Economics 9708/34 October/November 2025: question paper and mark scheme

Question

What will act as a barrier to collusion between firms? A an ability to detect price cuts by rivals B the abolition of anti-trust measures C the existence of a small number of firms in the industry D unstable demand conditions for products

Question

The diagram shows two indifference curves. good X I2 I1 O good Y What do indifference curves indicate? A Consumers get more satisfaction on curve I1 from consuming more of X and less of Y. B Consumers get more satisfaction on curve I2 from consuming less of X and more of Y. C Each point on the curve represents the marginal rate of substitution of good X for good Y. D Movement from I1 to I2 cannot be made unless the indifference curves cross.

Question

What is an example of forward vertical integration? A A firm manufacturing computers merges with a firm that manufactures furniture. B A firm manufacturing computers merges with a firm that manufactures silicon chips for computers. C A firm manufacturing computers merges with a retail outlet that sells computers. D A firm manufacturing computers merges with another firm that also manufactures computers.

Question

The diagram shows positive and negative externalities of production and consumption. MPC price, MSC costs MPB MSB O X Y output Which row shows the correct combination of production and consumption externality when economic welfare is maximised? position of production consumption economic welfare externality externality A X negative negative B Y positive negative C X negative positive D Y positive positive

Question

A firm has fixed costs of $300 and can produce two units per hour. Its total variable costs are $200 for one unit and $300 for two units. Which cost will fall by the lowest amount when the second unit is produced? A average fixed cost B average total cost C average variable cost D marginal cost

Question

What is the most likely evidence that an economy has reached a position of Pareto optimality? A price volatility B a large current account deficit C a regressive taxation system D full employment

Question

A firm is operating at a level of output which corresponds to the point where MR = 0. What objective is the firm achieving? A maximising consumer surplus B maximising profit C maximising sales D maximising revenue

Question

What is a potential benefit of the privatisation of a country’s railway services? A higher levels of competition B higher costs passed on in the form of higher prices C opportunity for government regulation D potential for a private monopoly

Question

Which of these actions illustrates equality rather than equity? A A firm that installs ramps to its workplace to improve the access for people with disabilities. B A government subsidy on rice of $0.10 per kilo for all members of the public. A university admissions policy that offers places to students from disadvantaged socio-economic C backgrounds. D An income tax system where high-income earners pay a higher percentage of income as tax.

Question

There is a decrease in the supply of female labour. What will the likely effect on male and female wages be? male wages female wages A decrease decrease B decrease increase C increase decrease D increase increase

Question

A government introduces a national minimum wage. What is not a benefit of this to the economy? A It boosts the morale of workers and enhances labour productivity. B It raises incomes of poorer workers. C It reduces government spending on welfare payments. D It reduces structural unemployment.

Question

An increase in which variable would shift the supply curve for farm workers to the right? A job security B the hourly wage rate C the productivity of farm workers D the qualifications required

Question

Which combination of policies is most likely to reduce the number of low-paid workers caught in the poverty trap? individual’s tax-free national minimum allowance for income tax wage in real terms A decrease increase B decrease unchanged C increase increase D increase unchanged

Question

The diagram represents the demand and supply of labour in a competitive industry. S wage W D O L labour What is true about unit of labour L when they are paid wage W? A L is paid only economic rent. B L is paid an element of economic rent and transfer earnings. C L is paid below transfer earnings and leaves the industry. D L is paid exactly transfer earnings and remains in work.

Question

What leads to an inflationary gap? A Aggregate demand is greater than the maximum potential output of the economy. B Investment increases at a greater rate than profits received by a firm. C The economy is operating below its full capacity. D Innovation results in increased productivity in the economy.

Question

An open economy has a positive output gap. What is likely to be decreasing? A expenditure on imports B leisure time of workers C nominal wage rates D the general price level

Question

In a two-sector economy, autonomous consumer expenditure increases by $100 billion, autonomous investment expenditure increases by $200 billion, and the marginal propensity to consume is 0.5. What will the increase in National Income be? A $150 billion B $300 billion C $450 billion D $600 billion

Question

Which government policy is least likely to promote inclusive economic growth? A increasing the national minimum wage B investment in transport and infrastructure C legislation reducing the power of trade unions D using taxes and transfer payments to redistribute income

Question

What is an example of a demand-side macroeconomic policy that would reduce cyclical unemployment? A an increase in government spending on new infrastructure such as roads B an increase in government spending on retraining workers C a reduction in the rate of tax on imports D an increase in the rate of tax on goods and services

Question

The diagram shows two liquidity preference curves LP1 and LP2. rate of interest LP2 LP1 O quantity of money What would cause the liquidity preference curve to shift from LP1 to LP2? A There has been a fall in national income. B There has been a rise in the general price level. C There has been an increase in government borrowing. D There has been an increase in the rate of interest.

Question

What does the Phillips curve show? A the relationship between economic growth and employment B the relationship between inequality and income per capita C the relationship between inflation and unemployment D the relationship between prices and national income

Question

A government is aiming to increase the role of market forces. Which policy might achieve this? A deregulation B nationalisation C price controls D production quotas

Question

A country has a progressive income tax system. What is not a valid reason for a government’s decision to reduce the rate of income tax paid on higher incomes? A to attract highly skilled workers from abroad B to prevent tax evasion C to provide work incentives D to reduce income inequalities

Question

A political party proposed a policy of quantitative easing (the creation of money by the central bank). When would such a policy be least likely to destabilise the macroeconomy in the short run? A when the economy was experiencing a high level of inflation B when the economy had price stability but there was full employment of the labour force C when there was a deep recession with high levels of unemployment D when there was full employment and a current account balance of payments deficit

Question

What does the Laffer curve show? A the amount of tax revenue received at each tax rate B the impact on the distribution of income after tax rates rise C the rise in inflation following a fall in unemployment due to a cut in income tax D the rise in poverty due to a rise in the basic rate of income tax

Question

What are the variables identified on the axes of a Kuznets curve diagram? vertical (Y) axis variable horizontal (X) axis variable A cumulative % of income cumulative % of families B measure of inequality income per capita C measure of standard of living economic growth rate D income per capita optimum population

Question

What might cause income inequality to worsen in a country? A increased discrimination B increased labour market participation C increased skill level of workers D increased welfare payments

Question

A multinational company is planning to invest in a new factory in a low-income country. What is not a possible benefit to the low-income country? A acquiring improved technology B better training for the workforce C extra tax revenue for the government D increased competition for small domestic producers

Question

A country with fixed exchange rates faces a surplus on its current account. Which policy is most desirable to maintain the fixed exchange rate? A an increase in subsidies given to exporters B the imposition of trade barriers on the import of non-essential goods C the sale of foreign currencies in the foreign exchange market D the use of expansionary monetary policy

Question

Which criticism of foreign direct investment (FDI) is least valid? It encourages competition, reduces prices and forces the less efficient domestic firms to leave A the market. It brings workers from its own country and provides only low paying jobs to low skilled local B workers. It is usually withdrawn quickly in case of a global crisis, making developing countries more C vulnerable to global shocks. D Its actions often result in environmental degradation, and over exploitation of natural resources.