Economics 9708/33 October/November 2025: question paper and mark scheme

Question

Why would an economy wish to achieve economic efficiency? A to achieve an equal distribution of income B to achieve full employment C to ensure resources are not wasted D to ensure international competitiveness

Question

A firm has set a low price in the short run to act as a barrier to entry for new firms entering the market. This is an example of which pricing strategy? A limit pricing B predatory pricing C price discrimination D price leadership

Question

A dentist is found to have charged patients for treatment they did not need. What is the likely cause of this market failure? A a minimum price B asymmetric information C non-excludability D productive inefficiency

Question

The diagram shows the average total cost for a firm. At what level of output does marginal cost exceed average total cost? average total cost costs A B C D quantity

Question

The diagram shows the effect of a demand curve shift from D1 to D2 for a profit maximising firm. J price H K L G M N F MC = ATC D1 MR2 MR1 D2 O Q quantity What has happened to the firm’s total revenue and the deadweight welfare loss? deadweight total revenue welfare loss A decreases to OGLQ decreases by KLN B decreases to OGLQ increases by KLN C increases to OHKQ decreases by KLN D increases to OHKQ increases by KLN

Question

A firm sells 10 000 units per month at a price of $10. The firm’s total fixed cost is $40 000 per month. The firm makes only normal profit. What is the average variable cost for this output? A $2.00 B $4.00 C $6.00 D $8.00

Question

The diagram shows the long-run total cost (LRTC) curve of a firm. LRTC costs O W X Y Z output At which output is the long-run average total cost at its minimum? A OW B OX C OY D OZ

Question

Assuming there are no externalities, where would a nationalised firm set output to maximise social welfare? A where average revenue equals average cost B where average revenue equals marginal cost C where marginal revenue equals marginal cost D where marginal revenue is zero

Question

There has been an increase in labour productivity. Which combination of effects is most likely? shift of demand shift of supply effect on wage rate curve for labour curve for labour A none inward increase B none outward decrease C inward none increase D outward none increase

Question

Which method of government intervention may correct market failure caused by the under-consumption of a merit good? A minimum price B privatisation C indirect taxation D subsidy

Question

Some governments introduce rent controls (maximum prices) on houses rented from private landlords. They impose such rent controls to improve living standards for individuals with low incomes. What might be the effects of rent controls in the long run? A The long-run supply of rental houses will contract. B The number of unoccupied privately rented houses will increase over time. C The price of owner-occupied houses will increase. D There will be no effect on the supply of rental housing.

Question

To reduce the damage done by cigarette smoking, the government of a country increases the indirect tax on cigarettes and makes it illegal to smoke in public. Which combination of circumstances is most likely to result in government failure in its attempt to reduce the damage done by cigarette smoking? price elasticity of government spending demand for cigarettes on law enforcement A >1 high B >1 low C <1 high D <1 low

Question

Which stage of the business (trade) cycle is most likely to be characterised by an increasing negative output gap? A boom B recession C recovery D trough

Question

Sometimes monetary policy is ineffective. The supply of money (MS) is assumed to be controlled by the central bank. The demand for money is LP. There has been an increase in real income in the economy. Which position on the diagram makes expansionary monetary policy ineffective? LP1 LP2 rate of MS1 MS2 MS3 interest D B C A LP O quantity of money

Question

Which policy is most likely to lead to a reduction in the natural rate of unemployment? A an increase in government expenditure on goods and services B an increase in government expenditure on training schemes to address skill shortages C an increase in the period when the unemployed are eligible for welfare benefits D an increase in the minimum wage

Question

On a diagram showing a production possibility curve, what definitely represents long-run economic growth? A a change in the slope of the curve B a movement from a point below the curve to a point on the curve C a movement from one point to another along a given curve D an outward shift of the curve

Question

The diagram shows equilibrium in the money market at point X. If there is an increase in the level of income in the economy, which point shows the new equilibrium in the short term? MS1 MS2 rate of interest r3 A r2 B r1 X C LP3 r4 D r5 LP1 LP2 O Q1 Q2 quantity of money

Question

Which combination of policies is most likely to reduce cyclical unemployment but might increase frictional unemployment? unemployment direct taxes benefits A decrease decrease B decrease increase C increase decrease D increase increase

Question

What would cause the short-run Phillips curve to shift to the right? A the unemployment rate is above the natural rate of unemployment, decreasing inflationary expectations B the unemployment rate is above the natural rate of unemployment, increasing inflationary expectations C the unemployment rate is below the natural rate of unemployment, decreasing inflationary expectations D the unemployment rate is below the natural rate of unemployment, increasing inflationary expectations

Question

Which macroeconomic policy is most likely to be used as a long-run means of reducing inflationary pressures? A exchange rate policy B fiscal policy C supply-side policy D monetary policy

Question

The table identifies pairs of possible government aims. The achievement of aim 1 needs to be consistent with the achievement of aim 2. Which row shows the combination where both aims are likely to be achieved. aim 1 aim 2 A higher foreign exchange rate lower rate of unemployment B low rate of inflation current account surplus C more even distribution of income higher rate of saving D rapid economic growth sustainable economic development

Question

The central bank of an economy decreases the money supply in an attempt to reduce inflation. Under which conditions is this policy most likely to be effective? responsiveness of aggregate exchange rate demand to interest rate changes A fixed low B fixed high C floating low D floating high

Question

A government reduces both the income tax paid by all earners and the amount of means-tested benefits paid to those receiving low or no incomes. What is most likely to be its objective? A a more equitable income distribution B a reduction in the rate of inflation C a reduction in the trade deficit D an increase in the rate of economic growth

Question

What is not a likely feature of a customs union? A common external tariffs with non-member nations B elimination of tariffs between member nations C elimination of quotas between member nations D shared common currency among member nations

Question

A central bank officially lowers the price of its currency relative to an agreed rate in terms of other currencies. What type of central bank policy is this? A appreciation B depreciation C devaluation D revaluation

Question

Which combination of events would cause the biggest increase in real GDP per capita? GDP population general price level A rises falls falls B rises falls rises C rises rises falls D rises rises rises

Question

A low-income country receives aid from a high-income country. When will this aid give maximum benefit in the long term to the low-income country? type of aid purpose of the aid A grant purchase of agricultural machinery B grant payment of food subsidies C loan purchase of agricultural machinery D loan payment of food subsidies

Question

Which variable is included in the calculation of both the Human Development Index (HDI) and the Multidimensional Poverty Index (MPI)? A child mortality rate B gross national income (GNI) per capita C life expectancy at birth D years of schooling

Question

Which diagram is not an example of a Kuznets curve? A B Gini Human coefficient Development Index O income O income per capita per capita C D inequality inequality O income O development per capita

Question

The table shows the value of the Gini coefficient for an economy from 2018 to 2020. year Gini coefficient 2018 0.29 2019 0.28 2020 0.27 What is most likely to explain the change in the value of the Gini coefficient between 2018 and 2020? A an increase in indirect taxes B an increase in long-term unemployment C an increase in the national minimum wage D an increase in population