Economics 9708/33 October/November 2024: question paper and mark scheme

Question

A rational consumer chooses what quantities of two products Y and Z to purchase with a given income. MUY and MUZ are the additions to total utility that would result if the consumer were to purchase an additional unit of each product. PY and PZ are the current prices of the two products. Which outcome would represent consumer equilibrium? A when MUY = MUZ B when MUY × PY = MUZ × PZ C when MUY × PZ = MUZ × PY D it is not possible to tell from the information available

Question

Which statement about indifference curves is not correct? A Indifference curves are usually convex to the origin of the diagram. B Indifference curves can intersect each other. C The consumer always prefers a higher indifference curve to a lower one. D The slope of the indifference curve represents the marginal rate of substitution.

Question

A firm increases its production. When will this result in allocative efficiency? A when the cost of producing the last extra unit equals the value the consumers place on it B when the cost of producing the last extra unit is at a minimum C when the total cost of production equals the value that consumers place on the total product D when the total revenue reaches a maximum

Question

The table shows a firm’s revenue and costs at different levels of output. marginal average marginal average output revenue revenue cost total cost 1 125 125 90 140 2 85 105 40 90 3 45 85 45 75 4 25 70 95 80 5 20 60 130 90 What is the firm’s total supernormal profit at the profit-maximising level of output? A –15 B 10 C 30 D 120

Question

Which diagram shows a monopolistically competitive firm in long-run equilibrium? A B revenue MC revenue MC / cost AC / cost AC MR AR MR AR O Qe output O Qe output C D revenue MC revenue MC / cost AC / cost AC MR AR MR AR O Qe output O Qe output

Question

In a perfectly contestable market, entries and exits are cost-free. In reality, why is this not the case with some firms in contestable markets? A Firms cannot recover all fixed costs if they cease operations. B Firms in the industry all operate at the equilibrium level of output. C Large firms do not have to increase capital to grow. D Multinational companies always benefit from economies of scale.

Question

Which points show where each maximisation objective occurs? MC cost or price $ AC J K H AR MR O L quantity revenue sales maximisation maximisation A J L B L K C J K D L H

Question

What is an external economy of scale? A cheaper costs from purchasing large quantities of inputs B decreased interest rates on borrowed funds C increased labour productivity D relevant training facilities at a local college

Question

A group of producers enter into an agreement to restrict supply or fix the price of a good. What does this describe? A a cartel B a conglomerate merger C economies of scale D horizontal integration

Question

What is meant by a four-firm concentration ratio of 25%? A The largest four firms’ market share totals 25%. B The largest four firms have a market share of 25% each. C There are only four firms in the industry. D The largest firm has a 25% market share.

Question

A government decides to use price controls to achieve allocative efficiency in a monopoly market. Which price would need to be set to achieve allocative efficiency? MC price AC A B C D MR D = AR O Q1 Q2 Q3 Q4 quantity

Question

The diagram shows the supply of and the demand for workers in the car manufacturing industry. A trade union successfully negotiates a wage increase from W1 to W2. S wage rate W2 W1 D O L2 L1 L 3 quantity of labour What is the likely impact on the level of employment? A fall from L1 to L2 B fall from L3 to L2 C rise from L1 to L3 D rise from L2 to L3

Question

A firm buys new machinery which increases the marginal productivity of its workforce. What will be the resulting impact on the market for labour? A a shift to the left in the demand curve for labour B a shift to the right in the demand curve for labour C a shift to the left in the supply curve of labour D a shift to the right in the supply curve of labour

Question

The diagram represents the market for labour. wage S1 S2 W D O N number of workers What would be the effect on transfer earnings and economic rent of a change in the supply curve from S1 to S2? transfer economic earnings rent A fall falls B fall rises C rise rises D rise falls

Question

Which combination of policies is most likely to increase the number of low-paid workers caught in the poverty trap? individual’s proportion of all tax-free allowance benefits that are for income tax means-tested A decrease increase B decrease decrease C increase increase D increase unchanged

Question

A website compares the prices of groceries. Which function of money is illustrated by this? A medium of exchange B standard of deferred payment C store of value D unit of account

Question

Two statements about the types of unemployment are shown. 1 You will get unemployment if you pay people not to work, and tax them when they do. 2 An individual is actively seeking work but due to negative economic growth cannot find employment. Which row best describes the two types of unemployment in these statements? 1 2 A cyclical structural B voluntary frictional C structural cyclical D voluntary involuntary

Question

A government decides to cut the rate of interest in order to stimulate aggregate demand and increase employment. Why might this policy not work in a recession? A Business confidence is low. B It leads to deflation. C It leads to an appreciation in the exchange rate. D It leads to a decrease in the money supply.

Question

Households in an economy change their consumption behaviour causing the consumption curve to shift from C1 to C2. C1 consumption spending C2 O disposable income What has happened to autonomous consumption and the marginal propensity to consume? autonomous marginal propensity consumption to consume A decreased decreased B decreased increased C increased decreased D increased increased

Question

How would decreasing interest rates be most likely to reduce unemployment? A by decreasing the borrowing costs of business B by decreasing the government’s budget deficit C by increasing the foreign exchange rate of the currency D by increasing the opportunity cost of spending

Question

The diagram shows a curve representing the relationship between a country’s unemployment rate and its inflation rate. inflation rate O unemployment rate Why is it likely that this curve only applies in the short run? A Any attempt to reduce unemployment will increase inflation. B Increased inflation actually increases unemployment. C Increased inflation leads to expectations of further inflation. D Increased inflation reduces real wage rates, which increases the demand for labour.

Question

What is the most likely result of a period of negative actual growth? A an increase in the surplus of the financial account of the balance of payments B an increase in the deficit of the current account of the balance of payments C an increase in the rate of inflation D an increase in the rate of unemployment

Question

An economy experiences falling incomes and rising unemployment. The central bank decides to reduce the rate of interest to stimulate economic activity. When would such a policy be most likely to succeed? A when spending by consumers on goods and services is income elastic B when spending by firms on capital goods is interest rate elastic C when the leakage on additional national income is high D when the overseas demand for exports is price inelastic

Question

Monetary policy does not usually work immediately. Which time lag is likely to be the least concern to a government whose priority is a rapid domestic impact? A the time it takes for policymakers to recognise the cause of a problem B the time it takes for the economy to respond to the introduction of the policy C the time it takes for the foreign exchange rate to respond to the effect of the policy D the time it takes to put the chosen policy measure into place

Question

The optimum level of population is deemed to be that level at which real output per head is maximised. The diagram shows the relationship between population size and output per head in a country for two different time periods. Q2 output output per head year 2 per head Q1 output per head year 1 O P1 P2 population Which change could not satisfactorily explain the shift from year 1 to year 2? A Population has increased. B State of technology has improved. C Stock of capital has increased. D Volume of productive resources in use has increased.

Question

A government wants to reduce the current account deficit on the balance of payments. What is an example of an expenditure-reducing policy? A a devaluation of the currency B a subsidy on domestic production C a tariff on imports D an increase in income taxes

Question

During a year, a country’s national income in money terms increased by 5%, prices increased by 4% and the total population increased by 2%. What was the approximate change in real income per head? A a decrease of 1% B a decrease of 2% C an increase of 1% D an increase of 2%

Question

What is most likely to result from foreign direct investment in a developing economy? A an improvement in the developing economy’s trade balance B an increase in the developing economy’s net investment income C a reduction in the developing economy’s government tax revenue D a reduction in wage levels in the developing economy

Question

The diagram shows an economy’s Lorenz curve (VW). 100 W 45° cumulative % of income area Y area Z V 0 100 cumulative % of population How is the Gini coefficient for the economy calculated? A Y B Y C Z D Z Y+Z Z Y Y+Z

Question

The table gives the percentage of employment in the primary, secondary and tertiary sectors in four countries. Which country is most likely to be a high-income country? primary secondary tertiary sector sector sector % % % A 15 40 45 B 30 40 30 C 35 45 20 D 45 35 20