit cost falls as output increases unit cost rises as output increases

Question

A government makes it compulsory for motorbike riders to wear helmets. What would represent a positive externality of consumption associated with this decision? A decreased pressure on the provision of health care B expenses incurred on surveillance of motorbike riders to ensure compliance C increased life expectancy of motorbike riders D increased profits of helmet manufacturers

Question

The table shows the market shares of firms selling a very similar product in a country between 2018 and 2020. firm 2018 2020 Norton 28.4 27.4 Souton 18.9 17.6 Eastern 17.1 14.7 Western 12.5 11.4 Scotsdale 7.2 8.5 Welshpool 5.8 8.2 Greenland 3.9 4.8 Franklin 2.2 3.6 Bellweather 2.1 1.9 others 1.9 1.9 What can be concluded from the data between the two years? A Market concentration increased. B Sales of the top four firms fell. C Scotsdale and Welshpool’s profits rose. D The concentration ratio of the four largest firms fell.

Question

The diagram shows a profit maximising firm in equilibrium. $ MC AC MR AR O quantity What would happen to the firm’s price, output and profit if there was an increase in its fixed costs? price output profit A rise fall rise B rise fall fall C unchanged rise rise D unchanged unchanged fall

Question

A bus company has a monopoly and specialises in long-distance travel. It initially sells its tickets to customers one month in advance of the journey. As the departure date approaches, the price of a ticket increases. Which kind of pricing policy does the bus company operate? A minimum pricing B predatory pricing C price discrimination D price leadership

Question

The diagram shows the marginal private benefit (MPB), the marginal private cost (MPC) and the marginal social cost (MSC) for firms in an industry. The equilibrium price is point X. price MSC MPC X MPB = MSB O quantity What should happen to achieve allocative efficiency? A a decrease in consumption and an increase in price B a decrease in production and no change in price C an increase in consumption and a decrease in production D an increase in price and no change in production

Question

Firm X is considering whether to co-operate with its rival so that their joint profit is $4000 a month ($2000 each). It calculated that, if it did not co-operate, its own profit would be $2800 a month provided it kept all its customers itself. However, if its rival undercut X’s price and took some of X’s customers then X’s profit would be $1200. It has no knowledge of what the rival’s policy will be. What describes the situation that the firm is facing? A monopoly profit maximisation B principal agent problem C prisoner’s dilemma D satisficing

Question

A smartphone manufacturing company takes over an electronic chip design company. This is an example of which type of growth? A horizontal B lateral C vertical backwards D vertical forwards

Question

What is not a valid comment economists may make regarding the need to subsidise a green energy market that uses solar and wind power? A It is cheaper to use the plentiful supply of coal. B Markets will become more efficient. C The value of the positive externalities cannot be estimated. D The value of the negative externalities cannot be estimated.

Question

In which situation is the introduction of a minimum wage most likely to raise employment opportunities as well as wages? A Firms face intense competition both at home and abroad. B Labour costs are a high proportion of the total cost of the firm. C The minimum wage is not high enough to lower the profits of the firms. D The minimum wage introduced in monopsony is less than the marginal revenue productivity (MRP) of the last worker employed.

Question

The diagram shows a firm’s initial marginal revenue product of labour curve (MRP1). marginal revenue product of labour MRP1 MRP2 O labour hours What could cause the curve to shift to MRP2? A a fall in the wage rate B a fall in the price of the final product C a rise in the wage rate D a rise in the price of the final product

Question

A firm operates in a perfectly competitive labour market. The table shows the marginal revenue product (MRP) and marginal cost of labour (MCL) for each additional worker employed by this profit-maximising firm. units of labour MRP MCL employed 1 50 30 2 40 30 3 30 30 4 20 30 How many units of labour will this firm employ? A 1 B 2 C 3 D 4

Question

Countries in South East Asia have some of the highest income inequality in the world. Which policy could be adopted by governments in South East Asia to reduce income inequality in the short run? A Increase the general sales tax / VAT rate on luxury goods. B Introduce a minimum wage. C Invest heavily in schools and education programmes. D Stimulate economic growth through skills and productivity training.

Question

When buying a car, Salma agrees to pay half of the cost now and the other half in six months time. Which function of money does this illustrate? A divisibility B durability C standard of deferred payment D store of value

Question

When is the natural rate of unemployment most likely to fall? A when there is a decline in the education levels of workers B when there is an increase in income tax rates C when there is an increase in labour mobility D when there is a rise in the rate of state unemployment benefits

Question

A country has increasing productivity and falling unemployment. What can be concluded from this information? A Economic efficiency has increased. B Interest rates have increased. C Taxation has increased. D The labour force has increased.

Question

The diagram shows full employment, national income, and expenditure (AMD). The economy is in equilibrium at J. AMD (C + I + G + X – M)2 K (C + I + G + X – M)1 L J 45° O full employment national income What does the distance KL represent? A a deflationary gap B a trade deficit C an inflationary gap D an employment gap

Question

A country experiences an increase in unemployment due to deficiency of aggregate demand. What will be the effect of this on tax revenue and government expenditure, assuming that tax rates and rates of unemployment benefit remain unchanged? government tax revenue expenditure A decrease increase B decrease no change C increase decrease D no change increase

Question

A government is successful in raising the rate of economic growth. As a result, which other macro-economic aim would it most likely have achieved in the short run? A balance of payments surplus B higher employment C lower inflation D stronger exchange rate

Question

Which argument for lowering income tax rates is always valid? A It boosts economic activity. B It promotes the incentive to work. C It reduces the budget deficit. D It reduces the incentive to evade taxes.

Question

The table shows the percentage of labour force unemployed and the rate of inflation in a country over a five-year period. unemployment inflation year % % 1 3.5 4.0 2 4.1 3.6 3 4.3 2.5 4 4.5 2.2 5 4.8 2.0 Which statement about the application of the Phillips curve theory to this country is most supported by the data? A The data are entirely consistent with the theory of the Phillips curve. B The data prove conclusively that the Phillips curve theory does not operate. C The data suggest that no conclusions can be reached about the validity of the Phillips curve theory. D The data suggest that the theory of the Phillips curve is correct, though with time lags.

Question

What indicates that a more equal distribution of income has been achieved? A a faster rate of economic growth B a higher Human Development Index C a lower Gini coefficient D a lower tax / GDP ratio

Question

In 2018, the United States (US) government introduced tariffs on a wide range of imports from China. Which type of policy was the US government adopting? A expenditure-reducing B expenditure-switching C expansionary monetary D contractionary monetary

Question

A US company receives a US$20 million dividend from shares that it owns in a Brazilian company. How would this dividend be shown in the balance of payments of the United States? A a credit in the capital account B a credit in the current account C a debit in the capital account D a debit in the current account

Question

An increase or decrease in exchange rates can take place in both a floating and a fixed exchange rate system but different terminology is used for each system. What is the correct terminology? floating rate fixed rate decreases increases A depreciation appreciation B depreciation revaluation C devaluation appreciation D devaluation revaluation

Question

Company X is a multinational company that produces batteries for electric cars. It decides to invest in a new factory in country N. Under which conditions is this investment most likely to improve the current account balance on the balance of payments in country N? % of raw materials income elasticity used to make of demand for batteries supplied electric cars outside by country N country N A 10 0.5 B 10 1.5 C 90 0.5 D 90 1.5

Question

The diagram shows two Lorenz curves. 100 percentage of income L1 L2 0 100 percentage of population If the Lorenz curve shifts from L1 to L2, what is least likely to have caused this? A Capital gains tax has been reduced. B Income tax has been made more progressive. C Inheritance tax has been reduced. D The tax-free allowance has been decreased for everyone.

Question

What is a likely result of globalisation? A Absolute advantage replaces comparative advantage as the basis for trade. B Firms’ supply chains are shortened. C Trade is less likely to suffer from international economic shocks. D There are higher standards of living.