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Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2016
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*1524452076*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages and 2 blank pages.

IB16 03_9708_32/2RP
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2

1 What is an example of market failure?

A difficulties in allocating property rights

B diseconomies of scale
C high prices caused by increased demand
D the existence of scarcity

2 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 international competitiveness
D to ensure resources are not wasted

3 What will happen if a firm is taxed by an amount equal to the external costs that it imposes on the
rest of society?

A Production will be increased.

B Resource allocation will be improved.
C Resource allocation will be maximised.
D There will be no effect upon production.

4 The current distribution of goods between two individuals in a two-person economy with given
technology and resources is at point X.

According to the Pareto criterion, which point would definitely indicate increased allocative
efficiency?

Sunil’s
goods C
B
X
D

O Fatima’s goods

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3

5 What represents the transfer earnings of the factor enterprise?

A excess profit
B normal profit
C return on capital
D start-up costs

6 The diagram shows two indifference curves and two budget lines for two goods X and Y.

M
S

good Y P
IC2
R

IC1
O M1 M2
good X

The initial position is P. P to R is a substitution effect. R to S is an income effect.

What type of good is good X?

A a Giffen good
B a luxury good
C a normal good but not a luxury good
D an inferior good but not a Giffen good

7 Which explains why, in long-run equilibrium in monopolistic competition, firms make only normal
profits?

A consumer resistance
B decreasing returns to scale
C differentiated products
D freedom of entry and exit

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8 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

9 Which combination of characteristics are likely to be found in almost all high-growth firms?

high high market high levels of high levels of

productivity share employment innovation

A    
B    
C    
D    

10 A monopolist changes its objective from sales revenue maximisation to profit maximisation.

MC

H AC
P1
cost,
revenue P2 J K
G
F L

AR
MR
O Q1 Q2
output

On the diagram, which areas represent the monopolist’s total profit?

original profit final profit

A HKLG P1HKP2
B JKLG P1HGF
C P2JGF P1HJP2
D P2KLF P1HGF

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5

11 Which 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

12 The diagram shows a firm’s total revenue curve.

TR
revenue

O output

What is true at the highest point on the curve?

A Average revenue equals marginal revenue.

B Average revenue is zero.
C Marginal revenue is zero.
D Maximum profits are made.

13 A backward-sloping supply curve of labour is one where, beyond a certain point, the supply of
labour

A decreases as the demand for labour rises.

B increases as the demand for labour rises.
C decreases as wages rise.
D increases as wages rise.

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14 The diagram shows a firm’s average physical product of labour and marginal physical product of
labour curves.

units of
output APPL
MPPL

O L1 L2
labour hours

What can be deduced from the diagram?

A APPL declines beyond OL2 as a result of diseconomies of scale.

B A profit-maximising firm would never hire more than OL2 labour hours.
C Between OL1 and OL2, each extra labour hour hired causes both MPPL and APPL to decline.
D Diminishing returns first set in when the number of labour hours hired reaches OL1.

15 Labour is the only variable factor of a profit-maximising firm which is a price taker in the labour
market.

From what is the firm’s demand curve for labour derived?

A its marginal factor cost curve

B its marginal revenue curve
C its marginal revenue product of labour curve
D its short-run marginal cost curve

16 Which government policy has greater equality as one of its consequences?

A a cut in income tax

B increased reliance on indirect taxes
C payment of unemployment benefits
D privatisation of transport industries

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17 Which government policy to counter the effects of income inequality is correctly matched with one
of its advantages and one of its disadvantages?

policy advantage of policy disadvantage of policy

A food stamps for the poor targets the needy high administrative costs
B higher national minimum wage encourages skill training higher budget deficit
C provision of free child care increases employability disincentive to work
D universal monetary benefits saves on bureaucracy reduced labour mobility

18 A government uses personal disposable income per head as a measure of the standard of living.

What does this measure not take into account?

A changes in the average price level

B the level of direct taxation
C the level of national income
D the size of the population

19 The table shows figures estimated at the end of a train drivers’ strike.

$
(000s)

loss of revenue from train journeys 600

value placed on extra leisure time by strikers 20
loss of government tax revenue 40
overtime payments to police 30

What was the reduction in the recorded level of national income resulting from the strike?

A $570 000 B $610 000 C $640 000 D $690 000

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20 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 developed country?

primary secondary tertiary

sector % sector % sector %

A 15 40 45
B 30 40 30
C 35 45 20
D 45 35 20

21 How may outward migration from a developing economy affect its balance of payments?

A It may improve its balance of payments by increasing its export capacity.

B It may improve its balance of payments by increasing inflows of current transfers.
C It may worsen its balance of payments by causing its currency to depreciate.
D It may worsen its balance of payments by increasing consumer expenditure on imported
goods.

22 Which type of unemployment might arise from a worldwide decline in the demand for electronic
goods?

A frictional
B seasonal
C structural
D voluntary

23 Which pattern of labour market data is likely to indicate an increase in cyclical unemployment?

changes in
compulsory voluntary
redundancies resignations

A decrease decrease
B decrease increase
C increase decrease
D increase increase

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9

24 The central bank of a country creates cash to purchase government bonds from the commercial
banks.

What is this called?

A liquidity preference
B quantitative easing
C supply-side policy
D the transmissions mechanism

25 An upward movement in the curve relating consumption to national income could be caused by

A a reduction in taxation.
B an increase in investment.
C an increase in national income.
D an increase in savings.

26 The table shows some data for an economy.

When are injections and withdrawals in equilibrium?

government
savings imports taxation investment exports consumption
expenditure
$ $ $ $ $ $
$

A 100 150 200 200 400 400 450

B 150 175 350 200 400 400 500
C 200 200 400 200 400 400 600
D 250 250 500 200 400 400 1000

27 Which policy is most likely to conflict with a government’s aim of price stability?

A increasing spending on education and health

B increasing the basic rate of income tax
C limiting wage increases in the public sector
D preventing mergers of large companies

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28 What is not a supply-side policy measure?

A deregulating industry to encourage more competitive markets

B linking unemployment benefits to the obligation to look for work
C tackling cyclical slump by lowering interest rates
D tackling structural unemployment by giving grants for labour mobility

29 When will government success in achieving economic growth be most likely to conflict with a
desire to reduce a surplus in the balance of payments?

A when growth depends upon the import of capital equipment

B when growth increases foreign investors’ confidence in the country
C when growth requires a reduction in the level of its tariffs
D when growth results from the removal of restrictions on capital outflows

30 The diagram shows details of the British Government’s estimated spending and receipts for
2010–2011. All figures in UK £bn.

spending receipts
health
national
122
welfare income tax insurance
226 150 99

total: education total:

£697 89 £548 sales tax
billion billion 81
debt other
interest 79 excise duties
44 46
other defence
114 council tax
40 corporation
25
law and business tax
housing & 43
order rates
environment
35 25
27

What can be concluded from the diagram?

effect of largest
type of largest overall budget
spending item on
receipt item balance
income distribution

A less equitable indirect tax deficit

B less equitable indirect tax surplus
C more equitable direct tax deficit
D more equitable direct tax surplus

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 9708/32/F/M/16

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2017
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*8975581951*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages and 2 blank pages.

IB17 03_9708_32/3RP
© UCLES 2017 [Turn over
 www.dynamicpapers.com
2

1 What might help achieve allocative efficiency?

A differentiated products
B government subsidies
C monopsony
D supernormal profits

2 In 2015, a company electrified the main railway line between two cities in order to decrease the
journey time. The work was noisy, expensive and took a long time.

What would be the likely outcome of this project?

A External costs increased and private benefits decreased.

B Private benefits decreased and external cost decreased.
C Private benefits increased and private costs increased.
D Private costs increased and external costs decreased.

3 Which measure is specifically designed to reduce divergences between private and social costs?

A equal pay legislation

B minimum wage legislation
C the abolition of tuition fees paid by university students
D the introduction of ‘bus only’ lanes in city centres

4 Which is an internal economy of scale?

A efficient local transport networks

B improved access to spare parts as a result of industry growth
C lower risks from supplying a wider range of customers
D the training of skilled labour at a college financed by local firms

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5 The diagram shows the position of a profit-maximising firm in a perfectly competitive industry.

MC
price, AC
cost
AR = MR

O
output

What is the correct analysis of this position?

profits in number of firms in the

short run industry in the long run

A supernormal decrease
B supernormal increase
C normal remain the same
D subnormal decrease

6 When a firm doubles its variable inputs, its fixed inputs are unchanged and output less than
doubles.

What does this illustrate?

A decreasing average cost

B decreasing marginal cost
C diminishing returns
D diseconomies of scale

7 Which practices would be classified as price discrimination?

charging lower return flight fares from

charging higher rail fares to meet
Kuala Lumpur to Hong Kong for
the additional costs of train
passengers who stay overnight on a
companies
Saturday in Hong Kong

A no no
B no yes
C yes no
D yes yes

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8 To maximise total revenue, up to which point should a monopolist increase output?

A where marginal revenue equals average revenue

B where marginal revenue is maximised
C where marginal revenue is zero
D where price elasticity of demand is zero

9 A firm is operating in perfect competition.

What will be the effect on the firm’s revenue if it increases its output by 5 %?

A Its revenue will be unchanged.

B Its revenue will increase by 5 %
C Its revenue will increase by less than 5 %.
D Its revenue will increase by more than 5 %.

10 A firm successfully engages in a policy of predatory pricing.

What will happen to the prices charged by the firm in the short run and in the long run?

prices in the prices in the

short run long run

A rise rise
B rise fall
C fall rise
D fall fall

11 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

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12 The diagram represents different combinations of good X and good Y.

A consumer prefers more units of both goods to fewer units but prefers, as far as possible, not to
give up any of good Y to obtain more of good X.

U
good Y
T V

O
good X

Which combination in the diagram could represent the consumer’s order of preference in
descending order?

A UTVW B UVTW C TUVW D WVUT

13 A consumer demands two goods, X and Y. The indifference curve diagram shows the effect of a
change in the price of one of these goods on the consumer’s equilibrium.

good Y

I2

I1
O good X

Which demand curve can be deduced from the diagram?

A B C D

price of price of price of price of

good X good X good Y good Y

D D D D
O O O O
quantity of quantity of quantity of quantity of
good X good X good Y good Y
demanded demanded demanded demanded

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14 What could prevent a market failure?

A barriers to entry
B building regulations
C growth of firms
D persuasive advertising

15 The diagram shows the Gini coefficient for four countries between 1975 and 2010.

Gini coefficient for Brazil, Mexico, India and China 1975–2010

65
60
55 Brazil
50 Mexico
45 China
India
40
35
30
25
20
Jan 75 Jan 80 Jan 85 Jan 90 Jan 95 Jan 00 Jan 05 Jan 10

Which country made the greatest move towards a more equal income distribution over the
period?

A Brazil
B China
C India
D Mexico

16 Extra fishing boats start to operate from a local harbour which depends on fishing for its main
income.

Which action by the local authority is an example of nudge theory?

A distributing leaflets about the need to safeguard fish stocks

B increasing the licence fees for new boats
C insisting that all fish caught are sold to local people
D restricting the areas in which boats can fish

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17 What is the main disadvantage of government regulation aimed at restricting the profits earned in
a monopolistic industry?

A It acts as a disincentive to innovation.

B It cannot take account of externalities.
C It leads to diseconomies of scale.
D It leads to excessive advertising by firms.

18 What is an advantage of a ‘creation of property rights’ solution to externalities resulting from river
pollution?

A It allows the possibility of a claim for compensation to those harmed.

B It always makes the polluter pay for pollution caused.
C It results in better monitoring by the government of the damage from pollution.
D It will eliminate pollution completely.

19 In the UK in 2015 the average wage was £26 500 a year. At the same time, certain footballers
were earning more than £150 000 a week.

Which aspect of the theory of wage determination is most likely to explain this wage differential?

A aggressive wage bargaining by the professional footballers’ trade union

B the inclusion in wages of an element of economic rent
C the monopsony structure of the market for professional footballers
D the theory of net advantages

20 What is the most effective policy a government could introduce to reduce frictional
unemployment?

A cut welfare spending on benefits

B improve information about job vacancies
C reduce tax rates
D raise interest rates

21 Which combination is usually found in the least developed countries?

A a high birth rate and a dominant primary sector

B capital-intensive production and a low rate of saving
C labour-intensive production and a declining population
D net inward migration and a low death rate

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8

22 The diagram shows selected US labour statistics from 2001 to 2014.

300 65
net new jobs 200 64 employed as a
monthly average percentage of
100 63
(thousands) population aged
0 62 16 and over
–100 61
–200 60
–300 59
–400 58
–500
2001 05 10 14
year

What can be concluded from the diagram about 2001-2014?

A Employment as a percentage of the population aged 16 and over declined continuously.

B In periods when the number of net new jobs was rising the percentage employed increased.
C The natural rate of unemployment was achieved only in 2008.
D The number of unemployed workers fell in all except four years.

23 Under conditions of full employment, the Quantity Theory of Money suggests that (other things
being equal) the effect of an increase in the velocity of circulation will be to increase

A output.
B prices.
C the demand for money.
D the quantity of money.

24 In a closed economy with neither government expenditure nor taxation, the initial income is
$2000 million. All savings are carried out by consumers, who save 25 % of any income received
above $2000 million. Businesses plan to invest $2000 million.

What is the value of the multiplier?

A 5 B 4 C 4 D 3
3 4

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9

25 Which combination of factors is most likely to result in economic growth?

A an increase in management productivity together with a reduction in the hours worked per
employee
B increased educational enrolment together with an increase in business regulation
C the discovery of a new raw material deposit together with significant emigration of labour
D the invention of a technology together with the investment to use it in the economy

26 A country’s real national income per head increases.

What could explain why this might be accompanied by a fall in households’ standard of living?

A a decrease in state welfare payments

B a decrease in the working age population
C an increase in the trade deficit
D an increase in the consumer price index

27 A director becomes redundant as the result of a company merger. His salary was $80 000. He is
entitled to an annual private pension of $30 000.

In his first year after redundancy he earns $40 000 in consultancy fees and saves $8000 by
dismissing his gardener.

What is the resulting change in measured national income in the first year?

A + $70 000 B + $60 000 C - $80 000 D - $18 000

28 Which cause of economic growth would involve the least cost for present and future generations
of a country’s population?

A increased exploitation of a country’s mineral resources

B investment financed by borrowing from abroad
C investment financed by high rates of domestic savings
D technological innovations in productive processes

29 What would encourage industrial expansion in a region of high unemployment?

A a rationing system for building development in that region

B a reduction in tax allowances on investment
C a requirement that only local labour may be employed
D an end to nationally negotiated wage rates

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10

30 A government currently has a balanced budget. It is considering the possible variations in tax
revenue and government expenditure shown.

government
options tax revenue
expenditure

W increase increase
X increase reduce
Y reduce increase
Z reduce reduce

Which three options are likely to have the potential to move the budget into surplus?

A W, X and Y B W, X and Z C W, Y and Z D X, Y and Z

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 9708/32/F/M/17

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2018
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*0538215574*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages and 2 blank pages.

IB18 03_9708_32/2RP
© UCLES 2018 [Turn over
 www.dynamicpapers.com
2

1 In cost-benefit analysis the term net social benefit refers to

A private benefit plus social benefit.

B social benefit minus private benefit.
C social benefit minus private cost.
D social benefit minus social cost.

2 A government school is built by private builders in a residential neighbourhood. The builders

ignore the effects of noise and disturbance.

Why does a free market fail to take into account these external costs of building the school?

A Education is a public good which benefits society.

B Few people who live near the school object to the building.
C The government believes schools should be built privately.
D These costs are not paid for by the builders.

3 In all market structures, what must firms equate to ensure allocative efficiency?

A average cost and average revenue

B average cost and marginal revenue
C marginal cost and average revenue
D marginal cost and marginal revenue

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3

4 In the diagram a consumer’s budget line shifts from JK to GH.

J
quantity of G
good Y

O K H
quantity of good X

Which statement must be correct?

A There has been an increase in the consumer’s money income.

B There has been a decrease in the consumer’s real income.
C Good Y has become relatively more expensive.
D The price of good X has increased.

5 The table shows substitution and income effects for a normal good and for an inferior good as the
price of the good changes.

Which combination is correct?

demand change from demand change from

type of good price change
substitution effect income effect

A inferior fall negative positive

B inferior rise negative negative
C normal fall positive positive
D normal rise positive negative

6 A government imposes a $10 tax on each unit produced of a product.

How will this affect the firm?

A Its average cost will rise by less than $10.

B Its marginal cost will remain unchanged.
C Its minimum average cost output will be lower.
D Its minimum average cost output will be unchanged.

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7 According to oligopoly theory, what is not likely to characterise the behaviour of firms in the
industry?

A matching any price cuts made by their rivals

B matching any price rises made by their rivals
C selling a range of similar but differentiated products
D the ability to earn supernormal profit

8 The diagram shows the cost and revenue curves of a monopolist whose only cost of production is
a fixed cost.

What will be the monopolist’s profit maximising price?

costs
/ revenue

D
C

B
A ATC
O MR AR
output

9 Company R manufactures steel. Company S produces ships. Company T operates oil tankers.
Company V operates cruise liners.

Which statement is correct?

A If R takes over S, this is an example of forwards vertical integration.

B If S takes over V, this is an example of backwards vertical integration.
C If T takes over S, this is an example of diversification.
D If V takes over S, this is an example of horizontal integration.

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5

10 A monopolist chooses an output that maximises profits and makes normal profits.

What must be correct at the output chosen?

A Average cost equals average revenue.

B Average revenue equals marginal revenue.
C Marginal cost is at a minimum.
D The monopolist is allocatively efficient.

11 A firm operates in an imperfectly competitive market. The prices of its products are determined by
the maximum price each consumer is willing to pay.

What describes this pricing method?

A kinked demand curve

B limit pricing
C price discrimination
D price leadership

12 What is an argument for government policy which allows companies to take over other
companies?

A It allows firms to borrow from the banking system.

B It encourages companies to act to promote productive efficiency.
C It ensures wage rates will rise.
D It provides income and employment for investment bankers.

13 A government imposes a maximum price for electricity.

Which statement justifying this measure might be considered valid on economic grounds?

A It will encourage electricity suppliers to invest in additional capacity.

B It will increase the incentive for consumers to conserve energy.
C It will prevent the monopolistic exploitation of consumers.
D It will prevent the rationing of electricity through power cuts.

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14 The diagram shows the change in a market when a government places a production quota OQt
on the quantity of a good that has previously traded at quantity OQ.

price S
V
W X
Z
Y
D

O Qt Q
quantity

Which welfare loss results from the government’s policy?

A W+V B W+X C X+Z D Y+Z

15 Which policy by a government would increase the negative externalities that result from cigarette
smoking?

A a ban on cigarette advertising

B a ban on cigarette smoking in public places
C a ban on substitutes for cigarettes
D a ban on the sale of cigarettes

16 A teacher currently earns $30 000 but would be willing to continue to do the job provided she
earned at least $25 000. She prefers to stay in her teaching job than change to her next best
alternative employment as an accountant where she could earn $40 000.

Which statement is correct?

A Her economic rent as a teacher is $5000.

B Her economic rent as an accountant is $10 000.
C Her transfer earnings as a teacher are $30 000.
D Her transfer earnings as an accountant are $15 000.

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7

17 What will increase the power of a trade union, allowing it to increase wages without reducing the
employment of its members in a particular industry?

A The economy is experiencing a fall in the price of capital.

B The economy is experiencing rising employment.
C The price elasticity of demand for the industry’s goods is equal to 1.
D The price elasticity of demand for the industry’s goods is greater than 1.

18 The table shows the number of workers employed by four firms in the same industry, the average
number of hours worked each day and the total output each firm produces each day.

Which firm’s workers have the highest productivity?

average number
number of total output per
of hours worked
workers day (units)
per day

A 4 8 320
B 5 7 420
C 6 7 462
D 7 9 630

19 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

20 Which characteristics are typical features of the least developed countries?

dominant sector export terms of trade

of industry earnings over time

A primary stable stable

B primary unstable unstable
C secondary stable rising
D secondary unstable falling

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8

21 What is central to economic growth but not necessarily to economic development?

A an expansion of the range of economic choices available to individuals

B an increase in Gross Domestic Product
C the eradication of absolute poverty
D the satisfaction of basic needs amongst the whole population

22 What would be the essential element in listing countries in order of their standards of living during
a particular year?

A a deduction for profits transmitted abroad from the figures for Gross National Product
B allowance for different rates of population growth
C an adjustment for the inflation rates of different countries
D the use of purchasing power parity exchange rates

23 A government wished to increase demand in an economy in an attempt to reduce unemployment.

Which policy is most likely to achieve this?

A establishing greater health and safety rules for manufacturers

B increasing income tax
C increasing the rate of interest
D subsidising the building of new houses

24 What would be an increase in leakages or withdrawals from the circular flow of income?

A increase in government spending on anti-smoking campaigns

B increase in spending on imports of luxury cars
C increase in spending on transfer payments
D increase in wages paid to government employees

25 What is used to measure the deflationary gap?

A the increase in injections needed to reach full employment

B the public sector borrowing requirement
C the rate of deflation
D the rate of unemployment

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9

26 The following data describes an economy’s consumption function.

income consumption
($m) ($m)

100 90
140 122
180 154
220 186

What can be deduced about the value of the marginal propensity to consume in this economy?

A It increases as income increases.

B It decreases as income increases.
C It is 0.90.
D It is 0.80.

27 In which circumstance will there be an immediate increase in the domestic money supply?

A A consumer takes advantage of an overdraft facility to buy a car.

B A consumer uses a reserve of cash to buy a car.
C A consumer uses a reserve of Euros to buy a car abroad.
D A consumer uses their current bank account balance to buy a car.

28 The turning point on the Kuznets Curve for income inequality has been estimated to be in the
region of US $10 500.

For a country that has a GDP per capita of $8000, which is most likely?

A A reduction in GDP per capita will have no effect on income inequality.

B A reduction in GDP per capita will increase income inequality.
C An increase in GDP per capita will have no effect on income inequality.
D An increase in GDP per capita will increase income inequality.

29 Which macroeconomic policy aims are most likely to complement one another?

A high growth and low inflation

B high growth and low unemployment
C low inflation and low unemployment
D low unemployment and a balance of trade surplus

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10

30 All else remaining unchanged, what would result in an outflow of capital funds from a country?

A a fall in the country’s rate of inflation

B an expected appreciation of the country’s exchange rate
C an increase in foreign interest rates
D an increase in foreign prices

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 9708/32/F/M/18

 www.dynamicpapers.com

Cambridge Assessment International Education

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2019
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*1192745130*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 11 printed pages and 1 blank page.

IB19 03_9708_32/2RP
© UCLES 2019 [Turn over
 www.dynamicpapers.com
2

1 A project has a social cost of $100 million, a private cost of $40 million and an external benefit of
$20 million. Its net social value is zero.

What can be concluded about the project?

A External cost is greater than external benefit.

B Private cost is greater than external cost.
C Private cost is greater than private benefit.
D Social cost is greater than social benefit.

2 The diagram shows the cost and revenue curves for a firm.

At which price does allocative efficiency occur?

price

MC
AC

A
B
C
D
MR AR
O
quantity

3 A government is considering improving the rail links in its country. It also has to choose one of
four high-speed routes.

The benefits and costs of each route are shown below.

Which route should be chosen?

private benefits external benefits private costs external costs

$bn $bn $bn $bn

A 14 20 0.4 0.1
B 16 22 1.6 0.4
C 18 12 0.2 1
D 20 18 2 4

© UCLES 2019 9708/32/F/M/19

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3

4 The table shows the total utility gained by a consumer as they consume more apples.

apples
total utility
consumed

0 0
1 10
2 18
3 24
4 28
5 30
6 30

At which level of consumption would the marginal utility be zero?

A 1 B 4 C 5 D 6

5 In the indifference curve diagram point M is the consumer’s initial equilibrium, JK and JL are
budget lines and MN is the substitution effect of a fall in the price of good X.

If good X is a Giffen good, which point will be the consumer’s new equilibrium point after the fall
in the price of good X?

good Y
J

A
B
C
D
M
N

I
O K L
good X

© UCLES 2019 9708/32/F/M/19 [Turn over

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4

6 Selina has an income of $100 and buys food and drink. The price of a unit of food is $2 while the
price of a unit of drink is $1.

Which combination of spending would suggest that Selina wants to save some of her income?

food (units) drink (units)

A 20 50
B 30 40
C 40 20
D 50 10

7 The diagram shows a profit-maximising monopolist.

cost,
revenue
MC

AC
R
S

T
U

O MR AR
output

What would be the change in price if this monopolist changed from profit maximisation to revenue
maximisation?

A R to S B R to T C U to S D U to T

8 The goal of firm X is to make a minimum acceptable level of profit.

What does this describe?

A profit maximisation
B profit satisficing
C revenue maximisation
D sales maximisation

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5

9 A monopoly firm makes only normal profit in the long run.

What is most likely to explain this?

A The firm has decreasing long-run average costs.

B The firm is a public company with numerous shareholders.
C The firm is owned by a small number of financial institutions.
D The market in this industry is highly contestable.

10 The diagram shows the average fixed cost (AFC), average variable cost (AVC) and average total
cost (ATC) curves faced by three firms X, Y and Z. DX, DY and DZ are the three respective
demand curves. All three firms seek to make a profit.

ATC
DZ
price, ATC
cost AFC AVC

DY DZ

AVC
DX DY
AFC
DX
O
quantity

Which statement is not correct?

A Firm X will choose not to produce at all.

B Firm Y is likely to operate in the long run but not in the short run.
C Firm Y is likely to operate in the short run but not in the long run.
D Firm Z will operate in both the short run and the long run.

11 When a firm increases all its inputs fourfold, its output increases threefold.

What does this illustrate?

A decreasing marginal costs

B decreasing returns to scale
C economies of scale
D the law of diminishing returns

© UCLES 2019 9708/32/F/M/19 [Turn over

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6

12 What represents the transfer earnings of the factor enterprise?

A excess profit
B normal profit
C return on capital
D start-up costs

13 A country has a negative income tax.

The curve NT in the diagram shows the country’s initial tax schedule.

+
NT1
tax

NT

O
income

A change in the tax rate causes the schedule to shift to NT1.

How will this affect work incentives and the after-tax distribution of income?

work distribution
incentives of income

A strengthen more equal

B strengthen less equal
C weaken less equal
D weaken more equal

© UCLES 2019 9708/32/F/M/19

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7

14 In which labour market diagram is the economic rent of workers greatest?

A B

wage wage SL

W* SL W* MRPL

MRPL
O L* O L*
labour labour

C D
SL
wage wage SL

W* W*

MRPL MRPL
O L* O L*
labour labour

15 Which statement about government intervention is correct?

A Government failure may result from policies that have unintended side effects.
B Governments cannot identify the existence of inefficiency.
C Inefficient government policies mean that the market system will be better at resource
allocation.
D Market failure means that government action will necessarily improve the situation.

16 The government introduces a minimum wage above the equilibrium market wage rate.

How will this affect low-paid workers according to marginal revenue product (MRP) theory?

A All those initially in employment will receive the new guaranteed minimum wage.
B Fewer of those not already in employment will enter the labour force.
C There will be an increase in the number of low-paid workers in employment.
D Some low-paid workers will lose their job.

© UCLES 2019 9708/32/F/M/19 [Turn over

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8

17 The diagram shows the market for a good that creates a negative externality in production and no
positive externalities. The current level of consumption is OQ1.

S4
price Z S3

Y
S2=MSC=MPC+MEC
P4
P3 S1=MPC
X
P2 W

P1 V

D=MPB=MSB

O Q4 Q3 Q2 Q1
quantity

The government decides to tax producers of the good.

Which size of tax on producers would result in a socially efficient allocation of resources?

A VW B VX C VY D VZ

18 The diagram shows a production possibility frontier, PPF1. The economy is initially at point X.

If the economy achieves actual economic growth but not potential growth, what would the final
position be?

capital PPF2
goods
PPF1

D
C
B

O
consumer
goods

© UCLES 2019 9708/32/F/M/19

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9

19 The information in the table is taken from a country’s national income accounts.

$ million

consumer expenditure 250

investment expenditure 100
government expenditure 150
exports 100
imports 150
taxes 80
subsidies 40

What is the value of national income at factor cost in $ million?

A 410
B 450
C 500
D 550

20 Which source of income is not included in measuring real GDP?

A pension paid to retired people

B profits made by firms
C rent paid to landlords
D wages paid to nurses

21 Which adjustments to real GNP per head might make it a more reliable indicator when comparing
standards of living in different countries?

A adjustments to allow for differences in the level of government spending in different countries
B adjustments to allow for differences in the rates of inflation in different countries
C adjustments to allow for differences in the size of the hidden economy in different countries
D adjustments to allow for differences in the value of exports from different countries

22 What does the Kuznets curve represent?

A changes in income inequality over time

B changes in the Human Development Index over time
C changes in the Multidimensional Poverty Index over time
D the inverse of a Lorenz curve

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10

23 In an open economy with a government sector, the marginal propensity to import is 0.3, the
marginal propensity to tax is 0.3 and the marginal propensity to save is 0.2.

What is the value of the multiplier?

A 1.25 B 2 C 2.5 D 5

24 The information in the table is taken from a country’s national income accounts.

$ million

national income 600

consumer spending 400
investment spending 80
government spending on goods and services 100
exports 140

What is the value of imports in $ million?

A 100 B 120 C 140 D 240

25 The central bank of a country creates cash to purchase government bonds from the commercial
banks.

What is this called?

A liquidity preference
B quantitative easing
C supply-side policy
D the transmissions mechanism

26 Which row shows characteristics of a fast-growing emerging economy?

household
GDP per head birth rate
saving ratio

A falling falling rising

B falling rising falling
C rising falling rising
D rising rising falling

© UCLES 2019 9708/32/F/M/19

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11

27 Which policy is likely to increase unemployment?

A an increase in retraining facilities

B a significant increase in indirect taxes
C the imposition of selective import controls
D an increase in the public sector deficit

28 A government in a developed economy wishes to reduce cyclical unemployment.

Which policy is likely to be most effective?

A decrease government expenditure and increase income tax

B decrease its budget deficit
C increase government expenditure and decrease income tax
D increase its budget surplus

29 An economy adopts an expansionary monetary policy to boost employment. A result of this policy
is that the consumer price index rises at an accelerating rate.

Which curve could represent this?

A Kuznets curve
B Laffer curve
C Lorenz curve
D Phillips curve

30 In country X the government aims to protect jobs.

Which policy is most likely to succeed?

A decrease restrictions on immigrant labour

B decrease subsidies to domestic producers

C increase general tariffs on imports

D remove quotas on imports

© UCLES 2019 9708/32/F/M/19

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12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 9708/32/F/M/19

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2020
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*0744128682*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 03_9708_32/RP
© UCLES 2020 [Turn over
 www.dynamicpapers.com
2

1 Which statement about a product with external costs must be correct?

A The consumption of the product has positive effects on third parties.

B The private costs of its production exceed the social costs of its production.
C The production of the product has negative effects on third parties.
D The social costs of its production exceed the social benefits of its production.

2 What is correct if a firm in a perfectly competitive market is maximising its long-run profits?

it is allocatively it is productively
efficient efficient

A no no
B no yes
C yes no
D yes yes

3 The table shows the results of a cost-benefit analysis undertaken by a government when it was
considering investing US$200 million in building a new airport.

US$ million

private benefits 230

private costs 200
external costs 50

The government will build the airport if the net social benefit creates a return of at least 10% on
its investment.

What will the minimum external benefit need to be in US$ million to achieve this?

A 10 B 20 C 30 D 40

© UCLES 2020 9708/32/F/M/20

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3

4 The diagram shows a total utility curve for a consumer.

At which point does marginal utility equal zero?

total C
utility

A D
O
quantity

5 The diagram shows a consumer’s indifference curves and a budget line for electronic goods and
food.

If income and prices remain the same, at which point on the diagram will the consumer maximise
satisfaction?

electronic
goods
A
C
B I3
I2
D
I1
O
food

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4

6 The diagram shows a consumer’s total utility.

total
utility
TU1
TU2

TU3

TU4
O
quantity

Which curve would mean that marginal utility is diminishing?

A TU1 B TU2 C TU3 D TU4

7 Which is an internal economy of scale?

A cheaper loans from a local bank resulting from a merger

B efficient local transport networks
C specialist training facilities provided by a local college
D the reputation of an area for a particular product

8 Why might a firm continue in production in the short run even though the price of its product has
fallen below its average total costs of production?

A It anticipates a rise in variable costs.

B It expects the fall in price to be temporary.
C It has large fixed costs of production.
D It has no control over the price of its product.

© UCLES 2020 9708/32/F/M/20

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5

9 The diagram shows that a producer increases output from Q1 to Q2.

MC
cost,
revenue

AC

AR
O Q1 Q2 quantity
MR

What will be the result?

total profit total revenue

A increased increased
B increased reduced
C reduced increased
D reduced reduced

10 What is true about economies of scale but not diseconomies of scale?

A They occur because average revenue is increasing.

B They occur because of management policy changes.
C They occur in the short run.
D They occur with decreasing average cost.

11 What is most likely to be found when comparing the long-run equilibrium outcome in monopolistic
competition with that in perfect competition?

A a greater degree of excess capacity in monopolistic competition

B a higher level of profit in monopolistic competition
C a larger number of firms in monopolistic competition
D a more price-elastic demand curve in monopolistic competition

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6

12 A government divides a nationalised rail service and sells it to five private companies. The largest
of these companies dominates the four smaller companies.

How will these changes affect the market structure for rail services?

A It will change from monopoly to monopolistic competition.

B It will create an oligopoly with the possibility of price leadership.
C It will encourage freedom of entry due to lower capital costs.
D It will guarantee ticket prices based on average costs.

13 What is meant by ‘real wages’?

A the marginal physical product of labour

B the opportunity cost of labour
C the purchasing power of money wages
D wages net of tax

14 The graph shows the percentage growth in average earnings for the UK economy.

2.8
2.8
UK average
weekly earnings 2.6
2.6
growth (%)
2.4
2.3
2.2 2.2
2.2
2.1
2.0
Jan April
2017 2017

What is the most likely cause of the pattern shown in the graph?

A a decrease in the supply of labour

B a decrease in the interest rate
C an increase in productivity
D an increase in the size of the labour force

© UCLES 2020 9708/32/F/M/20

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7

15 Which combination of policy changes is most likely to redistribute income from the richest
households to the poorest households in an economy?

means-tested benefits
indirect taxes
benefits for everyone

A decrease increase decrease

B decrease increase increase
C increase decrease increase
D increase decrease decrease

16 The diagram shows the impact on the labour market of the introduction of a national minimum
wage (MW).

wage rate supply

X Y Z
MW

demand

O
labour

What do the distances XY and YZ represent?

XY YZ

A increase in employed workers redundant existing workers

B redundant existing workers unemployed new entrants
C redundant existing workers increase in employed workers
D unemployed new entrants redundant existing workers

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8

17 At present, motorists who drive their cars within area 1 on the map pay a daily congestion charge
of $8.

Y
Z

area 1

area 2

Which car journeys would decrease in number if the congestion charge area were extended to
include area 2?

A journeys from point X to point Z

B journeys from point X to point Y
C journeys from point Y to point Z
D journeys from point Z to point Y

18 What is most likely to be the biggest contribution to sustainable economic growth in a developed
economy?

A a movement of people from rural to urban areas

B an increase in technical training
C an increase in the size of the population
D rising consumer credit levels

19 When calculating national income by the income method, what would not be included?

A income from abroad

B profits of private sector businesses
C rent from the ownership of land
D transfer payments

© UCLES 2020 9708/32/F/M/20

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9

20 Which changes to basic income at points W and X might be included in the calculation to reach
disposable income?

basic income
add W =
gross income
subtract X =
disposable income

W X

A bonus payment direct taxes

B bonus payment indirect taxes
C cost of living direct taxes
D cost of living indirect taxes

21 In a closed economy with no government sector, when will an increase in investment spending
generate the largest increase in equilibrium national income?

A when households have a high level of autonomous consumption

B when households have a high level of compulsory saving
C when households have a high marginal propensity to consume
D when households have a high marginal propensity to save

22 The table shows economic data for four different countries for 2015.

Which country is most likely to be classed as ‘developed’?

GDP per annum ($) HDI population

A 10.9 trillion 0.727 1.37 billion

B 2.4 trillion 0.897 66.8 million
C 481 billion 0.527 182.2 million
D 19 billion 0.516 15.6 million

23 What is an example of a Keynesian 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 a reduction in the rate of tax on goods and services

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10

24 The graph shows changes in the unemployment rates in countries X, Y and Z over the period
2000 to 2010. All three countries faced recession between 2008 and 2010.

10
unemployment
rate % 8 X

Y
6
Z
4

0
2000 2005 2008 2010
year

Which conclusion can be drawn from the graph about the period 2000 to 2010?

A All three countries experienced an upward trend in unemployment over the period.
B Country X had the highest number out of work in 2010.
C In terms of unemployment, the country least harmed by the recession was country Y.
D The total number out of work in the three countries was higher in 2010 than in 2000.

25 The diagram shows the annual percentage (%) change in employment and output in the UK
private sector between 2000 and 2012.

4 output 10
employment 2 5 output

0 0
employment
–2 –5

–4 –10

–6 –15
2000 02 04 06 08 10 12

In which year did labour productivity decrease the most?

A 2001 B 2008 C 2011 D 2012

© UCLES 2020 9708/32/F/M/20

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11

26 Recently, among European countries the Netherlands had the highest percentage of part-time
employees and an average working week for all employees of 32 hours. Greece had a smaller
percentage of part-time employees but an average working week for all employees of 41 hours.

Which conclusion may be drawn from this information?

A Greece has a higher percentage of its workforce in full-time employment than the
Netherlands.
B On average part-time employees work longer in Greece than in the Netherlands.
C The average working week in Greece for full-time employees is longer than in the
Netherlands.
D There are more part-time employees in the Netherlands than in Greece.

27 In 2017 a report suggested that by 2030 automated robots could threaten 33% of existing jobs in
the UK, compared with 38% in the US and 21% in Japan. Manufacturing and retail jobs faced the
greatest threat.

Which type of unemployment is illustrated in the above paragraph?

A demand-deficient unemployment
B frictional unemployment
C seasonal unemployment
D structural unemployment

© UCLES 2020 9708/32/F/M/20 [Turn over

 www.dynamicpapers.com
12

28 Which diagram shows the effect of a policy of quantitative easing on the rate of interest?

A B

rate of rate of
interest interest

LP2
LP1 LP1

O MS1 MS2 O MS1

quantity quantity
of money of money

C D

rate of rate of
interest interest

LP1
LP1 LP2

O MS2 MS1 O MS1

quantity quantity
of money of money

29 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 monetary policy
D supply-side policy

30 What may prevent a government achieving a faster rate of growth of real GDP?

A Consumption and investment expenditure are interest rate elastic.

B The consumer price index is below its target set by the central bank.
C The economy is operating on the long-run aggregate supply curve.
D There is a large negative output gap in the economy.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

© UCLES 2020 9708/32/F/M/20

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2021
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*0320037266*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB21 03_9708_32/3RP
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2

1 Over time the average total cost curve of a firm is lowered.

Which form of efficiency does this represent?

A allocative
B dynamic
C Pareto
D productive

2 The diagram shows the private and social marginal costs and benefits curves for the antibiotics
market. The market equilibrium is at point X.

cost MPC = MSC

benefit

P1
X
P
MSB
MPB
O Q Q1
output

Why does market failure occur?

A There is overconsumption and overpricing.

B There is overproduction and under-pricing.
C There is underconsumption and under-pricing.
D There is underproduction and overpricing.

3 The table shows the results of a cost-benefit analysis of the construction of a new airport.

US$ million

private cost 400

private benefit 440
social cost 450
social benefit 480

What is the total value, in US$ million, of all the externalities created by construction of the new
airport?

A 30 B 40 C 50 D 90

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3

4 A utility-maximising consumer has a fixed income and can choose between good X and good Y.
The diagram shows her budget line and different consumption combinations (F, G, H, J, K and L)
of products X and Y.

F
good G
Y

J
H K

L
O good X

Which consumption combinations are currently available to her?

A F, G, H and L
B F, G, J, and L
C G, J and L only
D G, H, J and L

5 Rational consumer Romesh spent 90 rupees buying herb X and spice Y. Both cost 10 rupees per
gram.

grams total utility total utility

purchased herb X spice Y

2 15 12
3 30 25
4 45 35
5 55 42

How much of each should he buy?

herb X spice Y
(grams) (grams)

A 2 3
B 3 5
C 4 5
D 5 4

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4

6 In the diagram, TC is a firm’s short-run total cost curve.

TC

costs

O Q1 Q2 Q3
output

Which statement is correct?

A Average total cost is minimised at output OQ3.

B Average variable cost is minimised at output OQ2.
C Average variable cost is minimised at output OQ3.
D Marginal cost is minimised at output OQ1.

7 What is correct about cartels?

A They are a form of trade union restrictive practice.

B They are a type of industrial merger.
C They are often subject to government investigation.
D They establish a vertical link between firms.

8 When output increases in the short run, which statement is correct?

A Average fixed cost first falls and then, beyond some point, rises.
B Average variable cost increases as soon as the law of diminishing marginal returns begins to
operate.
C The minimum point of the average total cost curve occurs at a greater level of output than the
minimum point of the average variable cost curve.
D When marginal cost reaches its minimum point, average variable cost must be greater than
average fixed cost.

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5

9 The diagram shows a competitive industry facing constant marginal and average costs. In
equilibrium its output is OQC and its price is OPC. A series of horizontal mergers generate
economies of scale and create a monopoly in the industry. The new equilibrium output is OQM
and price is OPM.

price

PM
W
PC MCC = ACC
X Z
MCM = ACM

MRM DC = ARM
O QM QC
quantity

Which area represents the producer surplus after these mergers?

A W B W+X C W+X–Z D X

10 A firm that controlled over 50% of the market successfully merges with its main competitor to
form one large company.

What is the most likely reason why, from the firm’s point of view, the merger will fail?

A a fall in consumer surplus

B cost of funding the merger
C economies of scale
D market dominance

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6

11 The diagram shows a monopolist’s cost and revenue curves.

cost, MC
revenue

ATC

P1
P2

AR
O Q1 Q2
MR
output

The monopolist changes its price from P1 to P2 and its output from Q1 to Q2.

Which change in objective is indicated by the move from P1 to P2?

A profit maximisation to sales revenue maximisation

B profit maximisation to sales maximisation subject to earning a normal profit
C sales revenue maximisation to profit maximisation
D sales revenue maximisation to sales maximisation subject to earning a normal profit

12 The diagram shows the demand curve for a firm’s product.

price

D
O quantity

Which diagram depicts the shape of the firm’s corresponding total revenue (TR) curve?

A B C D
TR TR
price price price price

TR TR

O quantity O quantity O quantity O quantity

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7

13 A government is attempting to achieve allocative efficiency in a nationalised industry.

price
$
W

Y AC
Z MC
MR AR
O
quantity

What will the government do?

A It will set price at W and make sub normal profit.

B It will set price at X and the firm will make supernormal profits.
C It will set price at Y and make normal profits.
D It will set price at Z and make a loss.

14 The diagram shows a sign beside a busy road.

This road was recently

cleared of 17 bags of litter.

Clearing litter puts lives at risk.

What is this an example of?

A free good
B government regulation
C merit good
D nudge theory

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8

15 Recent research has shown that consumption of some foods might be harmful. A government
committee considers how to intervene in the markets.

Which intervention is most likely to reduce consumption of these foods without reducing income
equality?

A a minimum price for the harmful foods

B a subsidy for substitute foods
C an ad valorem tax on the harmful foods
D an indirect tax on the harmful foods

16 In which circumstances is a poverty trap least likely to operate?

A A female worker is paid less than a male worker for doing the same job.
B A worker is paid the minimum wage and refuses a higher paid job because net income is
lower after tax.
C A worker refuses higher paid work as it means more expensive travel and childcare costs.
D An unemployed worker refuses a job because earnings are less than unemployment benefit.

17 What would be most likely to cause the demand for labour in an industry to be inelastic?

A Labour costs are a small percentage of total cost.

B The demand for the final product has a price elasticity of demand that is greater than one.
C The workforce belongs to a strong trade union.
D There is a large pool of readily available labour.

18 Which influence is least likely to promote sustainable economic growth in a developing

economy?

A high saving rates

B involvement in free trade
C protected property rights
D rapid population growth

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9

19 Governments are interested in providing statistics on the standard of living. They measure the
value of material goods and services.

Non-material characteristics that affect the standard of living cannot easily be measured.

What is an example of a non-material characteristic?

A the failure to include unpaid work in the home

B the freedom to make informed economic choices
C the proportion of GNP used for weapons of war
D the removal of taxes from all forms of consumer expenditure

20 The diagram shows Lorenz curves for a developed economy.

100
cumulative
% of income

0 100
cumulative %
of households

Which combination of supply-side policies would shift the Lorenz curve from X to Y?

top rate of national

education
income tax minimum wage

A increase free increase

B increase students pay abolish
C reduce free abolish
D reduce students pay increase

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10

21 Two members of the Hernandez family have recently become unemployed. Mariana has lost her
job at the local factory, which has closed because of competition from cheaper imports. Alfonso
has lost his job as a shop assistant because the sales have dropped during a recession.

How would an economist classify these job losses?

Mariana Alfonso

A frictional unemployment seasonal unemployment

B regional unemployment frictional unemployment
C structural unemployment cyclical unemployment
D technological unemployment structural unemployment

22 Which combination of fiscal, monetary and supply-side policies is most likely to reduce
unemployment?

fiscal policy monetary policy supply-side policy

A increasing increasing increasing flexibility
taxation interest rate in the labour market
B increasing decreasing the increasing education
government expenditure money supply and training
C decreasing decreasing increasing flexibility
taxation interest rate in the labour market
D decreasing increasing the increasing education
government expenditure money supply and training

23 Which policy combination will reduce the level of national income by the greatest amount?

A decrease direct taxation and increase interest rates

B decrease direct taxation and increase quantitative easing
C increase direct taxation and increase interest rates
D increase direct taxation and increase quantitative easing

24 In a closed economy, the marginal propensity to save is 0.1 and the marginal propensity to pay
taxes is also 0.1. These values are constant and do not vary with the level of income.

What will be the increase in national income if there is an injection of $100 million into the circular
flow?

A $1000 million
B $500 million
C $100 million
D $80 million

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11

25 Which combination is consistent with liquidity preference theory?

type of demand determined by determined by

for money interest rates changes in income

A speculative yes no
B speculative no yes
C transactions no no
D transactions yes no

26 What is assumed by Keynesians?

A An increase in supply always creates an equal increase in demand.

B Government intervention is required to manage the economy.
C Prices always adjust so that markets clear.
D The economy always has full employment.

27 Which row correctly identifies injections into a country’s circular flow of income?

private sector public sector trade sector

(S > I) (T > G) (X > M)

A no no no
B no no yes
C yes no no
D yes yes yes

28 Which policy by developed economies would be most beneficial for developing economies?

A a ban on resource exploration by mining companies in developing economies

B restrictions on investment by global firms in developing economies
C the removal of restrictions on emigration of skilled labour from developing economies
D the withdrawal of agricultural subsidies in developed economies

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12

29 The natural rate of unemployment in an economy is 5%.

What will happen if a government persists in trying to achieve a target rate of unemployment of
3% by expansionary monetary policy?

A an accelerating rate of inflation

B a diminishing rate of inflation
C a high but constant rate of inflation
D a negative rate of inflation

30 What is a reflationary fiscal measure?

A increasing government spending

B increasing taxes
C increasing the money supply
D reducing interest rates

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/32/F/M/21

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice February/March 2022
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*4191877893*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB22 03_9708_32/2RP
© UCLES 2022 [Turn over
 www.dynamicpapers.com
2

1 What can be deduced about an economy where no-one can be made better off without making
someone else worse off?

A Firms succeed in maximising profits.

B Production causes no external costs or benefits.
C The distribution of income and wealth is perfectly equal.
D The resources of the economy are allocated efficiently.

2 What is equivalent to social benefits?

A the amount that the government spends on social security benefits

B the benefit gained by society from total government spending
C the benefit to third parties from household consumption of a good
D the private and external benefits from household consumption of a good

3 The diagram shows the average cost (AC), marginal cost (MC), average revenue (AR) and
marginal revenue (MR) curves for a monopoly.

At which point will allocative efficiency be achieved?

price

A
P1

P2 B C
P3 AC
P4 MC
D
MR AR
O Q1 Q2 Q3
quantity

4 How can the concept of marginal utility explain the shape of the downward sloping demand
curve?

A Consumer tastes and preferences only change when their spending power increases.
B Extra utility gained from consuming successive units of a good will fall continuously.
C Satisfaction of consuming one more unit of a good is greater than the loss of money spent.
D Total utility gained from buying more and more units of a good will continue to increase
indefinitely.

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3

5 XY is the budget line of an individual consumer.

quantity of X
good M

Y
O quantity of
good N

Which changes could leave the position of XY unchanged?

consumer’s
price of good M price of good N
income

A decrease decrease increase

B decrease increase increase
C increase increase decrease
D increase increase increase

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4

6 The diagram shows an indifference map and two budget lines.

When the consumer’s budget line shifts from BL1 to BL2, consumption changes from point W to
point Z.

good Y

I2
I1

W Z

BL1 BL2
O good X

What do these changes indicate about the nature of goods X and Y?

good X good Y

A normal inferior
B normal normal
C inferior normal
D inferior inferior

7 Small farmers supply all their rice production to a single buyer.

Which term best describes this market structure?

A monopolistic
B monopoly
C monopsony
D perfect competition

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5

8 A firm operating in an imperfectly competitive market decides to change its objective from sales
revenue maximisation to sales volume maximisation.

Why might it have decided to do this?

increase short-run maximise short-run minimise short-run

profits market share average costs

A no no yes
B no yes no
C yes no yes
D yes yes no

9 The diagram shows the marginal cost (MC), average cost (AC), marginal revenue (MR) and
average revenue (AR) curves of a profit-maximising, monopolistically competitive firm.

cost and
revenue MC

AC

AR
O
quantity
MR

Based on its profit, and assuming no market growth, what is likely to happen to the demand for
this firm’s output in the long run?

A The short-run profit position will encourage other firms to enter the market and the firm’s
demand curve will shift to the left.
B The short-run profit position will encourage other firms to enter the market and the firm’s
demand curve will shift to the right.
C The short-run profit position will encourage other firms to exit the market and the firm’s
demand curve will shift to the left.
D The short-run profit position will encourage other firms to exit the market and the firm’s
demand curve will shift to the right.

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6

10 A monopoly firm is producing output OT, and selling its product at price OW, thereby maximising
its profits, as shown.

AC
W X
AC-subsidy
price
Y MC
Z

V
AR

O T
quantity
MR

The government now decides that the firm’s operation generates positive externalities, and so
gives the firm a subsidy.

Assuming that the firm continues to seek maximum profit, what will result?

A The firm continues to produce OT, and price remains at OW.

B The firm continues to produce OT, but charges a lower price.
C The firm increases production above OT, and reduces price.
D The firm reduces production below OT, and reduces price by the amount of the subsidy.

11 In many developed economies, large and small firms often exist side by side in the same
industry.

What is most likely to explain the survival of the small firms?

A They each offer a much wider range of products.

B They have a higher minimum efficient scale.
C They pay much higher wages to their staff.
D They provide a more personal level of consumer service.

12 What is generally associated with the principal agent problem?

A Directors prefer company growth to greater shareholder dividends.

B Managers ignore workers’ concerns about safety in the workplace.
C Shareholders determine the price of products.
D Workers go on strike against managers’ reorganisation plans.

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7

13 A government wishes to reduce the negative externalities caused by the use of coal.

Which policy should the government use?

A Impose an indirect tax on the production of hydroelectric power.

B Increase income tax.
C Remove any restrictions on coal production.
D Subsidise wind-powered electricity production.

14 What would be an example of ‘nudge’ theory?

A a subsidy on fresh fruit to increase demand

B a unit tax on unhealthy food to reduce demand
C banning all unhealthy food to reduce demand
D putting fresh fruit at eye level in shops to increase demand

15 When is a policy of income redistribution from rich people to poor people most appropriate?

A when control of demand-pull inflation is the priority

B when equality is valued more highly than efficiency
C when monetary reward is the best incentive to risk-taking
D when the rich have higher marginal utility curves than the poor

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8

16 Which diagram correctly shows the relationship between the average product (AP) and the
marginal product (MP) of labour, given that the quantities of other factor inputs remain constant?

A B
average MP average
product, AP product,
marginal marginal
product product

MP AP
O labour O labour

C D
MP
average average AP
product, product,
marginal marginal
product product

AP MP
O labour O labour

17 Wages in industry X are significantly higher than in industry Y.

What could explain this difference?

A Workers in industry Y are highly mobile.

B Trade union organisation in industry Y is relatively strong.
C Industries X and Y compete with each other for workers.
D Industry Y has non-monetary advantages.

18 Economic growth has both benefits and costs.

In which situation would living standards be judged to have definitely increased?

A As countries became industrialised, economic growth led to a fall in hours worked, as well as
a rise in real incomes.
B China had a huge rise in real GDP per head in the last 20 years but there was a decrease in
air quality in urban areas.
C Economic growth in high-income countries has seen childhood obesity increase, but has also
seen increased resources devoted to its treatment.
D The 1990s saw a significant rise in real GDP per head in the US with only a relatively small
increase in the Gini coefficient during the same period.

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9

19 What is not included in National Income accounts?

A a gift by a parent to her daughter as a deposit on an apartment

B earnings of a part-time worker in a school dining room
C interest earned on savings accounts intended for retirement
D profits re-invested by a company to fund capital expenditure

20 A government wishes to attract foreign direct investment to assist the development of its
economy.

What is most likely to encourage this?

A improved health and safety standards for workers

B increased import quotas
C increased spending on infrastructure
D introducing a minimum wage

21 Which indicator is least likely to be used when measuring the comparative economic
development of a country?

A adult literacy rate

B average life expectancy at birth
C level of real GNP per head
D size of population

22 Which term is given to short-term unemployment when people are changing jobs?

A cyclical
B frictional
C seasonal
D voluntary

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10

23 The table shows data for an economy’s labour market.

million
number of people of working age 42.7
number of people of working age who are 2.2
actively seeking work, but are not working
number of people of working age who are 9.4
not actively seeking work

What is the economy’s percentage employment rate, to the nearest whole number?

A 5% B 23% C 73% D 95%

24 Rapid economic growth is claimed by some to harm the environment.

Which outcome would not harm the environment?

A the greater mobility of workers resulting from increased vehicle ownership

B the increased levels of income that reduce fertility rates and family size
C the relocation of workers from agricultural to manufacturing employment
D the use of improved technology to access previously inaccessible natural resources

25 The diagram shows an increase in both aggregate demand from AD1 to AD2 and aggregate
supply from AS1 to AS2.

AS1 AS2
general
price
level

AD2
AD1

O Y1 Y2 Y3 Y4
real GDP

What shows the output gap after the increase in AD and AS?

A Y1Y2 B Y1Y3 C Y2Y3 D Y3Y4

© UCLES 2022 9708/32/F/M/22

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11

26 Which statement would be associated with Keynesian economic theory?

A A change in the money supply is the main determinant of the rate of inflation.
B When unemployment falls below its natural rate, there is upward pressure on prices.
C Total spending in the economy affects real output and employment in the short run.
D Wages and prices are flexible so output and employment will always return to its equilibrium
rate.

27 In a closed economy with no government sector, the multiplier shows the impact of a change in

A consumption on investment.
B investment on national income.
C national income on consumption.
D national income on investment.

28 In year 1, countries X and Y are each in balance of payments equilibrium. In year 2, country X, an
exporter of oil, raises the price of its oil, which increases its foreign earnings by $500m, half of
which is deposited with banks in country Y.

Country Y is an important buyer of X’s oil and the price rise increases its foreign expenditure by
$400m.

Other things remaining equal, what are the total currency flows for X and Y?

X ($m) Y ($m)

A +150 –150
B +150 – 400
C +250 –150
D +250 – 400

29 What does the Laffer curve show?

A the relationship between the rate of inflation and the rate of unemployment
B the relationship between the rate of interest and the speculative demand for money
C the relationship between tax rates and the amount of tax revenue collected by governments
D the relationship between how two goods can be produced in an economy with given
resources

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12

30 The table shows key macroeconomic indicators for four countries in 2018.

economic growth inflation rate current account

unemployment
(% change in (% change in CPI balance
rate (%)
GDP per annum) per annum) (% of GDP)

Argentina – 6.2 9.1 50.7 – 4.8

China 6.4 3.8 1.5 0.4
Italy 0 10.7 0.9 2.6
United States 3.0 3.8 1.5 – 2.4

What can be concluded from the table?

A Countries with current account surpluses had low unemployment rates.

B Countries with high economic growth rates had high inflation rates.
C Countries with low economic growth rates had high unemployment rates.
D Countries with positive economic growth rates had current account deficits.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/32/F/M/22

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 A Level Multiple Choice February/March 2023
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*6162979766*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 03_9708_32/3RP
© UCLES 2023 [Turn over
 www.dynamicpapers.com
2

1 Utility theory is based on the assumption of the ‘rational consumer’.

What is necessary to act as a ‘rational consumer’?

choice is
access to
addictive independent
complete
behaviour of other
information
consumers

A no yes yes
B yes no no
C yes yes no
D yes no yes

2 The price of good S is $6 and the price of good T is $8. A consumer’s marginal utility for each
good is shown.

marginal utility marginal utility

units
of good S of good T

1 36 32
2 24 22
3 18 20
4 9 18
5 0 9

If this consumer wants to maximise total utility, which combination of goods would they consume?

good S good T

A 1 1
B 2 1
C 3 4
D 5 5

© UCLES 2023 9708/32/F/M/23

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3

3 The diagram shows the effect of a price change on an individual consumer’s equilibrium, moving
from E1 to E2.

good Y
F

E2
E1

I2

I1

O G H
good X

What can be deduced from the diagram about the price change, the substitution effect and the
income effect?

substitution
price change income effect
effect

A price of X falls positive positive

B price of X falls positive negative
C price of Y rises negative positive
D price of Y rises negative negative

4 What is likely to help create dynamic efficiency?

A Entry barriers are reduced to increase competition in the market.

B Firms are legally bound to produce where price equals marginal cost.
C Taxes on profits are raised to encourage firms to produce where price equals average cost.
D Taxes on retained profits are reduced to encourage investment in new technology.

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 www.dynamicpapers.com
4

5 At which level of output is sales maximisation achieved consistent with earning normal profit?

MC
cost or
price AC
$

MR

AR
O A BC D
quantity

6 What is achieved in monopolistic competition in the long run?

allocative supernormal
efficiency profit

A no no
B no yes
C yes no
D yes yes

7 The world’s largest pharmaceutical companies developed and distributed an effective vaccine to
combat a dangerous virus.

What can be associated with this vaccine programme?

A demerit good and negative production externality

B imperfect competition and positive consumption externality
C perfect competition and negative consumption externality
D public good and negative production externality

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5

8 A landlord owns a house which is rented to tenants. The tenants are required to pay the
electricity and water bills. The landlord is required to decorate and repair damage to the house
and its gardens.

What is not an example of the principal-agent problem?

A The tenants forget to switch off a tap when filling a bath and water overflows, damaging the
floor.
B The tenants have a party and their guests cause damage to the interior of the house.
C The tenants leave the lights and the TV on when they go out for an evening meal.
D The tenants park their car in the garden, damaging the grass and the surrounding hedge.

9 The result of a cost-benefit analysis of a proposed government road-building project is that there
will be a positive net social benefit of $50 million.

Why might the government not proceed with the project?

A The project would not be profitable for a private firm.

B The project would cause negative externalities.
C There is limited capital available for government projects.
D There would be more who lost than gained.

10 If the marginal cost of a good is lower than its price, allocative efficiency has not been achieved.

What is likely to remedy this situation?

production of price of
the good the good

A decrease decrease
B decrease increase
C increase decrease
D increase increase

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6

11 The diagram shows an industry’s demand for and supply of labour.

wage
rate S

W0

O X Y Z
number
of workers

Initially, the labour market is in equilibrium. The government introduces a minimum wage of OW0.

What will be the effect on the level of employment in the industry?

A a decrease equal to XY
B a decrease equal to XZ
C an increase equal to XY
D an increase equal to YZ

12 The diagram shows the supply curve of labour for two separate markets, X and Y.

X
wage
rate

O
quantity of labour

What explains the difference in the gradients of the labour supply curves?

A Market X has a higher marginal revenue product per worker than Y.

B Market X has a higher percentage of its labour belonging to a trade union than Y.
C Market X has higher labour costs as a percentage of total costs than X.
D Market X has more specific skills and training requirements than Y.

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13 The table shows the main characteristics of employment in two occupations.

occupation X occupation Y

average annual wage $100 000 $60 000

number of weeks of annual leave 5 weeks 10 weeks
average length of working week 48 hours 44 hours
job security low high
length of training course to obtain job qualification 1 year 2 years

What can definitely be deduced from the table?

A Those employed in occupation Y attach greater importance to job security.

B Those employed in occupation X attach less importance to leisure activities.
C There will be more competition for places on training courses to enter occupation X than
occupation Y.
D Occupation Y has more non-pecuniary advantages than occupation X.

14 Which changes in direct and indirect tax are likely to increase the inequality in the distribution of
income in a developed economy?

direct taxes indirect taxes

A fall fall
B fall rise
C rise fall
D rise remain constant

15 A government wishes to reduce the use of cars in cities.

Which policy should be used?

A a decrease in parking charges

B lowering tax on petrol (gasoline)
C restricting cycling
D subsidising public transport

16 In a country, the top 20% of earners pay 45% in income tax and 25% on sales taxes, and receive
5% in cash benefits.

What is the percentage of disposable income for this group?

A 30% B 55% C 60% D 80%

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17 Which combination of circumstances is most likely to lead to an increase in a country’s budget

deficit?

government
total GDP unemployment
spending

A decreases rises decreases

B decreases rises no change
C increases falls increases
D increases falls no change

18 Which statement applies to a central bank and to a commercial bank?

central commercial
bank bank

A issues bank notes yes yes

B lender of the last resort yes yes
C maximises profit no yes
D receives deposits directly no yes
from the government

19 What is most likely to be the biggest contribution to sustainable economic growth in a developed
economy?

A a movement of people from rural to urban areas

B an increase in technical training
C an increase in the size of the population
D rising consumer credit levels

20 Which policy is likely to increase unemployment?

A an increase in retraining facilities

B a significant increase in indirect taxes
C the imposition of selective import controls
D an increase in the public sector deficit

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21 What does the accelerator principle state?

A Consumption is a function of the rate of change of income.

B Income is a function of the rate of change of investment.
C Investment is a function of the rate of change of income.
D Investment is a function of the rate of interest.

22 Which government aim is least likely to be achieved using macroeconomic monetary policy
measures?

A low unemployment level

B more equal income distribution
C stable exchange rate
D steady price level

23 A government adopts an expansionary fiscal policy to increase the economic growth rate.

Which other main macroeconomic aims is this policy most likely to help?

full stable current account

employment price level surplus

A   
B   
C   
D   

24 Country X decides to devalue its currency to eliminate a balance of payments deficit.

Why might devaluation have a positive effect on its macroeconomy?

A Competitive pricing of exports may create employment potential in country X.

B Foreign importers may depreciate their own currencies and reduce any advantage gained by
country X.
C Inelastic demand for imported raw materials may lead to cost inflation in country X.
D Loss of import duties by country X may reduce government backing for trade promotion.

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25 Which cause of economic growth would involve the least cost for present and future generations
of a country’s population?

A increased exploitation of a country’s mineral resources

B investment financed by borrowing from abroad
C investment financed by high rates of domestic savings
D technological innovations in production processes

26 Which additional components may be included when measuring economic development that are
not included in measures of economic growth?

changes in
level of real income
the distribution
poverty per capita
of GDP

A no no yes
B no yes no
C yes yes no
D yes yes yes

27 Which curve is shown in the diagram?

income
inequality

O
income per capita

A Kuznets curve
B Laffer curve
C Lorenz curve
D Phillips curve

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28 Which indicator is least likely to be used when measuring the comparative economic
development of an economy?

A mean years of schooling

B average life expectancy at birth
C level of real GNP per head
D size of population

29 What is an example of an expenditure-switching policy?

A an increase in income tax rates

B an increase in interest rates
C an increase in tariff rates
D an increase in the supply of money

30 Labour from low-income countries often migrates to high-income countries and finds jobs.

How would such a movement of labour be likely to affect the economic growth and the pressure
on wage rises in the high-income country?

pressure on
economic growth
wage rises

A decrease decrease
B decrease increase
C increase decrease
D increase increase

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reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

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Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 A Level Multiple Choice February/March 2024
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*8674842092*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB24 03_9708_32/RP
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2

1 A person buys two pairs of socks.

What does the purchase of the second pair of socks lead to?

A a decrease in marginal productivity

B a decrease in marginal utility
C an increase in marginal productivity
D an increase in marginal utility

2 What does an indifference curve show?

A the amount of two products achievable with given income and prices
B the different combinations of two goods that give a consumer equal utility
C the income available to buy the two goods
D the rate at which marginal utility changes as consumption changes

3 The table shows the total amount consumers are willing to pay for different quantities of good X
and the total external benefits that arise from the consumption of X.

quantity of consumers’ total external

good X willingness to pay benefits
(000 units) ($000) ($000)

1 100 20
2 180 38
3 240 54
4 280 68
5 300 80

What is the value of the marginal social benefit when 5000 units are consumed?

A $12 000 B $32 000 C $80 000 D $380 000

© UCLES 2024 9708/32/F/M/24

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3

4 The statement and the table provide information about a production function.

The production function represents the amount of ......1...... obtainable from each
combination of ......2...... and can be used to give information about ......3...... .

Which words correctly complete gaps 1, 2 and 3?

1 2 3

A demand labour returns to scale

B demand labour normal profit
C output inputs returns to scale
D output inputs supernormal profit

5 Two firms selling the same type of product find it more efficient to merge.

Which combination describes how the merged firm’s average costs of production and demand
curve are expected to change?

average costs demand curve

A fall more elastic

B fall more inelastic
C rise more elastic
D rise more inelastic

6 The diagram shows the costs and revenues of a firm operating in an imperfect market.

MC
cost,
revenue
AC

MR
AR
O W XYZ
output

The firm is currently producing at the profit maximising level of output. It wishes to produce at the
sales maximising level of output.

What would be the change in its output?

A OW to OX B OW to OY C OW to OZ D OY to OZ

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4

7 In which market structure is dynamic efficiency least likely to occur?

A oligopoly
B monopolistic competition
C monopoly
D perfectly competitive

8 Which type of employment contract is most likely to overcome the principal agent problem?

A increasing monthly salaries of waiters in a restaurant to decrease their dependence on tips

from customers
B linking workers’ pay with the profits of the firm to motivate them to raise the profitability of the
firm
C making full fee payment in advance to a lawyer to motivate him to prepare a legal case well
D offering permanent contracts to give workers job security

9 Company R manufactures steel. Company S produces ships. Company T operates oil tankers.
Company V operates cruise liners.

Which statement is correct?

A If R takes over S, this is an example of forwards vertical integration.

B If S takes over V, this is an example of backwards vertical integration.
C If T takes over S, this is an example of diversification.
D If V takes over S, this is an example of horizontal integration.

10 There are two firms in an industry. Firm X faces a choice. It can either act independently or work
with its rival. If it acts independently its profit could be $900 a week but it could be only $400 a
week depending on what its rival does. If it works with its rival the joint profit of the two firms
together would be $1400, $700 each. It has no knowledge of what the rival’s policy will be.

Which concept describes this situation?

A contestable market
B kinked demand curve
C principal agent problem
D prisoner’s dilemma

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11 A government wishes to use market forces to remove a negative externality in the consumption
of a good.

Which policy is likely to be the most effective?

A It should provide information about the undesirable side-effects of the good.

B It should give producers a subsidy, to allow consumers to purchase the product more
cheaply.
C It should impose an indirect tax on consumers, to reduce consumption to the socially efficient
level.
D It should not interfere at all, to allow the free market to generate maximum efficiency.

12 A government decides to replace a private company with its own company to collect household
waste.

Why could such action be justified?

A Waste collection is a public good.

B Costs of waste collection are bound to be lower if paid out of local taxes.
C Private companies are always less efficient than government companies.
D Private companies might put profits before customer needs.

13 What is a failure of government microeconomic intervention?

A An indirect tax equal to external costs is imposed on cigarettes and the demand falls.
B Limits are placed on a trade union’s restrictions that increase labour mobility.
C Price controls on bread are removed which allow a free market to operate.
D Tariffs are imposed on imported goods which cause the Gini coefficient to increase.

14 What would shift the marginal revenue product curve for workers producing electric vehicles to
the right?

A a decrease in the price of petrol vehicles

B a decrease in the productivity of electric vehicles workers
C an increase in the price of electric vehicles
D an increase in the wage rate of electric vehicles workers

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6

15 The diagram shows a perfectly competitive firm’s average product of labour (APL) and marginal
product of labour (MPL) curves.

wage ($),
average
product,
marginal
product
(units) W

APL
MPL

O N1 N2 N3 N4

workers employed

How many workers will the firm employ at a wage of W?

A ON1 B ON2 C ON3 D ON4

16 Which change is likely to result in a decrease in the demand for money?

A a decrease in the use of credit cards by consumers

B a switch from monthly to weekly payments of wages
C a decrease in interest rates
D an increase in the perceived risks involved in holding government bonds

17 Which combination of factors is most likely to lead to a decrease in structural unemployment?

A a fall in inflation and an increase in lending for low income households

B a fall in real wages and an increase in subsidies for technological improvements
C an increase in tariffs and lower taxes for new businesses
D the introduction of a national minimum wage and better working conditions

18 Why might country X have a higher natural rate of unemployment than country Y?

A There is a higher level of trade unionisation in X.

B There is more training and education in X.
C There are greater incentives to find work in X.
D There is a higher level of job vacancy information in X.

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19 Over the period of a year, nominal national income increased by 2%, inflation was 3% and
population increased by 1%.

Which statement is correct?

A Real income decreased by 2% per head.

B Real income increased by 1% per head.
C Real income increased by 4% per head.
D There was no change in real income per head.

20 What is likely to be the most effective policy to reduce inflation caused by a rapid rise in import
prices?

A a decrease in the domestic rate of interest

B a decrease in the rate of income tax
C an increase in trade tariffs on imports
D a revaluation of the exchange rate

21 Which macroeconomic policy objective will not apply to a government in a closed economy?

A achieving a low and steady rate of inflation

B achieving a more equal income distribution
C achieving a surplus on the balance of payments
D achieving a sustainable rate of economic growth

22 A government increases its budget deficit to spend money on infrastructure development. It

finances this by printing money.

How is this policy likely to affect the government’s main macroeconomic policy objectives?

higher
lower lower
economic
unemployment inflation
growth

A less likely less likely more likely

B less likely more likely less likely
C more likely more likely less likely
D more likely more likely more likely

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8

23 The government increases interest rates in order to reduce the rate of inflation.

What will also result from this action?

A a depreciation of the country’s currency

B a fall in the level of savings
C a reduction in economic growth
D a reduction in unemployment

24 The diagram shows the relationship between the income tax rate and tax revenue.

tax
X
revenue

O Z Y
income tax rate

Which statement is correct?

A A tax rate cut from Y to Z will cause tax revenue to decrease.

B At tax rates below Z a tax rate cut will cause tax revenue to increase.
C The greater the rate of tax beyond Z, the smaller will be the tax revenue generated.
D Tax revenue will always increase as the rate of income tax increases.

25 In which situation is devaluation of the currency most likely to cause inflation?

A Excess capacity is available.

B Import tariffs are reduced.
C Local substitutes of imported raw materials are unavailable.
D The demand for exports is price inelastic.

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9

26 A country imports most of the raw materials used as factor inputs.

Which policy is most likely to control cost-push inflation?

A an appreciation of the exchange rate

B an increase in the rate of income tax
C an increase in the rate of interest
D an increase in the rate of sales tax

27 Germany, one of the world’s strongest trading nations, achieved a surplus on current account of
the balance of payments in 2021–2022.

Which income flow would not have been included in the calculation of Germany’s current
account?

A Declining sales of German cars for export overseas.

B Falling earnings of foreign exchange from visitors to Germany.
C Increasing transfers of aid to less developed countries.
D Investment in a natural gas pipeline link to its main foreign supplier.

28 A country maintains its foreign exchange rate against the United States dollar, within a narrow but
changing band.

What is this type of exchange rate?

A fixed
B floating
C managed float
D trade-weighted

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29 The Lorenz curves in the diagram show different distributions of income and of wealth.

100
% of income
or % of wealth

1
2

4
3
0
0 100
% of households

At first, income in a country is more equally distributed than wealth.

In a period, the distribution of income becomes more unequal but the distribution of wealth
becomes more equal.

Which movement would show the effects of these changes on the distribution of income and
wealth within the country?

distribution of income distribution of wealth

A shift from curve 1 to curve 2 shift from curve 4 to curve 3

B shift from curve 2 to curve 1 shift from curve 3 to curve 4
C shift from curve 3 to curve 4 shift from curve 2 to curve 1
D shift from curve 4 to curve 3 shift from curve 1 to curve 2

30 What is likely to happen in a developing country as it becomes more developed?

A A lower percentage of people will go to university.

B Average life expectancy will rise.
C The rate of population growth will increase.
D The tertiary sector will decline in importance.

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11

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9708/32/F/M/24

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2016
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*0533490684*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages and 2 blank pages.

IB16 06_9708_32/2RP
© UCLES 2016 [Turn over
 www.dynamicpapers.com
2

1 What action by a firm is most likely to raise its dynamic efficiency?

A distributing all its current profit to its existing shareholders

B maximising the labour productivity of its current workers
C minimising the average cost of producing its current output
D retaining its current profit for product research and development

2 The current distribution of goods between two individuals in a two-person economy with given
technology and resources is at point X.

According to the Pareto criterion, which point would definitely indicate increased allocative
efficiency?

Tariq’s
goods X B
C
D

O Samir’s goods

3 The concept of allocative efficiency assumes that each individual in society is the best judge of
their own economic welfare.

Which example of government intervention is based on an argument which rejects this

assumption?

A pollution controls
B subsidies for merit goods
C the provision of public goods
D the regulation of monopolies

© UCLES 2016 9708/32/M/J/16

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3

4 In the indifference curve diagram point M is the consumer’s initial equilibrium and MN is the
substitution effect of a fall in the price of good X.

If good X is a Giffen good which point will be the consumer’s new equilibrium point after the fall in
the price of good X?

A
B
C
good Y
D
M
N

I
O K L
good X

5 To maximise the satisfaction he derives from a given level of expenditure on two goods, X and Y,
a consumer should allocate his expenditure between the two goods so that

A marginal utility of X = price of X and marginal utility of Y = price of Y.

B marginal utility of X plus marginal utility of Y is maximised.
C marginal utility of X = marginal utility of Y.
marginal utility of X price of X
D =
marginal utility of Y price of Y.

6 Which statement about the ‘kinked demand curve’ model of oligopoly is incorrect?

A The kink in the demand curve of each firm is based on expectations about other firms’
responses to changes in its price.
B The marginal revenue curve of the firm has a vertical segment at the market price.
C The model explains how the equilibrium market price is determined.
D The model suggests price stickiness within a certain range of marginal costs.

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7 A monopolist changes its objective from profit maximisation to sales revenue maximisation.

MC

H AC
P1
cost,
revenue P2 J K
G
F L

AR
MR
O Q1 Q2
output

On the diagram, which areas represent the monopolist’s total profit?

original profit final profit

A P1HJP2 P2KLF
B P1HJP2 JKLG
C P1HGF P2KLF
D P1HGF JKLG

8 A firm estimates that, all else remaining unchanged, an increase in its output will result in a fall in
its revenue.

What can be concluded from this?

A The demand for the firm’s product is price-elastic.

B The demand for the firm’s product is price-inelastic.
C The supply of the firm’s product is price-elastic.
D The supply of the firm’s product is price-inelastic.

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5

9 The diagram shows the cost and revenue curves of a firm.

MC
ATC

cost,
revenue

D
MR
O quantity

What does the diagram represent?

A a firm in monopolistic competition making normal profit

B a firm in monopolistic competition making short-term losses
C a firm in perfect competition at long-run equilibrium
D a monopoly making abnormal profits

10 Which is a risk-bearing economy of scale?

A greater bargaining power in purchasing from suppliers

B greater diversification of the product range
C lower costs in raising capital
D lower distribution costs by increasing market share

11 A firm wishes to eliminate competition and become a monopoly.

What should it do?

A maximise output
B maximise profit
C reduce prices
D reduce the number of its suppliers

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12 In many developed economies, clothes are designed by small firms and retailed by large firms.

What is the most likely explanation for this pattern?

clothes design firms clothes retail firms

A need to be flexible to cope need to exploit marketing
with frequent fashion changes economies of scale
B need to employ highly need to operate at a low
specialised and skilled workers minimum efficient scale
C need to operate at a high need to offer a wide range
minimum efficient scale of products to survive
D need to overcome high need to take advantage of
barriers to entry into the industry technical economies of scale

13 What is likely to have its cause in the separation of ownership and control in a firm?

A contestable markets
B diseconomies of scale
C principal-agent problem
D prisoner’s dilemma

14 A firm employs a worker who adds less to output than the previous worker employed.

What does this illustrate?

A decreasing marginal costs

B diseconomies of scale
C increasing returns to scale
D the law of diminishing returns

15 To increase the number of cleaners at a local school from 10 to 11, the employer has to raise the
hourly rate of pay from $8.00 to $8.50.

What is the marginal cost of labour per hour to the employer?

A $0.50 B $13.50 C $88.50 D $93.50

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7

16 For a firm in imperfect competition, the marginal revenue product of labour at any given level of
employment is equal to

A marginal revenue divided by the number employed.

B marginal revenue divided by the wage rate.
C the marginal physical product of labour multiplied by marginal revenue.
D the marginal physical product of labour multiplied by the wage rate.

17 Which policy would be most effective in achieving a more equal distribution of disposable
incomes between households?

A government support for trade unions

B import duties on manufactured goods
C minimum wage policy
D progressive income taxes

18 A government regulates the price charged by a monopolist.

In which circumstance will such intervention improve economic efficiency?

A The government sets the price where average revenue equals marginal cost.
B The government sets the price where marginal cost is below average cost.
C The intervention results in an increase in producer surplus.
D The intervention results in predatory pricing.

19 What would cause estimates of the money value of the ‘Measure of Economic Welfare’ for a
country to be greater than the value of ‘Gross National Product’?

A negative externalities such as pollution

B property income received from abroad
C regrettable necessities
D the value of non-marketed activities and leisure

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20 In 2012 a United Nations report calculated the stock of wealth of 20 countries in terms of human,
natural and produced resources. This was measured as the Inclusive Wealth Index (IWI).

The diagram shows the annual percentage (%) change in the IWI between 1990 and 2008 of the
economies with the fastest and the slowest growth in IWI. It also shows their 2008 GDP per
head ($).

GDP change in inclusive wealth index, 1990-2008 key

human
China 3404
natural
Kenya 722
Nigeria 1401 produced
Russia 11 704 inclusive
wealth index
–25 0 25 50 75
%

What can be concluded from the diagram?

A A low level of GDP per head meant an inability to build stocks of wealth.
B No country was able to prevent depletion of its natural resources.
C The faster the growth in a country’s IWI the higher was its GDP.
D There was an increase in human resources in all four countries.

21 Which combination is usually found in less developed economies?

low high

A capital : output ratio saving ratio

B external debt capital : output ratio
C population growth external debt
D saving ratio population growth

22 Which change is most likely to increase both economic growth and economic development in the
long run?

A a decrease in the saving ratio

B an increase in investment in human capital
C the depletion of non-renewable resources
D the greater use of compulsory overtime working of labour

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9

23 Which type of unemployment occurs when aggregate demand is deficient?

A cyclical unemployment
B regional unemployment
C seasonal unemployment
D structural unemployment

24 The diagram shows the annual percentage (%) change in employment and output in the UK
private sector between 2000 and 2012.

4 output 10

2 5

0 0
employment employment output
–2 –5

–4 –10

–6 –15
2000 02 04 06 08 10 12

In which year did labour productivity increase the most?

A 2003 B 2007 C 2009 D 2012

25 According to Keynesian theory, when will an increase in the money supply leave the level of
output unchanged?

A when the liquidity trap is operative

B when the money supply increase was not anticipated
C when there is a floating exchange rate
D when there is an immediate adjustment to expectations about future price levels

26 In a 4-sector economy, consisting of households, firms, government and foreign trade, the level
of national income is in equilibrium where

C + I + G + (X – M) = Y.

What must Y include for an equilibrium to exist?

A C+S+M
B C+S+T
C S+T
D S+T+M

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 www.dynamicpapers.com
10

27 When would an economic recession result in an increase in a government’s budget deficit?

A The government increases tariffs on imports with inelastic demand and keeps the total
amount it spends on unemployment benefit unchanged.
B The government keeps the unemployment benefit rate and direct and indirect tax rates
unchanged.
C The government reduces foreign aid and widens the tax base.
D The government reduces the unemployment benefit rate and decreases the tax free
allowance on income tax.

28 What will be most likely to rise if unemployment is increasing in an economy?

A the human capital of unemployed workers

B the living standards of all workers
C the nominal money wage rate of employed workers
D the tax burden on employed workers

29 What is most likely to result from foreign direct investment in developing economies?

A a deterioration in the trade balances of developing economies

B a reduction in migration to urban areas in developing economies
C a reduction in the transfer of technology to developing economies
D a rise in per capita levels of consumption in developing economies

30 What will increase the multiplier effect of an increase in government spending on national
income?

A an increase in direct taxation

B an increase in interest rates
C an increase in the marginal propensity to consume
D an increase in the marginal propensity to import

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publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 9708/32/M/J/16

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2017
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*9542356828*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 13 printed pages and 3 blank pages.

IB17 06_9708_32/FP
© UCLES 2017 [Turn over
 www.dynamicpapers.com

1 When will an economic activity create a net social benefit?

A when (private benefit + external benefit) – (private cost + external cost) is negative
B when (private benefit + external benefit) – (private cost + external cost) is positive
C when (private benefit + private cost) – (external benefit + external cost) is negative
D when (private benefit + private cost) – (external benefit + external cost) is positive

2 The diagram shows the private and social costs and benefits of production in a free market that
result in market failure.

MSC
costs,
benefits
MPC

MSB

MPB
O K L M N
output

Which change in output would be necessary to overcome this market failure?

A from K to M
B from M to N
C from M to L
D from N to L

© UCLES 2017 9708/32/M/J/17

 www.dynamicpapers.com

3 The diagram shows the production possibility curve for an economy.

good Y
L

O good X

What might make it possible for consumers in this economy to consume the combination of
goods X and Y indicated by the point L?

A a reduction in unemployment
B the achievement of productive efficiency
C the elimination of a monopoly in the production of good X
D trade with other economies

4 The diagram shows two indifference curves for a consumer.

good Y

Q IC2
IC1
O
good X

What can be concluded if the consumer’s equilibrium moves from Q to R?

A The consumer is acting rationally.

B The consumer’s money income is unchanged.
C The opportunity cost of good Y is constant.
D The price of good X has risen.

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 www.dynamicpapers.com

5 When the price of a good falls the effect on the quantity demanded is the result of an income
effect and a substitution effect.

Which statement about these effects is correct?

A For inferior goods the income effect and the substitution effect work in the same direction.
B For inferior, but not Giffen, goods the income effect outweighs the substitution effect.
C For normal goods the income effect and substitution effect work in the same direction.
D For normal goods the income effect outweighs the substitution effect.

6 Where is the long-run equilibrium output of a perfectly competitive firm?

A where average costs are at a minimum

B where average costs are falling
C where marginal costs are at a minimum
D where marginal costs are falling

7 A firm estimates that, all else remaining unchanged, an increase in its output will result in an
equal proportionate increase in its revenue.

What can be concluded from this?

A The demand curve for the firm’s product is horizontal.

B The firm operates in a monopolistically competitive market.
C The price elasticity of demand for the firm’s product is –1.
D The supply of the firm’s product is perfectly inelastic.

© UCLES 2017 9708/32/M/J/17

 www.dynamicpapers.com

8 The diagram shows a firm’s cost and revenue curves.

cost,
revenue
MC

AC

MR AR
O
output

The firm changes its objective from profit maximisation to sales revenue maximisation.

Which groups are likely to be winners and losers as a result of this change?

winners losers

A customers shareholders
B managers customers
C workers managers
D shareholders workers

9 What could be a reason for the existence of small firms in various industries?

A a low minimum efficient scale of production

B greater scope for specialisation and division of labour
C the need to diversify in order to reduce risk
D the principal-agent problem

10 A firm in monopolistic competition that is producing at its profit maximising output is making a loss
in the short run.

For it to continue in production, what must be correct about its average revenue (AR), marginal
revenue (MR) and average variable cost (AVC)?

A AR = MR; AVC > AR

B AR = MR; AVC < AR
C AR > MR; AVC > AR
D AR > MR; AVC < AR

© UCLES 2017 9708/32/M/J/17 [Turn over

 www.dynamicpapers.com

11 The diagram shows the demand curve for a firm’s product.

price

O output

Which diagram shows the shape of the firm’s total revenue (TR) curve?

A B C D
revenue revenue revenue revenue

O output O output O output O output

12 The diagram shows a firm in monopoly producing OQ units.

MC ATC
price
$
AVC

MR D
O Q
quantity

Which outcome can be observed in the diagram?

A loss minimisation
B profit satisficing
C revenue maximisation
D unit cost minimisation

© UCLES 2017 9708/32/M/J/17

 www.dynamicpapers.com

13 Which feature of oligopoly is being assumed when the demand curve for an individual firm is as
shown?

price D

O quantity

A price discrimination
B price leadership by the dominant firm
C interdependence between firms
D collusion between firms

14 Which statement is most likely to explain why a government decides to increase the highest rates
of tax on personal income?

A It expects total tax revenue to be unaffected by the policy change.

B It is concerned about the possibility of emigration by some high earning individuals.
C It regards equity considerations as being more important than efficiency ones.
D It wishes to switch the emphasis of its tax system from direct to indirect taxation.

© UCLES 2017 9708/32/M/J/17 [Turn over

 www.dynamicpapers.com

15 The Lorenz curves in the diagram show different distributions of income and of wealth.

100
% of income
or % of wealth

1
2

4
3
0
0 100
% of households

Income in a country is more equally distributed than wealth.

In a period the distribution of income becomes more unequal but the distribution of wealth
becomes more equal.

Which movement would show the effects of these changes on the distribution of income and
wealth within the country?

distribution of income distribution of wealth

A shift from curve 1 to curve 2 shift from curve 4 to curve 3

B shift from curve 2 to curve 1 shift from curve 3 to curve 4
C shift from curve 3 to curve 4 shift from curve 2 to curve 1
D shift from curve 4 to curve 3 shift from curve 1 to curve 2

16 A government wishes to discourage tax avoidance.

Which policy to achieve this would be an example of the behavioural approach of nudge theory?

A compelling direct tax deduction by employers

B making random inspections of individual tax records
C providing information on how the tax is spent by the government
D using penalties, such as fines and imprisonment for tax avoidance

© UCLES 2017 9708/32/M/J/17

 www.dynamicpapers.com

17 The diagram shows the supply and demand situation in a particular labour market.

supply
wage rate N

L
M

J
demand

O K
quantity of labour

When the market is in equilibrium, which areas measure the economic rent and transfer earnings
received by employees?

economic rent transfer earnings

A JLN OKLJ
B JML OKLJ
C NML OKLM
D OKLM NML

18 In 2015 a company drilling for oil wished to reduce its workforce because of a fall in the price of
oil. The workers’ trade union opposed the proposal.

Which situation would have helped the trade union in the negotiations?

A Capital and labour were close substitutes.

B The cost of labour had been a small percentage of total cost.
C The demand for oil had been price inelastic.
D There had been a large supply of labour.

19 Which policy is specifically designed to reduce the level of structural unemployment?

A an increase in the level of state benefits paid to the unemployed

B a reduction in interest rates
C a reduction in the level of direct taxation
D the provision of retraining schemes

© UCLES 2017 9708/32/M/J/17 [Turn over

 www.dynamicpapers.com

10

20 What is typically associated with a relatively low level of income per capita in a country?

A low exports
B low inflation
C low investment
D low population

21 During a certain period, a country with a constant population expands its output per head. It also
experiences a significant increase in river and atmospheric pollution.

In the absence of any other changes, which measure would show a decrease in living standards?

A Gross Domestic Product per head

B Gross National Product per head
C Human Development Index
D Measure of Economic Welfare

22 The graphs below show percentage changes in money GDP and consumer prices in a country
between 2008 and 2010.

10 6
% %
4
5
2

2008 2009 2010 2008 2009 2010

% change in % change in
money GDP consumer prices

Which conclusion may be drawn from the graphs?

A Between 2009 and 2010 money GDP fell but consumer prices continued to rise.
B Consumer prices and money GDP both continued to rise throughout the period.
C In real terms GDP grew throughout the period.
D When consumer prices rose, money GDP fell.

23 Why do some economists suggest there may be positive benefits from frictional unemployment?

A A short spell of frictional unemployment may lead workers to become discouraged.

B Frictional unemployment allows time for retraining in newly emerging skills.
C Job search during frictional unemployment may lead to a better match of workers and jobs.
D The psychological effects of frictional unemployment are less than the economic effects.

© UCLES 2017 9708/32/M/J/17

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11

24 The table shows the levels of consumption expenditure for given family incomes.

disposable consumption
family income expenditure
($) ($)

2000 2150
3000 3100
4000 4000
5000 4850
6000 5650
7000 6380

Over the range of disposable income shown, as income rises what happens to the marginal
propensity to consume?

A It falls and then rises.

B It falls continuously.
C It rises and then falls.
D It rises continuously.

25 Which could cause the official statistics for the national income per head of a developing country
to overstate the true level of economic well-being of its inhabitants?

A if there is dependence on barter in internal trade

B if subsistence agriculture dominates total economic activity
C if services are an important component of exports
D if there is extreme income inequality

© UCLES 2017 9708/32/M/J/17 [Turn over

 www.dynamicpapers.com

12

26 The table shows some United Nations population statistics for 2010 and estimates for 2050.

total total urban urban population population

types of region population population population population urbanised urbanised
(m) 2010 (m) 2050 (m) 2010 (m) 2050 (%) 2010 (%) 2050

more developed regions 1237 1275 930 1100 75 86

less developed regions 5671 7875 2556 5186 45 66
least developed regions 855 1673 249 914 29 55

Which relationship can be confirmed from the table?

A The least developed regions have the largest urban populations, actual or predicted, in both
years.
B The more developed regions have the lowest growth rate of urbanisation between 2010 and
2050.
C The type of region with the greatest total population in 2010 is predicted to have the greatest
rate of population growth by 2050.
D The type of region with the greatest urban population in 2010 is predicted to have the highest
level of urbanisation by 2050.

27 In 2015, the World Bank agreed to give a loan of $650 m to Angola to help stabilise the economy.
The Bank said Angola needed to have a fiscal policy that would encourage the diversification of
its economy.

Which policy would be consistent with this requirement?

A the lowering of interest rates to encourage investment in solar power

B the relaxing of regulations to allow the development of a new hydro-power project
C the spending of the loan supporting its oil industry after oil prices collapsed
D the subsidising of a partnership with a French company to establish a chain of tourist hotels

28 A country with demand-pull inflation decides to fix its exchange rates against other currencies
above the purchasing power parities.

What is likely to happen to the macroeconomic indicators shown?

current account
interest rate inflation rate
balance

A decrease decrease improve

B decrease increase worsen
C increase decrease worsen
D increase increase improve

© UCLES 2017 9708/32/M/J/17

 www.dynamicpapers.com

13

29 In the short run, which policy measure would tend to reduce a country’s balance of payments
deficit but increase its inflation rate?

A a decrease in the level of import tariffs

B an appreciation of the country’s currency
C an increase in the level of indirect taxes
D a reduction in government spending

30 In an economy with unemployed resources the government increases its expenditure.

When would this be least likely to increase national income by the full multiplier effect?

A when the level of autonomous private investment is increased

B when the marginal propensity to save is reduced
C when the government allows money supply to expand
D when the level of interest rates rises

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 9708/32/M/J/17

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2018
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3891506080*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 11 printed pages and 1 blank page.

IB18 06_9708_32/RP
© UCLES 2018 [Turn over
 www.dynamicpapers.com
2

1 How is social cost calculated?

A external cost minus external benefit

B external cost minus private cost
C external cost plus private cost
D social cost minus social benefit

2 Which government policy is not aimed at correcting inefficiency in resource allocation?

A marginal cost pricing in state owned industries

B permits restricting the pollution of rivers by private firms
C requiring firms to pay a minimum wage
D the provision of public goods at zero price

3 The table shows some of the costs and benefits, in $ millions, associated with a road building
project. Both a government department and a profit-maximising private firm are considering
building the road.

private external external social

costs costs benefits benefits

450 75 50 550

Who would be willing to build the road?

A Both would be willing to build it.

B Neither would be willing to build it.
C Only the government department would be willing to build it.
D Only the private firm would be willing to build it.

© UCLES 2018 9708/32/M/J/18

 www.dynamicpapers.com
3

4 In the diagram, Q1 is the quantity produced of a good as the result of market forces.

price S2 (social cost)

S1 (private cost)

D
O Q1
quantity

Which concept is present at output Q1?

A a government subsidy
B a negative externality
C a positive externality
D a specific tax

5 What would not affect the budget line of an individual consumer?

A the individual’s preference for various goods

B the level of income tax
C the money prices of goods
D the wages earned by the individual

© UCLES 2018 9708/32/M/J/18 [Turn over

 www.dynamicpapers.com
4

6 The diagram shows the demand curve for a product.

D
price

O X
quantity

What is maximised at X?

A marginal revenue
B total revenue
C marginal utility
D total utility

7 The diagram shows a firm’s cost and revenue curves.

costs,
revenue
P

MC
MR

D
MR
O Q
output

Which features are associated with the diagram?

A economies of scale and allocative efficiency

B interdependence and allocative efficiency
C price rigidity and economies of scale
D price rigidity and interdependence

© UCLES 2018 9708/32/M/J/18

 www.dynamicpapers.com
5

8 In the year ending July 2016, airline fuel prices fell by 20.4% while the price of passenger aircraft
increased by around 1.1%.

Assuming no other changes in the passenger airline industry, what was the outcome for fixed
costs and variable costs?

fixed costs variable costs

A decreased decreased
B decreased increased
C increased decreased
D increased increased

9 Which feature of production would make it more likely that an industry is a contestable market?

A advertising has established consumer loyalty

B all firms in the industry share research and development
C low fixed costs
D market rivals aim to reduce product differentiation

10 What is an example of backward vertical integration?

A a bakery buying a wheat farm

B a car manufacturer buying a car showroom
C a vineyard buying an apple orchard
D two rival supermarkets joining together

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6

11 The diagram shows a firm in imperfect competition. It changed its aim from profit maximising to
sales revenue maximising.

cost,
MC
revenue

AC

AR
MR
O
output

Which type of profit was it making in each case?

profit sales revenue

maximising maximising

A normal profit supernormal profit

B subnormal profit normal profit
C supernormal profit normal profit
D supernormal profit supernormal profit

12 An airline sells seats at $100 each three months before a flight, at $150 each one month before
the flight and at $200 each the day before the flight.

What describes this type of market behaviour by the firm?

A limit pricing to deter entry in an imperfect market

B price discrimination by a monopoly supplier
C price leadership by an oligopolist
D pricing where price equals average cost under perfect competition

13 What would not be an indication of a divergence between the interests of the managers and the
shareholders of a company?

A an emphasis on sales maximisation

B management salaries which are linked to the long-run growth of the company’s share price
C the acceptance of ‘X’ inefficiency in the company’s production process
D the purchase of artwork for a company’s headquarters

© UCLES 2018 9708/32/M/J/18

 www.dynamicpapers.com
7

14 The total cost to a school of employing ten cleaners is $60 per hour.

The school estimates that the hourly marginal cost of employing an eleventh cleaner would be
$11.50.

By how much would the hourly wage have to increase to employ an additional cleaner?

A $0.50 B $0.65 C $2.25 D $11.50

15 What would cause a rise in the productivity of labour?

A an increase in indirect taxes

B an increase in the quality of capital
C a rise in consumer surplus
D a rise in the elasticity of supply of labour

16 In the diagram D1 and S are the initial demand and supply curves for building workers.

wage
S
Y Z
U
T
X

D2
R
D1
O V W
quantity of labour

If the demand for building workers increases to D2 by how much does the economic rent earned
by building workers rise?

A RUZ B TUZX C VXZW D XYZ

17 Under which circumstances will a subsidy from the government be most beneficial if there are
externalities from producing good X?

externality caused price elasticity of

by good X demand of good X

A negative <1
B negative >1
C positive <1
D positive >1

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 www.dynamicpapers.com
8

18 Which tax would help a government achieve a more equal distribution of income after tax?

A a constant rate sales tax applicable to all goods and services

B a constant rate tax per person
C an income tax with a constant marginal rate over the whole income range
D an income tax with a tax-free allowance and a constant marginal rate thereafter

19 A country has a population of 100 million. There are 5 million people unemployed and the country
has an unemployment rate of 10%.

What is the size of the labour force?

A 10 million B 50 million C 90 million D 95 million

20 Which type of unemployment is correctly linked to the description of its cause?

type of
description of the cause
unemployment

A cyclical a change in demand due to holiday periods

B frictional a lack of sufficient information
C structural a temporary change in consumers’ expenditure
D technological a general decrease in the demand for goods

21 Growth rates can be calculated using changes in the value of GDP from year to year.

Why is real GDP per head considered to be a better indicator than nominal GDP per head for this
calculation?

A Real GDP adjusts for price changes by using a base year.

B Real GDP ignores the effects of fluctuations in exchange rates on purchasing power.
C Real GDP includes changes in the size of the population.
D Real GDP measures GDP at factor cost rather than market prices.

22 What would not exist in a free market, open economy?

A autonomous investment
B household saving
C import spending
D indirect taxation

© UCLES 2018 9708/32/M/J/18

 www.dynamicpapers.com
9

23 The information in the table is taken from a country’s national income accounts.

US $
income
(millions)

wages 8000
salaries 7000
unemployment benefit 1000
pensions 1000
rent 3000
interest 2000

What is the value of national income?

A 17 000 B 19 000 C 20 000 D 21 000

24 What is a part of Keynesian economic analysis?

A a liquidity trap below which interest rates are ineffective

B an equilibrium price that always clears the market
C a small value for the government expenditure multiplier
D a vertical short-run aggregate supply curve

25 What will definitely increase a country’s Gross National Product?

A an increase in income taxes

B an increase in the marginal propensity to import
C an increase in the value of a country’s currency
D increased government expenditure on education

26 According to the accelerator theory, what determines this year’s net investment?

A last year’s consumption

B last year’s output
C the change in last year’s investment
D the change in last year’s national income

© UCLES 2018 9708/32/M/J/18 [Turn over

 www.dynamicpapers.com
10

27 Which diagram shows an economy experiencing an increase in actual output but a decline in
potential output?

A B

LRAS1 LRAS2 LRAS2 LRAS1

price price
level level

P1
P2 P1
AD1 AD1
AD2 AD2
O Y2 Y1 O Y2 Y1
real GDP real GDP

C D

price LRAS2 LRAS1 price LRAS1 LRAS2

level level

P2
P1 P1
AD2 AD2
AD1 AD1
O Y1 Y2 O Y1 Y2
real GDP real GDP

28 What is likely to follow if a central bank sets negative interest rates?

A an increase in government revenue

B an increase in the rate of inflation
C a reduction in bank lending
D deflation in the economy

© UCLES 2018 9708/32/M/J/18

 www.dynamicpapers.com
11

29 The Consumer Prices Index (CPI) fell by 3% in a year. Unemployment was regarded as
unacceptably high.

Which combination of policies would a government be most likely to adopt in such circumstances?

A an appreciation of the currency, together with an increase in the rate of interest

B increased government expenditure on education, together with an increase in taxes to pay
for it
C increased indirect taxes, together with a depreciation in the exchange rate
D reduced income taxes, together with a cut in the rate of interest

30 Other things being equal, what is most likely to result from an increase in a country’s interest
rates?

A a capital inflow
B a depreciation of the currency
C an increase in consumption
D an increase in investment

© UCLES 2018 9708/32/M/J/18

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12

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 9708/32/M/J/18

 www.dynamicpapers.com

Cambridge Assessment International Education

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2019
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3114709708*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 12 printed pages.

IB19 06_9708_32/3RP
© UCLES 2019 [Turn over
 www.dynamicpapers.com
2

1 Which statement is correct?

A In a command economy firms compete and profit maximise allocating resources efficiently.
B In a command economy resources are privately owned.
C In a market economy prices are used to signal the value of individual resources.
D In a market economy resources are allocated by central planners.

2 The diagram shows the market for a product, the production of which has both external costs and
external benefits.

costs, MSC
benefits
MPC

MSB

MPB
O W X Y Z quantity

What is the difference between the level of output that would be produced by the market and the
socially optimum level?

A WX B WY C XY D XZ

3 The government is considering building flood defences along a river. It has calculated the costs
and benefits as follows.

costs benefits
$m $m

private 450 260

external 60 190

According to cost-benefit analysis, which decision and reasoning about flood defences is correct?

decision reasoning

A build external benefits are greater than external costs

B build social benefits are greater than private benefits
C do not build private costs are greater than the external benefits
D do not build social costs are greater than the social benefits

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3

4 The graph shows the total utility (TU) obtained by a consumer from eating biscuits over a period
of one hour.

total utility
TU

0 1 2 3 4 5 6 7
biscuits eaten in an hour

After eating how many biscuits does the consumer’s marginal utility begin to diminish?

A 3 B 4 C 5 D 6

5 The diagram shows budget lines for normal goods X and Y.

P
good Y

O R Q
good X

What could cause a budget line to shift from PQ to PR?

level of
price of X price of Y consumer
incomes

A fall rise fall

B no change rise no change
C rise no change no change
D rise no change rise

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4

6 A consumer spends all of their income on two goods, Y and X, and is at position E. The price of X
falls and the price of Y remains constant.

The graph shows indifference curves and budget lines which are used to determine the price,
income and substitution effects that are related to this price change.

Y1
Y

Y2
E

I2
I1

O X1 X2 X3 X4 X5 X6
X

Which distance gives the income effect of this price change?

A X1X2 B X1X4 C X2X4 D X5X6

7 What defines average variable cost?

A total cost divided by the quantity of the variable factor employed

B total variable cost divided by the quantity of the variable factor employed
C total variable cost divided by the output produced
D the addition to total variable cost by producing one more unit of output

8 What cannot be changed in the short run?

A the level of stock held by firms

B the level of technology available
C the market price of goods
D the output of individual firms in an industry

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9 The market structure of an industry changed from being an oligopoly to monopolistic competition.

What is most likely to have increased?

A an individual firm’s ability to influence the market price

B an individual firm’s degree of interdependence in the market
C the concentration ratio in the market
D the number of firms in the market

10 A firm has total production cost of $200 000. Its average fixed cost is $120 and its average
variable cost is $80.

What are the firm’s total fixed costs?

A $12 000 B $40 000 C $80 000 D $120 000

11 What is a characteristic of monopolistic competition?

A abnormal profits in the long run

B advertising supporting product differentiation
C all firms charge the same price
D barriers to entry are high

12 The diagram shows the marginal cost (MC), average variable cost (AVC) and average total cost
(ATC) curves of a profit maximising firm in a perfectly competitive market.

cost MC
ATC
AVC
P4

P3
P2

P1

O
output

Which market price would mean the firm would operate in the short run but not in the long run?

A P1 B P2 C P3 D P4

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13 The table shows the average incomes of the richest 20% of households and the poorest 20% of
households in the UK (2015–2016), and the effects of government taxation and benefits on
average income.

average income average income

(£) of (£) of
richest 20% poorest 20%

before taxes and benefits 85 000 7 000

after direct taxes and cash benefits 68 000 13 000
after all taxes (direct and indirect) and all benefits 63 000 17 000

What can be concluded from the information in the table?

A The effects of direct taxation have affected the rich less than the poor.
B The government’s policy achieved income equality across households.
C The government redistributed all income taken from the rich to the poor.
D The government’s policy reduced the income inequality between the poor and the rich.

14 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

15 What is the specific advantage of pollution permits, when compared with an alternative policy of
taxes levied on the quantity of pollutants emitted by firms?

A firms have a financial incentive to reduce pollution

B no monitoring of firm’s emissions is required
C pollution levels can be reduced to zero
D the reduction in the level of pollution is more predictable

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7

16 Which diagram correctly shows the relationship between the average product (AP) and the
marginal product (MP) of labour, given that the quantities of other factor inputs remain constant?

A B
average MP average
product, AP product,
marginal marginal
product product

MP AP
O labour O labour

C D
MP
average average AP
product, product,
marginal marginal
product product

AP MP
O labour O labour

17 The diagram shows the short-run relationship between the total output of a firm and the quantity
of labour.

total
total output
output

O quantity of labour

What can be concluded about the firm?

A It is experiencing increasing returns to scale.

B It is experiencing constant returns to scale.
C The marginal physical product of capital is constant.
D The marginal physical product of labour eventually diminishes.

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18 Company X reduces its number of workers from 250 to 200 and as a result its output decreases
from 5000 to 4800 units per day.

Company Y increases its number of workers from 800 to 1000 and as a result its output
increases from 2000 to 2200 units per day.

What happens to labour productivity of the workers in the two companies?

company X company Y

A falls rises
B rises falls
C rises rises
D falls falls

19 What is not included in the measurement of national income?

A age-related pensions
B dividends obtained from foreign investments
C housing authorities’ income from rent
D profits distributed to shareholders

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9

20 The graphs show the Human Development Index and its component parts for Zimbabwe.

Human Development Index education index

0.55 0.6

0.5 0.55
0.5
0.45
0.45
0.4
0.4
0.35 0.35
0.3 0.3
1990 2000 2010 2012 1990 2000 2010 2012
1995 2005 2011 2013 1995 2005 2011 2013

life expectancy GNI per capita, ppp (2011 ppp)

0.55 0.6

0.5 0.55
0.5
0.45
0.45
0.4
0.4
0.35 0.35
0.3 0.3
1990 2000 2010 2012 1990 2000 2010 2012
1995 2005 2011 2013 1995 2005 2011 2013

Between 2005–2010, which components of HDI have comparable changes to its overall change?

A education and GNI per capita

B education and life expectancy
C education, GNI per capita and life expectancy
D GNI per capita and life expectancy

21 What makes it possible for the increase in real national output to exceed the increase in labour
productivity?

A an increase in employment
B an increase in the inflation rate
C an increase in the money supply
D an increase in total earnings

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22 The table shows the annual percentage (%) change in China’s GDP and the contribution of some
of its component parts between 2006 and 2012.

2006 2007 2008 2009 2010 2011 2012

GDP 12.7 14.2 9.6 9.2 10.4 9.3 7.7

consumption 5.1 5.6 4.2 4.6 4.5 5.2 4.2
investment 5.5 6.0 4.5 8.1 5.5 4.5 3.9
net exports 2.1 2.6 0.9 –3.5 0.4 –0.4 –0.4

What can be concluded about China’s economy between 2006 and 2012?

A China’s current account was in surplus more years than it was in deficit.
B China’s economic rate of growth fell in more years than it rose.
C China’s growth was greater overall in consumer goods than in capital goods.
D China’s standard of living rose at a decreasing rate.

23 What is a cause of seasonal unemployment?

A a general decrease in the demand for goods and services

B a lack of necessary skills in the workforce
C a temporary change in the pattern of consumers’ expenditure
D an unwillingness of workers to move to other parts of the country where there is work

24 Which row correctly identifies leakages from a country’s circular flow of income?

private sector public sector trade sector

(S > I) (T > G) (X > M)

A no no yes
B no yes yes
C yes no no
D yes yes no

25 In a closed economy with no government expenditure and no taxation, the initial income is
$5000 million. All savings are carried out by consumers, who save 20% of any additional income
received above $5000 million. Firms plan to invest $1000 million.

What is the value of the multiplier?

A 0.8 B 4 C 5 D 8

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26 The diagram shows a liquidity preference curve (LP) representing the demand to hold money in
relation to the rate of interest and the money supply (MS) in an economy. The market is in
equilibrium at interest rate r.

MS
rate of
interest

r LP

O quantity
of money

If the government increases the money supply, what will be the effect on the interest rate?

A falls below zero

B falls to zero
C increases
D no effect

27 An increase in which of the following will cause a decrease in investment spending?

A business confidence
B company profits
C interest rates
D national income

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28 The graph shows a shift in the liquidity preference curves for an economy from LP1 to LP2.

LP1 LP2
rate of
interest

O quantity
of money

What might have caused this shift?

increased pessimism
an increase in
about the future
real national income
of the economy

A  
B  
C  
D  

29 What is most likely to increase in the short run following a rise in an economy’s rate of inflation
caused by a demand-side shock?

A the current account deficit on the balance of payments

B the price of government bonds
C the purchasing power of the currency
D the rate of unemployment

30 Which combination of policies is most likely to increase output?

fiscal policy monetary policy

A decrease budget deficit decrease interest rates

B decrease budget deficit increase interest rates
C increase budget deficit decrease interest rates
D increase budget deficit increase interest rates

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

© UCLES 2019 9708/32/M/J/19

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Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2020
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*9757189366*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_9708_32/3RP
© UCLES 2020 [Turn over
 www.dynamicpapers.com
2

1 What is an example of a negative externality?

A Lower profit due to increased competition from new firms entering the market.
B Reduced government funding for a museum.
C The increase in noise levels from aircraft due to the expansion of a large city airport.
D The increase in production costs due to an increase in the cost of importing raw materials.

2 The diagram shows a firm operating in monopolistic competition.

At which point is the firm allocatively efficient?

revenue MC AC
/ costs

A
B

MR AR
O D output

3 The amount of training undertaken in a mixed economy is not socially optimal.

What could explain this?

A Experienced educators are a scarce resource.

B In a mixed economy training is a public good.
C The individual’s benefit from training is less than the benefit to society.
D Training is a large variable cost for firms.

4 Four bus companies control more than two-thirds of the market in a country.

Critics claim that these companies fix prices on some routes to maximise revenue whilst lowering
prices on other routes to stop smaller competitors entering the market.

Which anti-competitive practices are these companies accused of?

A collusion and limit pricing

B collusion and price leadership
C limit pricing and price discrimination
D price leadership and x-inefficiency

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3

5 On a diagram the slope of a consumer’s budget line becomes steeper.

What can definitely be concluded from this?

A The consumer’s income has fallen.

B The consumer’s income has risen.
C The price has decreased for the product on the horizontal axis.
D The price has increased for the product on the horizontal axis.

6 The diagram shows two indifference curves and two budget lines for goods X and Y.

good Y
Y

H
F
G
IC2

IC1
O X1 X2
good X

The consumer’s initial position is at point F. The consumer’s preferred final position becomes
point H.

What does the movement from F to G represent?

A the income effect of a price fall for X

B the price effect of a price change for X
C the substitution effect of a price fall for X
D the substitution effect of a price rise for X

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4

7 The table shows the total costs at different levels of output for a firm producing chairs.

output total cost

(chairs) ($)

0 50
1 60
2 64
3 77
4 94
5 114

What is the average variable cost when output is 4 chairs?

A $11 B $17 C $44 D $23.50

8 At which level of output will a firm achieve the aim of sales maximisation?

A where AC = AR
B where AC = MC
C where MC = AR
D where MR = zero

9 In market economies firms can operate under monopolistic competition.

Which feature is not typical of this type of market?

A non-price competition through advertising

B price leadership with few large firms
C promotion of differentiated products
D unrestricted entry results in long-run normal profit

10 When will the ‘principal-agent’ problem occur?

A when managers are not allowed to become shareholders

B when members of a cartel collude to gain higher profit
C when one firm dominates the market
D when owners have different objectives to managers

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5

11 Which feature of oligopoly is being assumed when the demand curve for an individual firm is as
shown?

price D

O quantity

A price discrimination
B price leadership by the dominant firm
C interdependence between firms
D collusion between firms

12 The table provides data on the number and value of mergers in Europe and North America
between 2014 and 2017.

Europe North America

year
number value (euro) number value (US dollar)

2014 17 000 980 billion 14 000 2289 billion

2015 15 500 1161 billion 14 500 2533 billion
2016 18 100 1003 billion 15 100 1858 billion
2017 18 000 980 billion 18 500 1822 billion

What can be deduced from the table?

A The average value of a merger in Europe was higher in 2017 than 2014.
B The difference in the number of mergers in Europe and North America was the same in 2014
and 2016.
C The value of mergers each year in US dollars was always lower in Europe.
D The number of mergers each year was always higher in Europe.

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13 Charities distribute plastic bags to households that householders can fill with clothes they no
longer want. The charities then collect them and sell the clothes to raise funds. Only one charity
leaves a note thanking the householder for the donation.

What best describes this charity’s approach?

A game theory
B monopoly behaviour
C non-price competition
D nudge theory

14 What could prevent a market failure?

A barriers to entry
B building regulations
C growth of firms
D persuasive advertising

15 When will a society have achieved an equitable distribution of income?

A when all individuals have equal job opportunities

B when all workers are paid the same wages
C when the incomes within the society are equally distributed
D when the society believes that the distribution of income is fair

16 ‘The addition to revenue which results from employing one additional unit of a factor of
production, while the quantities of all other factors of production remain constant’.

What does this define?

A marginal factor cost

B marginal revenue
C marginal revenue product
D the law of diminishing returns

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17 The alternative to work is to have leisure time. The diagram shows a worker’s decision of how
many hours of labour to supply.

Z
real wage rate supply of labour

X
O hours of
labour

What happens between Y and Z?

A Extra leisure is preferred to work.

B Extra work is preferred to leisure.
C The job now requires more specific skills.
D The price elasticity of supply for the final product has become more inelastic.

18 By moving from rural areas to large urban areas to work, how might economic migrants create
benefits in both areas in developing countries?

rural areas urban areas

A by improving land ownership systems by becoming better educated

B by receiving financial help from urban workers by providing necessary labour
C by reducing population pressure on resources by living in informal settlements
D by solving unemployment problems by obtaining loans from moneylenders

19 Which change is most likely to increase both economic growth and economic development in the
long run?

A a decrease in the saving ratio

B an increase in investment in human capital
C the depletion of non-renewable resources
D the greater use of compulsory overtime working of labour

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20 The table gives population data from the United Nations.

low-income lower-middle- upper-middle- high-income

countries income countries income countries countries
rate of population
change (% per year) 2.7 1.5 0.8 0.5

life expectancy
(years) 61 67 74 80

death rate (per 1000

population) 9 8 7 8

under-5 mortality
(per 1000 live births) 90 59 18 6

As countries move from low income to high income, which indicator shows a value that does not
represent the expected trend?

A the rate of population change in upper-middle-income countries

B the life expectancy in high-income countries
C the death rate in high-income countries
D the under-5 mortality in upper-middle-income countries

21 The diagram shows selected US labour statistics from 2001 to 2013.

300 65
net new jobs 200 64 employed as a
monthly average percentage of
100 63
(thousands) population aged
0 62 16 and over
–100 61
–200 60
–300 59
–400 58
–500
2001 03 05 07 09 11 2013
year

What can be concluded from the diagram?

A Between 2004 and 2005, when the number of net new jobs was rising, the percentage
employed increased.
B Employed as a percentage of the population aged 16 and over declined continuously.
C The natural rate of unemployment was achieved only in 2008.
D The number of employed workers rose in all except four years.

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9

22 What indicates that a developing country is becoming less dependent on foreign aid?

A It gains foreign currency by exporting a range of raw materials, and uses this to import
machinery from developed economies.
B It has to change its economic structure in order to qualify for a bailout loan from the World
Bank.
C Its balance of payments goes into deficit when it has to start paying interest on loans taken
out with foreign banks.
D Its local firms go out of business after a foreign multinational sets up in the country.

23 How must GDP at market prices (producer prices) be adjusted to find GDP at factor cost?

A by adding exports and deducting imports

B by adding net property income and deducting transfer payments
C by adding profits and deducting income taxes
D by adding subsidies and deducting indirect taxes

24 The diagram shows the equilibrium levels of national income in a closed economy with no
government, at two levels of investment, I1 and I2.

saving / S
investment
X
I2
I1
T Y

O
U Z national income

Which ratio gives the value of the multiplier?

TX UZ UZ XY
A B C D
UZ TX XY UZ

25 An upward shift of the curve relating consumption to national income could be caused by

A a reduction in taxation.
B an increase in investment.
C an increase in national income.
D an increase in savings.

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10

26 Which combination of changes is most likely to result in an increase in the demand for money?

income price interest

level level rate

A fall fall rise

B fall rise fall
C rise fall rise
D rise rise fall

27 In 1936 Keynes explained how economic policy can be used to increase aggregate demand and
prevent an economic depression.

Which policy supports Keynes’ theory?

A Central banks should raise interest rates and decrease liquidity.

B Governments should increase expenditure and decrease taxation.
C Governments should encourage consumer savings rather than expenditure.
D Trading policy should prevent the free movement of capital.

28 A central bank increases the money supply in an attempt to stimulate investment and growth
when the economy is in recession.

When might this policy be ineffective?

A if the economy is in the liquidity trap

B if the economy is in the poverty trap
C if the Marshall-Lerner condition does not hold
D if the value of the multiplier is very low

29 Which statement describes what the Phillips curve shows?

A An inverse relationship exists between inflation and unemployment.

B As employment increases the balance of payments deteriorates.
C Economic growth and employment have a positive relationship.
D It is possible to achieve low inflation and high economic growth at the same time.

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30 To stimulate economic growth the government increases the size of its budget deficit and funds
this by increasing the money supply.

What is most likely to reduce the effectiveness of these measures in achieving their aim?

A a floating exchange rate

B a high marginal propensity to import
C a low marginal propensity to save
D an interest-inelastic demand for money

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12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/32/M/J/20

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2021
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*5460809782*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 16 pages. Any blank pages are indicated.

IB21 06_9708_32/3RP
© UCLES 2021 [Turn over
 www.dynamicpapers.com
2

1 The diagram shows a monopolistically competitive firm.

Which point represents allocative efficiency?

MC
cost and
revenue
AC
C

BD
A

MR D=AR
O quantity

2 What is an argument against government intervention when there is market failure?

A Government intervention could increase positive externalities.

B Government intervention could increase the availability of merit goods.
C Government intervention could lead to a less efficient outcome.
D Government intervention could reduce information failure.

3 A government is choosing between four routes for a new road. The table provides details of the
costs and benefits associated with each route.

The government wants to get the highest return for taxpayers in terms of the social benefit
relative to the private cost.

Which route will the government choose?

route ($ million)
private private external
costs benefits benefits

A 20 25 5
B 25 30 10
C 20 25 10
D 30 35 10

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3

4 Donald maximises his utility when buying paperback books and audio books. The price of a
paperback book = $3 and the price of an audio book = $6.

If the marginal utility of the last paperback book was 12 units of utility (utils), what was the
marginal utility of the last audio book purchased?

A 2 utils B 12 utils C 16 utils D 24 utils

5 Which statement correctly describes the result of a price increase for an inferior good?

A Both the substitution effect and the income effect cause the consumer to buy less of the
good.
B Both the substitution effect and the income effect cause the consumer to buy more of the
good.
C The substitution effect causes the consumer to buy less of the good and the income effect
causes the consumer to buy more of the good.
D The substitution effect causes the consumer to buy more of the good and the income effect
causes the consumer to buy less of the good.

6 Which statement about a monopoly is correct?

A Profit maximisation occurs when average cost equals average revenue.

B Sales maximisation occurs when marginal cost equals marginal revenue.
C Sales revenue maximisation occurs when marginal revenue is equal to zero.
D Satisficing occurs when marginal cost is equal to zero.

7 A satellite communications company is bought by an investment bank.

Which outcome has resulted from this purchase?

A a cartel
B diversification
C lateral integration
D vertical integration

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8 The diagram shows the long-run average cost (LRAC) curve for a firm, and three short-run
average cost (SRAC) curves.

cost SRAC1
$ LRAC
SRAC2 SRAC3

O output

Which statement is correct?

A When the minimum point of SRAC3 is lower than the minimum point of SRAC2 it reflects the
law of variable proportions.
B The law of diminishing returns explains why each of the SRAC curves is U-shaped.
C The position of SRAC2 shows the minimum efficient scale of production.
D The rising section of SRAC1 indicates the existence of diseconomies of scale.

9 What is the most likely reason that barriers to entry might lead to x-inefficiency?

A The firm does not account for any external benefits.

B The firm has no incentive to cut its costs of production.
C The firm’s price is set higher than its average costs.
D The firm’s price is set higher than its marginal costs.

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5

10 The diagram shows the long-run cost and revenue curves for a public sector monopoly.

revenue
and costs AR

LRAC
MR LRMC
O
output

The government decides to set a price that maximises social welfare.

What will be the consequence of this decision?

A The firm will experience diseconomies of scale.

B The firm will make a loss.
C The firm will maximise profits.
D The firm will maximise total revenue.

11 The information gives the characteristics for a market structure.

● The two leading brands control 60% of the market.

● Other large firms and a few smaller firms exist in the market.
● Prices tend to be stable.
● There are significant barriers to entry.

Which market structure is this most likely to be?

A monopolistic competition
B monopoly
C oligopoly
D perfect competition

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6

12 The diagram shows a firm in imperfect competition. It changed its aim from profit maximising to
sales revenue maximising.

cost,
MC
revenue

AC

AR
MR
O
output

Which type of profit was it making in each case?

profit sales revenue

maximising maximising

A normal profit supernormal profit

B subnormal profit normal profit
C supernormal profit normal profit
D supernormal profit supernormal profit

13 In various countries, the supply of public utilities such as water and electricity have been licensed
by the government to a few private firms.

What should governments do to persuade these profit-seeking private firms not to overcharge
consumers?

A allow private firms to merge to create a monopoly

B appoint a regulatory body to guarantee supplies at all times
C deregulate nationalised industries to create a free market
D enable customers to switch easily from one private firm to another

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7

14 A government intends to use pollution permits to reduce environmental damage.

Under what circumstances is this policy most likely to fail to achieve the intended reduction?

A Firms within the scheme are required to have a sufficient number of permits to cover the
amount of pollution generated in production.

B Firms improve their technology to reduce the number of permits they require.

C Firms that do not use all of their permits can sell some of them to other firms.

D The permits do not impose strict enough limits on carbon emissions.

15 A government is committed to reducing the Gini coefficient.

Which policy is most likely to fail to achieve that policy objective?

A a decrease in ad valorem sales tax rates

B a more regressive income tax system
C a more progressive income tax system
D an increase in transfer payments to the unemployed

16 Which calculation would give the marginal revenue product (MRP) of labour for a firm selling its
product in an imperfectly competitive product market?

A average output produced per worker employed  marginal revenue of the product

B average output produced per worker employed  price of the product

C extra product produced by an additional worker  marginal revenue of the product

D extra product produced by an additional worker  price of the product

17 The diagrams show the demand for and supply of labour in four markets.

1 2 3 4
S S
wage wage wage wage
rate rate rate rate
S
S

D D D D
O number of O number of O number of O number of
workers workers workers workers

In which markets would labour’s transfer earnings exceed its economic rent?

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

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8

18 Which objective would not be suitable for a government if it were seeking sustainable economic
growth?

A achieving the highest growth rate by using all the natural resources
B careful management of the use of non-renewable resources
C effective protection of the environment, wildlife and landscapes
D meeting the needs of both its current and future population

19 What is the difference between a country’s gross domestic product and its gross national
income?

A capital consumption
B gross fixed capital formation
C net property income from abroad
D the value of exports less imports

20 Some individuals seek to increase their share of existing wealth without creating new wealth. This
can be a problem in developing economies.

What is an example of this behaviour?

A a government official taking a bribe for special treatment for the person offering the bribe
B a land owner renting a field to a farmer
C a landlord being paid for the hire of a room
D an entrepreneur earning a reward for setting up a firm that pays low wages

21 What is necessary to include to calculate the number unemployed?

everyone of those of part-time employees

working age who is pension age who seeking full-time
not in employment still want to work employment

A no no no
B no yes yes
C yes yes no
D yes yes yes

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9

22 The diagram shows changes in the numbers employed in four different industries in a city
between 2015 and 2020.

60
employment finance
(000) 50

40 manufacturing
30 education

20 leisure

10

0
2015 2016 2017 2018 2019 2020

What can be concluded from the diagram?

A Finance was always the largest employer.

B Leisure had the fastest growth rate in employment.
C Manufacturing was the only industry to show signs of decline.
D Total employment in the four industries decreased over the period.

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10

23 At the start of the year, the production possibility frontier for an economy is at PPF1 and the
economy is at point S. At the end of the year the production possibility frontier is at PPF2 and the
economy is at point T.

Which diagram shows that the economy has experienced actual growth but not potential growth?

A B

output Y output Y
S
T
T
S

PPF1 = PPF2 PPF2 PPF1

O output X O output X

C D

output Y output Y
T
S
S
T

PPF1 PPF2 PPF1 = PPF2

O output X O output X

24 Government spending in an economy increases by $4000 whilst at the same time investment
falls by $1500.

1
marginal propensity to save =
10

1
marginal propensity to tax =
5

1
marginal propensity to import =
10

What will be the increase in national income following these changes?

A $2500 B $6250 C $10 000 D $25 000

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11

25 Which change will allow an increase in an economy’s money supply?

A An outflow of currency for trade and capital purposes becomes an inflow.

B The central bank instructs commercial banks to keep higher ratios of cash to deposits.
C The government budget balance moves from a deficit to a surplus.
D The government replaces borrowing from the banks with borrowing from the general public.

26 In a country the initial money supply curve is given by MS0, the initial liquidity preference curve by
LP0 and the initial rate of interest by R0.

If there is an increase in the precautionary motive for holding money, which diagram shows the
changes that will occur?

A B

rate of LP0 MS0 MS1 rate of LP0 MS1 MS0

interest interest

R0 R1
R1 R0
O quantity O quantity
of money of money

C D

rate of LP1 LP0 MS0 rate of LP0 LP1 MS0

interest interest

R0 R1
R1 R0
O quantity O quantity
of money of money

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12

27 The UK gives aid to the Ugandan government to spend on a school. One condition is that they
must buy the materials from the UK.

Which type of aid does not take place?

A bilateral
B multilateral
C project
D tied

28 Unemployment in an economy increases.

What is a probable consequence?

A a switch from direct to indirect taxation

B an increase in demand-pull inflation
C an increase in the balance of trade deficit
D an increase in the government budget deficit

29 The government of Lesotho introduces a programme to promote exports and to encourage firms
to expand by subsidising local entrepreneurs.

Which effect is this likely to have on incomes, the balance of payments current account deficit
and government expenditure in Lesotho?

balance of
government
incomes payments current
expenditure
account deficit

A fall reduce rise

B fall uncertain rise
C rise reduce no change
D rise uncertain rise

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13

30 A government currently has a balanced budget. It is considering the possible variations in tax
revenue and government expenditure shown.

government
option tax revenue
expenditure

W increase increase
X increase reduce
Y reduce increase
Z reduce reduce

Which three options are likely to have the potential to move the budget into surplus?

A W, X and Y B W, X and Z C W, Y and Z D X, Y and Z

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publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/32/M/J/21

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Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice May/June 2022
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*0549356411*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9708_32/2RP
© UCLES 2022 [Turn over
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2

1 The generation of electricity causes external costs.

Who bears these external costs?

A the distributors who sell the electricity

B the electricity company that produces the electricity
C the government that subsidises the production of electricity
D the people living in the area where the electricity is generated

2 What must equal marginal cost when a profit-maximising firm produces at its allocatively efficient
output?

A average revenue
B average total cost
C total revenue
D total cost

3 What might reduce dynamic efficiency in an economy?

A government expenditure on enterprise education

B reinvestment of profits
C rising shareholder dividends
D the increase in innovation

4 In many countries, health authorities are concerned about the harmful effects of smoking
cigarettes.

Governments have imposed high sales taxes on cigarettes and have conducted anti-smoking
campaigns.

Why might the quantity of cigarettes demanded remain high?

A Better knowledge of health hazards is changing behaviour.

B Cigarette smoking will be replaced by cheaper alternatives.
C Consumer behaviour is irrational due to addiction.
D The income effect of a price rise makes consumers worse off.

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3

5 What does a budget line show?

A the behaviour of a utility-maximising consumer

B the difference between an individual’s consumption and saving
C the monetary value of the disposable income of a consumer
D the maximum combinations of two products that a consumer can buy with a given level of
income

6 When the price of a good falls, the overall effect on the quantity demanded can be separated into
income and substitution effects.

Which statement describes a Giffen good?

A The income effect is irrelevant for a Giffen good.

B The income effect works in the same direction as the substitution effect.
C The income effect works against the substitution effect and is of a greater magnitude.
D The income effect works against the substitution effect but is of a smaller magnitude.

7 The table provides some details of the soft drinks industry in a country.

number of firms 250

number of brands 1000
5 firm concentration ratio 65%

Which market structure best describes the country’s soft drinks industry?

A monopoly
B monopolistic competition
C oligopoly
D perfect competition

8 A rock band is due to play at a concert hall. In order to create a good atmosphere, the band’s aim
is to sell all the tickets. Ticket prices are set at the highest price that ensures all tickets will be
sold.

What is the motivation for this price strategy?

A profit maximisation
B revenue maximisation
C sales maximisation
D satisficing

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9 What would be most likely to allow the survival of small firms in an economy?

A an increase in the cost of borrowing from commercial banks

B an increase in personal services as a share of GDP
C an increase in the rate of change of information technology
D an increase in the ratio of capital to labour employed in an economy

10 What is a condition for operating a successful cartel?

A a large number of firms in the industry

B having a differentiated product
C low barriers of entry to the industry
D strictly enforced production quotas

11 In 2012, an Australian airline company separated its international and domestic operations into
separate companies. The company had been facing increasing competition from much larger
competitors in international markets but had relatively little competition in domestic markets that
had a higher price elasticity of demand.

Which row shows the reasons that would support this separation?

diseconomies of scale the level of

markets can easily
in the combined competition and
be separated by
company before the price elasticity in
this company
separation domestic markets

A no yes yes
B yes no yes
C yes yes no
D yes yes yes

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5

12 The diagram shows a firm’s marginal and average cost curves.

The firm enters a collusive agreement with other firms in the industry. It is agreed that each firm
will charge a common price, OP, and will restrict the level of its output to a production quota set
by the industry cartel.

The firm is allocated a production quota, Oq.

price
MC AC

P G H

L K
M J
N

O q
quantity

The firm decides to cheat in order to maximise its profits.

What is its short-run increase in profits?

A PGKL
B PHJL
C PHJL minus PGNM
D PGKL minus LKNM

13 To reduce road congestion caused by parked cars, a local government introduced a system of
tradable parking permits. Households were given a permit allowing them to park one car at the
roadside. Households with more than one car could buy extra permits from households with no
cars.

What is the most likely reason for this policy to fail?

A Fines for drivers parking in the area without a permit will internalise the externality.
B The local government has a monopoly over the issue of parking permits.
C Those suffering from too many parked cars are compensated by the households owning
extra cars.
D Too many households own cars so the market in permits is very small.

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6

14 What is not an example of the application of ‘nudge’ theory?

A A chain of coffee shops offers its customers a larger coffee if they bring their own reusable
cup.
B A government imposes an indirect tax on the purchase of sugary snacks, to try to reduce
childhood obesity.
C A government introduces an opt-out system for organ donation, to try to increase the number
of organs donated.
D A restaurant chain introduces smaller-sized main courses on its menu, to try to reduce the
volume of food wastage.

15 A government wishes to redistribute income from richer citizens to poorer citizens.

Which policy is it least likely to use?

A increase direct taxes

B increase indirect taxes
C increase subsidies
D increase transfer payments

16 What represents the transfer earnings of the factor enterprise?

A excess profit
B normal profit
C return on capital
D start-up costs

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17 The diagram shows the demand for and supply of labour in the construction industry. The labour
market is initially in equilibrium when the wage is W1.

A trade union wishes to increase the wage but does not wish to decrease employment. The union
asks for wage W2. The employers offer wage W3.

supply of labour
wage

G
W2
W3 E
W1 H
F

demand for labour

O Q1
quantity of labour

What would be the best policy to enable the trade union to achieve both its aims?

A accept W3 and a new equilibrium F

B continue to ask for W2 and a new equilibrium G
C keep W1 with a new equilibrium H
D increase marginal revenue productivity and a new equilibrium E

18 Many governments adopt sustainable economic growth as a macroeconomic policy aim.

What is meant by sustainable economic growth?

A increasing the current productive potential of the economy as fast as possible

B increasing the current productive potential of the economy by using only low-cost resources
C increasing the current productive potential of the economy without reducing future productive
potential
D increasing the future productive potential of the economy as fast as possible

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19 What would cause estimates of the money value of the Measure of Economic Welfare for a
country to be greater than the value of Gross National Product?

A negative externalities, such as pollution

B property income received from abroad
C regrettable necessities
D the value of non-marketed activities and leisure

20 The data provides information on indicators of the standard of living in four countries in 2019,
each with a population below 10 million.

Gross National expected skilled labour

life expectancy
country Income per capita years of (% of labour
at birth (years)
($) schooling force)

Croatia 78.3 23 061 15.0 91.5

Norway 82.3 68 059 18.1 84.3
United Arab Emirates 77.8 66 912 13.6 52.8
Qatar 80.1 110 489 12.2 43.9

Based (overall) on these indicators, which country is most likely to have had the highest HDI
ranking?

A Croatia
B Norway
C United Arab Emirates
D Qatar

21 What might help improve economic growth in developing countries over the next five years?

A an increase in income tax

B an increase in the birth rate
C an increase in the budget surplus
D an increase in training

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9

22 An economist once said ‘if you pay people not to work and tax them when they do, don’t be
surprised if you get unemployment’.

What is this an example of?

A cyclical unemployment
B frictional unemployment
C structural unemployment
D voluntary unemployment

23 What is the least likely consequence of a significant rise in unemployment during an economic
recession?

A a fall in aggregate demand

B a fall in expenditure on welfare
C a fall in revenues from income tax
D a fall in the rate of economic growth

24 In which context relevant to growth in the money supply is the term total currency flow used?

A the money flow between central banks and commercial banks

B the money flow between central banks and governments
C the money flow between domestic residents and foreign residents
D the money flow between the general public and the financial sector

25 What does not change the level of withdrawals from the circular flow of income?

A households having more of their income taken in tax following a rise in the rate of income tax
B households spending more on imported cars following a currency appreciation
C households taking money from their savings to spend on a celebration
D households transferring money from an account in one bank to a different bank

26 Which approach is consistent with the Keynesian school of economic thought?

A Balanced budgets should be a key policy aim.

B Inflation is caused by excessive money supply growth.
C Unemployment can still persist in the long run.
D Wages are flexible downwards in the short run.

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10

27 What could be used to offset a leakage from the circular flow of income?

A a reduction in domestic consumption

B a reduction in government expenditure
C an increase in the rate of interest
D an increase in investment

28 In some countries, life expectancy has fallen but the birth rate remains high.

Which effect will this have?

A Fewer schools and other resources for young people will be needed.
B More facilities will be needed for older people.
C There will be an ageing population.
D The working population will tend to become a smaller percentage of the total population.

29 The government’s chief economist says that increasing the top rate of income tax from 40% to
45% is likely to reduce tax revenue by 2%.

Which economic concept might explain this prediction?

A Kuznets curve
B Laffer curve
C Lorenz curve
D Phillips curve

30 Which combination of policies is most likely to reduce the rate of inflation?

government direct taxation

interest rates
spending on households

A decrease decrease increase

B decrease increase increase
C increase decrease increase
D increase increase decrease

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/32/M/J/22

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 A Level Multiple Choice May/June 2023
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*0800569016*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 06_9708_32/2RP
© UCLES 2023 [Turn over
 www.dynamicpapers.com
2

1 Studies show that some dentists replace patients’ teeth more often than is necessary.

Which factor helps to explain why excessive dental treatment may take place?

A the existence of asymmetric information

B the existence of dynamic efficiency
C the existence of positive externalities
D the existence of social benefits

2 The diagram shows an individual’s indifference curve, I1, for apples and pears.

apples

19 Y

X
12
I1

0
0 2 4
pears

What can be concluded from the movement from point X to point Y on this curve?

A The individual can afford more apples than pears.

B The individual has not changed their total utility.
C The individual prefers apples to pears.
D The individual has gained more utility by moving from point X to point Y.

3 What is not necessary for successful price discrimination?

A ability to separate markets

B different price elasticities of demand in each market
C monopoly power
D price leadership

© UCLES 2023 9708/32/M/J/23

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3

4 The diagram shows the cost curves of a firm.

What is the level of output below which the firm will shut down in the long run?

MC
cost or ATC
price
$

AVC

O A B C D
quantity

5 Steel producer X takes over its main competitor, steel producer Y.

What would X expect to happen to the average revenue for its product and its long-run average
cost as a result of this takeover?

average long-run
revenue average cost

A decrease decrease
B decrease increase
C increase decrease
D increase increase

6 Which statement is correct?

A External benefit minus private benefit equals social benefit.

B Private benefit minus external benefit equals social benefit.
C Social benefit minus external benefit equals private benefit.
D Social benefit plus private benefit equals external benefit.

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4

7 What can be done to help to overcome moral hazard?

A charging the same insurance premium to all people in the same age group
B designing insurance contracts so that the insurance company and client share any loss
C giving unconditional financial support to banks to protect jobs
D guaranteeing jobs for bank managers to provide a sense of security

8 Which action would produce a positive externality of production?

A A child is vaccinated against measles.

B A consumer donates products to a local food bank.
C A firm rebuilds a local road when constructing its new factory.
D A government pays a subsidy to firms producing cars.

9 A privately owned sole supplier of gas operates in an unregulated market with high barriers to
entry and exit.

Which row is most likely to indicate the economic efficiency resulting from the firm’s position in
this market?

productive allocative dynamic

efficiency efficiency efficiency

A no no no
B no no yes
C no yes yes
D yes no yes

10 A government increases the protection that patents offer to inventors of new products and
processes.

Which barriers to entry into an industry are higher as a result of this increase?

A cost barriers
B legal barriers
C market barriers
D physical barriers

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5

11 The table shows how a firm’s total cost changes as more workers are employed.

number of total costs

workers $

1 1200
2 2000
3 2700

What would be the effect of employing a third worker on the firm’s average costs and its marginal
costs?

average costs marginal costs

A decrease decrease
B decrease increase
C increase decrease
D increase increase

12 A government hopes to build an athletics stadium to hold the World Games. The stadium would
have high private and external costs, but it would increase national pride.

Why would it be difficult to use cost-benefit analysis to decide whether to build the stadium?

A The materials needed to build the stadium will need to be imported.

B The external costs of clearing land for building will outweigh the private costs.
C The stadium will not be used much for athletics after the World Games.
D The valuation of national pride will be complex to assess.

13 What will lead the demand curve for labour to shift to the right?

A a decrease in the marginal productivity of labour

B a decrease in the wage rate
C an increase in the marginal productivity of labour
D an increase in the wage rate

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6

14 The production schedule indicates how total output increases as up to five workers are employed
per week.

employment total product

of workers (units)

0 0
1 6.0
2 13.0
3 21.0
4 27.5
5 33.5

What is the marginal product when the average product per worker equals 7.0 units?

A 6.0 units B 6.5 units C 7.0 units D 8.0 units

15 What is likely to cause a more equal distribution of income in the long run?

A a reduction in the top rate of taxation

B an increase in government spending on education and training
C an increase in unemployment
D privatisation of the education sector

© UCLES 2023 9708/32/M/J/23

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7

16 Immigrants are awarded entry points according to their ability to fulfil criteria set by the Canadian
Government. A new Express Entry system for the immigration of skilled workers was introduced.

The diagram shows the change in the relative importance or weighting given to these criteria
between the old and new systems.

Criteria weighting (%) for skilled worker immigration

skill transferability
100
work experience
%
adaptability 80
age
60
education
40
language 20
job offer
0
old Express
system Entry
system

What can be concluded from the diagram?

A Canada intended to maintain the same level of skilled immigrants under both systems.
B Canada wanted a smaller number of highly educated skilled immigrants.
C Certainty of employment for skilled immigrants was made the main criterion.
D Skilled immigrants needed to have fewer years of work experience than previously.

17 A government imposes a maximum price for electricity.

Which statement justifying this measure might be considered valid on economic grounds?

A It will encourage electricity suppliers to invest in additional capacity.

B It will increase the incentive for consumers to conserve energy.
C It will prevent the monopolistic exploitation of consumers.
D It will prevent the rationing of electricity through power cuts.

18 Which statement best describes demand-induced investment?

A It is spending on capital goods by firms because the rate of growth in demand for final goods
and services increases.
B It is spending on capital goods by firms because the cost of borrowing has fallen.
C It is spending on capital goods by firms because they want to access new technology to
improve the output per worker.
D It is spending on new capital goods by firms replacing old and obsolete capital goods.

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19 Middle Eastern countries earn foreign exchange from exports of oil and natural gas. The World
Economic Forum has encouraged oil producers to assist low-income countries in achieving
economic growth.

Which policy by Middle Eastern countries would be least likely to achieve this economic growth
in low-income countries?

A assisting low-income countries to overcome foreign exchange shortages by writing off debts
B enabling low-income countries to undertake capital projects for supplies of clean water
through financial aid
C hiring mainly labour from low-income countries to build infrastructure in the Middle East
D reducing exports of fuels to low-income countries to lower pollution of the environment

20 An open economy has injections, J, into the circular flow of income and withdrawals, W.

W
injections and
withdrawals

S T
J
R

O
Q E
national income

If the full employment level of national income is OQ, what represents the inflationary gap?

A QE B RT C SR D ST

21 Which condition will produce the highest value of the national income multiplier in an open
economy with a government sector?

A high average and marginal tax rates

B high marginal propensity to save
C low level of autonomous consumption
D low marginal propensity to import

22 Which type of unemployment can be classified as voluntary?

A cyclical
B frictional
C structural
D technological

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9

23 Increased borrowing by the government results in higher interest charges and this leads to less
private investment expenditure.

Of what is this an example?

A an automatic stabiliser
B crowding out
C the accelerator
D the substitution effect

24 Governments set economic policy aims.

What will be least likely to occur if all these aims are achieved?

A a decrease in the average standard of living

B a decrease in the currency’s foreign exchange rate
C an increase in the level of frictional unemployment
D an increase in the rate of inflation

25 The government decides to raise the rate of value added tax (general sales tax).

What does this suggest is the government’s main macroeconomic objective?

A to reduce the budget deficit

B to reduce the inequality of income distribution
C to reduce the level of unemployment
D to reduce the rate of inflation

26 An economy imports most of the factors of production used in the manufacture of its exported
goods.

What effect would depreciation of this economy’s rate of exchange have?

price of imported price of exported

goods in the goods in the
domestic currency domestic currency

A fall fall
B fall rise
C rise fall
D rise rise

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 www.dynamicpapers.com
10

27 The table shows the Human Development Index (HDI) values for India in 2014 and 2020.

HDI value

2014 0.60
2020 0.64

Which conclusion is most likely to be drawn from the table about the change in the HDI value
from 2014 to 2020?

A India had a fall in life expectancy at birth.

B India had a fall in real national income per head.
C India had a rise in environmental pollution and crime rates.
D India had a rise in the mean years of schooling of the adult population.

28 The diagram shows a J curve which indicates that a fall in the exchange rate will worsen the
current account position before it starts to improve.

J curve
current
account
surplus

O
time

current
account
deficit

What is said to explain this?

A a time lag before recognising that prices have changed

B an improvement in the quality of goods produced
C the demand for imports and exports is elastic in the short run
D the supply of goods is price elastic

29 Which country is likely to be the most highly developed?

relative size of
Gini coefficient death rate
tertiary sector

A high high high

B low low low
C low low high
D low high low

© UCLES 2023 9708/32/M/J/23

 www.dynamicpapers.com
11

30 What is central to economic growth but not necessarily to economic development?

A an expansion of the range of economic choices available to individuals

B an increase in Gross Domestic Product
C the eradication of absolute poverty
D the satisfaction of basic needs amongst the whole population

© UCLES 2023 9708/32/M/J/23

 www.dynamicpapers.com
12

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/32/M/J/23

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 A Level Multiple Choice May/June 2024
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*8318944193*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB24 06_9708_32/3RP
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2

1 The table shows the total utility gained by a consumer from the consumption of water.

quantity
total
consumed
utility
/ bottles

0 0
1 30
2 40
3 48
4 54
5 58

What can be concluded from this table?

A Marginal utility increases as consumption increases.

B The consumer cannot switch expenditure to another product to increase total utility.
C The marginal utility of the 3rd unit is 8.
D The marginal utility of the 5th unit is 2.

2 A consumer has $100 to spend on two products, X and Y.

The budget line shows the different possible combinations of products X and Y that can be
purchased when all the consumer’s income is spent.

10
product X

0
0 20
product Y

If the price of product Y increases to $10, what will be the maximum number of units of product X
and product Y that the consumer can now purchase?

product X product Y

A 5 10
B 5 20
C 10 10
D 20 10

© UCLES 2024 9708/32/M/J/24

 www.dynamicpapers.com
3

3 Which combination of costs and benefits will lead to an increase in net social costs?

private benefits external benefits private costs external costs

A falls falls no change no change

B no change increases falls no change
C no change increases falls falls
D increases increases no change falls

4 A firm increases its output, starting from zero.

How will this affect its short-run marginal cost (MC), average total cost (ATC) and average fixed
cost (AFC)?

MC ATC AFC

A fall then rise fall then rise fall

B fall then rise rise then fall rise
C rise then fall fall then rise fall
D rise then fall rise then fall rise

5 Assuming the absence of price controls, in which industry is an individual firm least likely to be
able to alter the price at which it sells its product?

A air transportation
B hairdressing
C steel production
D wheat farming

© UCLES 2024 9708/32/M/J/24 [Turn over

 www.dynamicpapers.com
4

6 A firm has the choice between five levels of output. The table shows the total cost and total
revenue of producing at each output level. The firm could sell whatever output it produces.

output total cost total revenue

units $ $

1000 8 000 10 000

2000 12 000 18 000
3000 19 000 24 000
4000 23 000 28 000
5000 25 000 25 000

The firm decides to produce 4000 units.

What is the firm’s aim?

A to maximise profit
B to maximise sales
C to maximise revenue
D to minimise average costs

7 The diagram shows the costs and benefits of producing steel in a free market.

MSC
cost,
benefit MPC
R
X
T
Y
Z U
S

MPB = MSB

O M N
output

Which area measures the deadweight loss of economic welfare?

A RTS B RUS C TUS D YTUS

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5

8 What is likely to make it more difficult for a small firm to survive?

A increased preference on the part of consumers for distinctive non-standardised products

B reductions in the rate of interest charged by commercial banks
C the absence of effective barriers to the entry of potential competitors
D the existence of decreasing returns to scale

9 A market structure in which a small number of firms face competition from potential entrants.

What does this describe?

A a contestable market
B a monopoly
C monopolistic competition
D perfect competition

10 What is an example of backward vertical integration?

A a bakery buying a wheat farm

B a car manufacturer buying a car showroom
C a vineyard buying an apple orchard
D two rival supermarkets joining together

11 A government wants to introduce a policy that will reduce the pollution caused by the production
of a good.

Which policy would not make use of market forces?

A a quota to limit the production of the good

B a regulation to ban the production of the good
C a tax on the production of the good
D a tradable pollution permit system for producers of the good

© UCLES 2024 9708/32/M/J/24 [Turn over

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6

12 The table shows the annual percentage change in the output per worker employed for four
nationalised industries before and after privatisation.

before after
nationalised
privatisation privatisation
industry
% %

railways –4 2
electricity supply 7 9
shipbuilding 4 –1
telecommunications 6 6

What can be concluded about the effect of privatisation?

A Employment fell in the railway industry.

B Employment was unchanged in the telecommunications industry.
C Output was greatest in the electricity supply industry.
D Workers became less efficient in the shipbuilding industry.

13 Most workers in a country are employed in the manufacturing sector where they are paid a fixed
wage rate per hour.

What will lead to an increase in the net advantage of workers currently employed in the
manufacturing sector?

A a reduction in working hours available

B a shift in the country’s economy to the service sector
C a subsidised lunch is made available
D an increase in the number of jobs available

14 When will a profit-maximising firm employ the optimum number of workers?

A when the average revenue product of labour equals the average cost of hiring workers
B when the marginal revenue product of labour equals the average cost of hiring workers
C when the marginal revenue product of labour equals the marginal cost of hiring workers
D when the marginal revenue product of labour equals the trade union supplied cost of workers

© UCLES 2024 9708/32/M/J/24

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7

15 The diagram shows the labour market for farm workers in New Zealand.

wage supply of
rate F
labour

G
K

J
demand for
labour
O H
quantity of labour

Which areas represent the economic rent and transfer earnings of the farm workers?

economic transfer
rent earnings

A GFK GHOJ
B GHOJ GJK
C GJK GJF
D GJK GHOJ

16 What is not a function of a commercial bank?

A to help firms raise finance

B to hold cash on deposit for firms
C to lend money to households
D to provide savings accounts

17 In 2020 in a country, the unemployment rate of the 16–64 age group seeking work was 4.0%.

The employment rate for this group in the same period was 76.6%.

What can be concluded from this?

A 19.4% of the economy is working illegally.

B 23.4% of the age group is economically inactive.
C 80.6% of the age group is economically active.
D The data is inaccurate.

© UCLES 2024 9708/32/M/J/24 [Turn over

 www.dynamicpapers.com
8

18 Which statement relating to unemployment benefits provided by a government is not valid?

A They allow firms to dismiss workers as unemployment benefits provide support to

unemployed workers.
B They force firms to raise wages to encourage workers to work rather than relying on
unemployment benefits.
C They provide a safety net to workers which might reduce their efforts to find a suitable job.
D They increase government spending and force it to raise taxes.

19 Country X has a marginal propensity to consume (MPC) of 0.7. Its marginal propensity to save
(MPS), marginal rate of taxation (MRT) and marginal propensity to import (MPM) are each 0.1.

What is likely to lead to the biggest increase in the national income multiplier?

A a 5% increase in the MPC together with a 5% fall in the MRT

B a 5% increase in the MPM together with a 5% fall in the MRT
C a 5% increase in the MPS together with a 5% fall in the MPM
D a 5% increase in the MRT together with a 5% fall in the MPS

20 The diagrams show the performance of an economy using different measures.

LRAS trend
GDP
goods price real
level GDP X

AD
O services O X O year
real output

If an economy is currently at point X on each diagram, what is the most likely conclusion that can
be made based on this evidence?

A Prices will increase significantly as the economy grows in the near future.
B Supply-side policies would be the best option to encourage economic growth.
C The economy is currently experiencing a deflationary gap.
D There are shortages of skilled labour throughout the economy.

© UCLES 2024 9708/32/M/J/24

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9

21 Which row correctly identifies the characteristics of an economy experiencing the liquidity trap?

rate of
rate of rate of
economic
inflation interest
growth

A high high low

B low high low
C low low low
D low low high

22 Which combination of policies would be most likely to bring a country out of recession?

A expansionary fiscal and monetary policy as well as supply-side policies

B expansionary fiscal policy and tight monetary policy
C tight fiscal and monetary policy
D supply-side policies alone

23 The inflation rate in a country increased.

Which effect would this most likely have on the country’s balance of payments?

A an improvement in the current account balance

B an increase in price competitiveness
C an increase in export revenue
D an increase in import expenditure

24 A government uses monetary policy and fiscal policy to solve a problem of deflation.

Which policy combination is likely to be the most successful?

monetary policy fiscal policy

A increasing interest rates contractionary

B increasing interest rates expansionary
C reducing interest rates contractionary
D reducing interest rates expansionary

© UCLES 2024 9708/32/M/J/24 [Turn over

 www.dynamicpapers.com
10

25 The table shows indicators for the macroeconomies of two South American countries over one
year. During this year, both governments attempted to reduce unemployment by expanding
aggregate demand.

current account change in

GDP
country balance currency units
% change
% of GDP against US dollar

Argentina 17.9 1.7 –18.9

Chile 17.2 –1.8 –13.3

Based on the information given, what is the most likely reason why Argentina achieved a higher
% change in the unemployment rate than Chile?

A Argentina had a greater % change in GDP growth.

B Chile’s performance on the current account balance was worse.
C Each country had a weak exchange rate against the US dollar.
D Wage increases in each country were linked to their respective rates of inflation.

26 A measure encourages consumers to change spending on imports to spending on domestically

produced goods.

What does this describe?

A an expenditure-reducing policy
B an expenditure-switching policy
C the law of comparative advantage
D the Marshall–Lerner condition

27 The macroeconomic objective of a government is to move the current account of the balance of
payments from deficit to surplus. To achieve this, it devalues the currency.

Under which condition would a devaluation of the currency achieve this objective?

A if the combined price elasticity of demand for exports and imports is greater than 1
B if the combined price elasticity of demand for exports and imports is less than 1
C if the income elasticity of demand is less than 1
D if other countries decide to impose tariffs on all imported goods and services

© UCLES 2024 9708/32/M/J/24

 www.dynamicpapers.com
11

28 A multinational company (MNC) buys a manufacturing firm in a developing country that produces
goods for the developing country’s domestic consumers. The MNC then exports machinery and
raw materials that it needs to the developing country.

What is the most likely consequence of this foreign direct investment (FDI) by the MNC on the
balance of payments of the developing country?

current account financial account

A improves improves
B improves worsens
C worsens improves
D worsens worsens

29 The table gives information about the population of three countries in a given year.

birth rate death rate infant mortality % of population

per 1000 per 1000 rate per 1000 under 16

Singapore 12 4 5 18
Hong Kong 15 6 8 20
China 20 9 28 38

Which conclusion can be drawn about the countries in the table in that year?

A China had the highest percentage of children who died in infancy.

B People in Hong Kong lived the longest.
C Singapore had the largest number of people aged over 16.
D The population of Singapore was expected to fall in the next five years.

30 During a certain period, a country with a constant population expands its output per head. It also
experiences a significant increase in river and atmospheric pollution.

In the absence of any other changes, which measure would show a decrease in living standards?

A Gross Domestic Product per head

B Gross National Product per head
C Human Development Index
D Measure of Economic Welfare

© UCLES 2024 9708/32/M/J/24

 www.dynamicpapers.com
12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9708/32/M/J/24

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2016
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*0929309474*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 11 printed pages and 1 blank page.

IB16 11_9708_32/3RP
© UCLES 2016 [Turn over
 www.dynamicpapers.com
2

1 What is the purpose of trying to achieve economic efficiency?

A to achieve full employment

B to achieve the cheapest possible price for products
C to ensure resources are not wasted
D to use as many resources as possible

2 In the diagram, a firm increases its output from OY to OZ.

MC

costs,
revenue

AR

O Y Z
output

Which statement about the effect on economic efficiency is correct?

A It will increase because a greater quantity will be produced and higher total revenue will be
earned.
B It will increase because the value that consumers place on the product comes closer to the
cost of producing the last unit.
C It will decline because both average and marginal revenue will fall.
D It will decline because both total and marginal cost will rise.

3 A proposal for a new power station was rejected by the government because it was not socially
beneficial.

The government calculated that the private costs would be $800 m, private benefits $900 m and
external benefits $300 m.

What must have been true about the external costs of the power station?

A External costs were equal to external benefits.

B External costs were greater than $400 m.
C External costs were less than external benefits.
D There were no external costs.

© UCLES 2016 9708/32/O/N/16

 www.dynamicpapers.com
3

4 What will happen if, in response to a fall in its price, a consumer buys more of a good?

A a fall in the total utility derived from consuming the good

B a movement along the consumer’s demand curve
C a rise in the marginal utility derived from consuming the good
D a shift in the consumer’s demand curve

5 The diagram shows two indifference curves and two budget lines for goods X and Y.

good Y H
F
G
IC2

IC1
O X1 X2
good X

The consumer’s initial position is at point F. The consumer’s preferred final position becomes
point H.

What does the movement from F to G represent?

A the income effect of a price fall for X

B the price effect of a price change for X
C the substitution effect of a price fall for X
D the substitution effect of a price rise for X

6 What is one of the long-term benefits to a firm of vertical integration?

A a concentration on activities in which the firm has a comparative advantage

B a reduction in the total costs involved in agreeing contracts with other firms
C an increase in the firm’s market share
D improvements in efficiency resulting from increased use of market incentives

© UCLES 2016 9708/32/O/N/16 [Turn over

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4

7 The organisers of a major sporting event produce official souvenir products. Cheaper unofficial
souvenirs are also produced by street traders who sell them to people walking to the event.

Of what is this an example?

A a contestable market
B perfect competition
C price discrimination
D price leadership

8 Which assumption is made in calculating a firm’s short-run production function?

A All factors of production are fixed.

B All factors of production are variable.
C The state of technology is fixed.
D The state of technology is variable.

9 In the diagram, TC is a firm’s short-run total cost curve.

TC

costs

O Q1 Q2 Q3
output

Which statement is correct?

A Average total cost is minimised at output OQ2.

B Average variable cost is minimised at output OQ1.
C Average variable cost is minimised at output OQ3.
D Marginal cost is minimised at output OQ2.

© UCLES 2016 9708/32/O/N/16

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5

10 The table shows the total cost of a firm.

total cost
output
$

0 40
1 55
2 60
3 65
4 80

What is the average variable cost of producing 4 units of output?

A $10 B $15 C $20 D $40

11 Which condition must apply before a market can be regarded as perfectly contestable?

A All firms in the industry are price-takers.

B All firms in the industry produce an identical product.
C There are a large number of firms in the industry.
D There are zero costs of entry to, and exit from, the industry.

© UCLES 2016 9708/32/O/N/16 [Turn over

 www.dynamicpapers.com
6

12 The diagram shows the average and marginal revenue curves of an oligopolistic firm. OQ is the
profit-maximising output.

Which curve could be the firm’s marginal cost curve?

A
MR
B

costs / D
revenue

AR

MR
O Q
output

13 What is most likely to be found when comparing the long-run equilibrium outcome in monopolistic
competition with that in perfect competition?

A a greater degree of excess capacity in monopolistic competition

B a higher level of profit in monopolistic competition
C a larger number of firms in monopolistic competition
D a more price-elastic demand curve in monopolistic competition

14 Which is not a source of market failure?

A imperfect information
B income inequality
C monopoly
D non-excludability

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7

15 The government wants to regulate the consumption of a demerit good in order to increase
society’s net welfare.

In which situation will society’s net welfare increase?

A The fall in the marginal social benefit is greater than the fall in the marginal social cost.
B The fall in the marginal social cost is greater than the fall in the marginal social benefit.
C The fall in the total social benefit is greater than the fall in the total social cost.
D The fall in the total social cost is greater than the fall in the total social benefit.

16 Which measure is least likely to help a household out of the poverty trap?

A changing a universal benefit to a means-tested benefit

B increasing the threshold at which income tax is paid
C introducing a national minimum wage
D reducing the basic rate of income tax

17 ‘The addition to revenue which results from employing one additional unit of a factor of
production, the quantities of all other factors of production remaining constant’.

What does this define?

A marginal factor cost

B marginal revenue
C marginal revenue product
D the law of diminishing returns

18 The diagrams show the demand for and supply of labour.

S
S
wage wage wage
rate rate S rate
1
3 4
2 D D D
O quantity of labour O quantity of labour O quantity of labour

Which two areas represent economic rent?

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

© UCLES 2016 9708/32/O/N/16 [Turn over

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8

19 The table shows the short-run production function of a firm with labour as the variable factor of
production.

number of
total output
workers
per day
employed

1 10
2 20
3 40
4 50
5 60

If workers are hired in a perfectly competitive labour market at a wage rate of $50 per day, when
will the labour cost per unit of output be at its lowest?

A 2 workers
B 3 workers
C 4 workers
D 5 workers

20 Over a given period the amount of overtime worked in manufacturing industry increases.

What is likely to be a consequence of this?

A a decrease in employment
B a decrease in the rate of inflation
C a more rapid growth in average earnings than in hourly wage rates
D a more rapid growth in manufacturing output than in productivity

21 What is a common characteristic of developing economies?

A a relatively small agricultural sector

B extensive underemployment
C high saving rates
D stable export earnings

© UCLES 2016 9708/32/O/N/16

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9

22 The diagram shows data on various aspects of four countries.

Which country is likely to be least developed?

% of population
in rural areas key
country A
country B
country C
country D

average years life expectancy

of schooling at birth (years)

GDP per capita

(US$ PPP)

23 If the marginal propensity to consume in an economy in a given period becomes greater than
unity, this must mean that

A consumers will be spending more than they are earning.

B inflation will be generated in the economy.
C the country will suffer a trade deficit.
D the marginal propensity to save will be negative.

24 Which row correctly identifies net leakages from the circular flow of income?

trade surplus government budget deficit private sector surplus

(exports - imports) (government spending - taxes) (saving - investment)

A   
B   
C   
D   

© UCLES 2016 9708/32/O/N/16 [Turn over

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10

25 The table shows the levels of consumption expenditure and savings for given family incomes.

disposable consumption
savings
family income expenditure
($)
($) ($)

2000 2150 –150

3000 3100 –100
4000 4000 0
5000 4850 150
6000 5650 350
7000 6380 620

Over the range of disposable income shown, as income rises the marginal propensity to consume

A falls and then rises.

B falls continuously.
C rises and then falls.
D rises continuously.

26 What would cause an increase in the transactions demand for money?

A a fall in the price of bonds

B an increase in nominal national income
C an increase in the rate of interest
D an increase in unemployment

27 Government economic advisers disagree over the relative impact of fiscal and monetary controls.

What is most likely to be the first stage at which a time lag will occur?

A in the introduction of the chosen policy

B in the operational effectiveness of the policy
C in the recognition of the existence of the problem
D in the selection of the appropriate policy

© UCLES 2016 9708/32/O/N/16

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11

28 What has not accompanied global economic growth over the last twenty five years?

A a depletion of non-renewable resources

B decreased international trade
C growing urbanisation
D increased atmospheric pollution

29 Which policy pursued by a central bank represents a contractionary monetary policy?

A a reduction in the interest rate at which it will lend to banks

B a reduction in the minimum cash to deposit ratios of banks
C the purchase of foreign currency to influence the country’s exchange rate
D the sale of government bonds in the open market

30 Which policy’s principal aim is to ensure sound public finances?

A environmental policy
B fiscal policy
C monetary policy
D supply-side policy

© UCLES 2016 9708/32/O/N/16

 www.dynamicpapers.com
12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 9708/32/O/N/16

 www.dynamicpapers.com

Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2017
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*6384713963*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages and 2 blank pages.

IB17 11_9708_32/RP
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1 In an economy no one can be made better off without making someone else worse off.

What can be deduced from this?

A Individuals are the best judges of their own well-being.

B Individuals can be relied upon to behave rationally.
C The distribution of income is socially optimal.
D The economy’s resources are allocated efficiently.

2 In 2015, a large mining company said it would reduce the number of staff by 6000 and sell its less
profitable mines in an attempt to become more efficient.

If it is successful, what is most likely to happen to its costs?

total variable
total fixed cost average cost
cost

A fall fall fall

B fall fall no change
C fall no change fall
D no change fall fall

3 The production of a firm which operates in an imperfectly competitive market gives rise to
external production costs.

Which statement about this firm must be correct?

A External costs exceed external benefits.

B Private costs exceed social costs.
C Social costs exceed private costs.
D Social costs exceed social benefits.

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3

4 In the UK in 2015 there were two methods of charging for water supply.

1 a fixed charge giving the consumer the right to consume water at zero price per litre
2 a price per litre of water used

It has been observed that the amount of water consumed is markedly lower when method 2 is
used.

What is implied by this observation?

A Water in the UK is not a scarce good.

B Water is a free good of nature and no charge should be levied.
C Water is a necessity, the use of which should not be restricted by unit prices.
D Water is subject to the law of diminishing marginal utility.

5 The diagram shows the cost curves for a firm.

price MC
ATC

AFC
O Q1 Q2
output

What does the firm experience as it increases output from Q1 to Q2?

A decreased average variable cost

B diminishing returns
C economies of scale
D increased profit

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4

6 Firms X and Y merge in a horizontal integration.

What must be true about the industry and the stage of production in which X and Y operate?

stage of
industry
production

A different different
B different same
C same different
D same same

7 In the diagram the curve TC shows the relationship between a firm’s total costs and its level of
output.

TC
total
cost

O Q
output

At output OQ average fixed costs are

A equal to OP .
QR

B equal to QR .
OQ

C equal to OP .
OQ
D measured by the slope of the line OR.

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5

8 Which diagram shows the total revenue function for a firm in perfect competition?

A B
TR
revenue revenue

TR

O output O output

C D
TR
revenue revenue

TR
O output O output

9 Many public utilities can be described as ‘natural’ monopolies.

Which statement best describes the situation leading to a ‘natural’ monopoly?

A There are high fixed costs and falling average costs over all outputs demanded.
B There are legal restrictions on new entrants.
C A single firm controls the supply of raw materials.
D The firm has a patent on an essential process.

10 Increased advertising by a firm in an imperfectly competitive industry leads to an increase in

demand for the industry’s product but a fall in the firm’s profits.

What could help to explain this?

A Production is subject to diseconomies of scale.

B Rival firms respond by increasing their advertising outlays.
C The demand for the industry’s product is price-inelastic.
D The increase in demand for the firm’s output is entirely at the expense of other firms.

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11 An industry consists of a dominant firm, which acts as a price leader, and a large number of small
firms.

Which statement about the profit-maximising output of the small firms is correct?

A Average cost is equal to average revenue.

B Average cost is minimised.
C Marginal cost is equal to price.
D Marginal revenue is zero.

12 There are two firms in an industry. Firm X faces a choice. It can either act independently or work
with its rival. If it acts independently its profit could be $900 a week but it could be only $400 a
week depending on what its rival does. If it works with its rival the joint profit of the two firms
together would be $1400, $700 each. It has no knowledge of what the rival’s policy will be.

Which concept describes this situation?

A contestable market
B kinked demand curve
C principal agent problem
D prisoner’s dilemma

13 What explains the kinked demand curve model of price rigidity in oligopoly?

A collusion between all firms in the industry in the setting of prices

B the assumption that a single firm acts as price leader for all firms in the industry
C the individual firm’s expectations about other firms’ responses to its price changes
D the presence of barriers to the entry of new firms into the industry

14 Which policy is not designed to correct a market failure?

A government provision of health care

B removing import quotas
C price controls on large firms
D regulations to limit smoke pollution

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7

15 A tax system allows people to earn a certain sum of income free of income tax. On income above
this level, tax is levied at a constant rate.

Which diagram correctly shows how marginal and average rates of tax vary with income?

A B

rate rate
marginal
of tax of tax
marginal

average
average

O income O income

C D

rate rate
of tax of tax
marginal

average = marginal
average

O income O income

16 What is the best example of nudge theory as applied to the prevention of tax evasion?

A employing an extensive administration to ensure detection of evasion

B imposing heavy penalties to deter offending behaviour
C providing information to taxpayers about the undesirable effects of tax evasion
D requiring employers to inform the tax authorities of workers’ pay

17 In many countries it has been observed that, when high marginal rates of income tax imposed on
richer groups are reduced, the tax revenue raised increases.

What is an implication of this observation?

A Government policy should aim to minimise the income tax.

B Sales taxes are always superior to income taxes as a means of raising revenue for the
government.
C Tax policy intended to reduce income tax on the rich may make the poor better off.
D The government should always levy proportional rather than progressive income taxes.

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8

18 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 earnings economic rent

A fall falls
B fall rises
C rise rises
D rise falls

19 How might real GNP per head be adjusted to make it a more reliable indicator when comparing
standards of living in different countries?

A adjustments to allow for differences in population size in different countries

B adjustments to allow for differences in rates of inflation in different countries
C adjustments to allow for differences in the relative size of the hidden economy in different
countries
D the use of market exchange rates rather than purchasing power parity exchange rates

20 Which combination of circumstances is most likely to lead to an increase in a country’s budget

deficit?

discretionary
total GDP unemployment government
spending

A decreases rises decreases

B decreases rises no change
C increases falls increases
D increases falls no change

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21 To combat a rising crime rate, the government decides to recruit additional police officers who are
paid a wage equal to that which they previously earned in the private sector.

As long as their previous jobs remain unfilled, what effect will the recruitment of the additional
police officers have on the national income and on economic welfare?

effect on effect on
national income economic welfare

A increase unchanged
B uncertain decrease
C unchanged decrease
D unchanged uncertain

22 What could not exist in a closed, mixed economy?

A a balance of trade deficit

B a budget deficit
C household debt
D national debt

23 What does the accelerator principle state?

A Consumption is a function of the rate of change of income.

B Income is a function of the rate of change of investment.
C Investment is a function of the rate of change of income.
D Investment is a function of the rate of interest.

24 What would not be classified as structural unemployment?

A a car worker who is replaced by a robot on the production line

B a coal miner whose mine closes because of increased use of solar power
C a fruit picker who cannot find work in the winter months
D a textile worker whose factory closes as production moves abroad

25 What represents a leakage from the circular flow of income in an economy?

A a balance of trade surplus

B a government budget surplus
C reduction in funds for research and development
D re-investment of a firm’s profits

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26 What will cause a downward shift in the aggregate demand curve of an economy?

A an increase in firms’ stocks of raw materials

B a decrease in the export of goods
C a decrease in the propensity to import
D a decrease in saving

27 Which policy is most likely to raise the level of total demand in an economy?

A an increase in direct taxation matched by a reduction in indirect taxation

B a relaxation of import controls
C cuts in public expenditure matched by tax cuts
D devaluation of the currency

28 The government cuts taxes and increases its spending in order to create jobs during a recession.

When will a resulting budget deficit be least likely to cause a permanent reduction in
unemployment?

A when households expect higher inflation rates in the future

B when households spend their extra disposable incomes on domestic products
C when the government’s extra spending is on new infra-structure projects
D when the government’s extra spending is on the salaries of public sector workers

29 In 2011, the global money supply, narrowly defined, rose 11% and broadly defined money
increased roughly 8%, as central banks continued efforts to keep interest rates low.

What type of policy does this statement illustrate?

A contractionary fiscal
B contractionary monetary
C expansionary fiscal
D expansionary monetary

30 Which policy measure would be most likely to reduce a developing economy’s birth rate and its
household saving ratio?

A an increase in student tuition fees

B a relaxation of immigration controls
C the introduction of a basic state pension
D the removal of tariffs on imported foodstuffs

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 9708/32/O/N/17

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Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2018
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*2619652600*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages and 2 blank pages.

IB18 11_9708_32/2RP
© UCLES 2018 [Turn over
 www.dynamicpapers.com
2

1 In which situation are there definitely positive externalities?

A Private benefits exceed private costs.

B Private benefits exceed social benefits.
C Social benefits exceed private benefits.
D Social benefits exceed private costs.

2 A cost-benefit analysis is carried out on the construction of a hydroelectric power station.

Which combination of circumstances would be most likely to lead to the scheme being approved?

A Private benefits are greater than private costs.

B Social benefits are greater than social costs.
C Social benefits are greater than total costs.
D Total costs are greater than total revenue.

3 What does not pose a threat to the achievement of allocative efficiency?

A imperfect information on the part of consumers

B income inequalities
C the existence of externalities
D the presence of monopolistic elements

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3

4 The diagram shows budget lines and an indifference curve. The consumer’s initial position is T.
The price of good X then falls.

good Y
J

P
Q
R
S
T
U

I
O K L
good X

Which combination of statements about the movements in this diagram is correct?

A T to Q represents perfect elasticity; T to P represents a Giffen good

B T to R represents an income effect; R to S represents a substitution effect
C T to U represents a substitution effect; T to Q represents a normal good
D T to U represents a substitution effect; U to P represents an income effect

5 The diagram shows various combinations of apples and rice which are potentially available to a
consumer.

apples
X
Z
W
Y

O rice

If standard indifference curves were added to the diagram they would show that the consumer is
indifferent between combination X and combination W.

What can be concluded?

A The consumer is indifferent between combination Y and combination Z.

B The consumer is indifferent between combination Z and combination W.
C The consumer prefers combination Y to combination X.
D The consumer prefers combination Z to combination W.

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4

6 The schedule shows the short-run marginal cost of producing good X.

units of X 1 2 3 4 5
marginal cost ($) 45 40 30 20 20

Given that the total fixed cost is $50, which level of output minimises average total cost?

A 2 units B 3 units C 4 units D 5 units

7 What must be found in two markets for price discrimination to be profitable?

A different price elasticities of demand

B different price elasticities of supply
C different producers
D different products

8 A firm maximises its profits by maximising its total revenue.

What does this imply?

A Average fixed cost is zero.

B Average revenue is equal to average cost.
C Marginal cost is zero.
D Marginal revenue is greater than marginal cost.

9 Technological change reduces the minimum efficient scale of production in an industry.

What is likely to result?

A increased number of firms and increased size of firms

B increased number of firms and reduced size of firms
C reduced number of firms and increased size of firms
D reduced number of firms and reduced size of firms

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5

10 The diagram shows the costs and revenue for a firm in imperfect competition.

Which level of output would produce only a normal profit?

$ MC

AC

AR
O A B C D
quantity

MR

11 What would be a reason why small firms do not survive?

A In certain industries, there are economies of scale.

B Small firms often supply personal services to consumers.
C Small firms often supply products, the size of the market for which is limited.
D Small owner-managed firms involve less risk.

12 What is the implication of a dominant oligopoly following a limit pricing policy?

A The industry will be restricted to a target number of firms.

B The industry will contract as rival oligopolists are eliminated.
C The oligopolist will achieve a satisficing level of profit.
D The oligopolist will sacrifice short-term profit for long-term profit.

13 Transport economists estimate the price elasticity of demand for private car use is very low.

What would be the most effective way of reducing road traffic congestion?

A banning private cars and lorries from town centres

B introducing a subsidy to lower the price of using bicycles
C introducing road pricing on all main roads
D subsidising public transport such as trains and buses

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6

14 What would help to explain why there was a reduction in wage inequality in a country during the
post-2008 economic recession?

A a decline in the share of wages in national output

B a decline in trade union bargaining power
C the existence of a minimum wage
D the trend towards later retirement

15 How is marginal revenue product calculated?

A marginal physical product × marginal revenue

B marginal physical product ÷ price

C total physical product × marginal cost

D total physical product ÷ marginal cost

16 A firm currently employs 30 workers at a daily wage of $50 each.

The marginal cost of employing one extra worker is $112 per day.

By how much will the firm have to increase the daily wage in order to increase its labour force
from 30 to 31 workers?

A $2 B $4 C $62 D $112

17 In the diagram, HN is the initial supply of labour curve faced by a firm, and RM is its initial
marginal cost of labour curve.

wage, M N
cost of
labour

J K
W X

R
H
O
quantity
of labour

What will be the firm’s new labour supply curve if the workers join a trade union and achieve a
union negotiated wage, OW?

A RJX B HKX C WJM D WKN

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7

18 Output per worker in an industry increases more slowly than the industry’s total output.

What could explain this?

A a decrease in labour productivity

B an increase in employment
C an increase in overtime working
D an increase in the hourly wage rate

19 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 frontier 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

20 When is economic growth most likely to promote economic development?

A when it achieves maximum rates of extraction of raw materials

B when it concentrates on increasing production
C when it discovers valuable new resources in remote natural environments
D when it provides the funds to finance cleaner production processes

21 Which items in the table are classified as foreign aid?

official portfolio
foreign direct
development investment
investment
assistance flows

A no no yes
B no yes no
C yes no yes
D yes yes no

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8

22 Country X’s living standards were compared with country Y’s living standards using real GNP per
head converted into US dollars. Country X was ranked above country Y.

Which factor might have caused this ranking to be incorrect?

A Actual market exchange rates were used rather than purchasing power parity rates.
B Government spending on transfer payments was higher in country Y than in country X.
C Inflation was higher in country X than in country Y.
D The distribution of income was more unequal in country X than in country Y.

23 In 2007 Turkey had a population of 73 m. Its labour force was 36 m, of which 12 m were trained
for the primary sector and 24 m were trained for the secondary and tertiary sectors. The
unemployment rate was 10%.

What was the number of people unemployed?

A 1.2 m B 2.4 m C 3.6 m D 7.3 m

24 An economy’s manufacturing share of real GDP fell from 30% in 1970 to 12% in 2016.

What type of unemployment would result from this?

A cyclical
B frictional
C structural
D voluntary

25 In an open economy, when autonomous investment increases by 100, equilibrium national

income increases by 300.

Which conclusion can be drawn?

A The accelerator is 3.

B The marginal propensity to consume is 2 .

3
C The marginal propensity to import is 2 .
3
D The marginal propensity to save plus marginal tax rate is 1 .
3

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9

26 The diagram outlines the monetary transmission mechanism following an expansionary central
bank intervention (quantitative easing). Key actions have been omitted from the process.

central bank ......1...... government assets

↓
short-term interest rates ......2......
↓
investment demand ......3......
↓
real GDP rises

Which words complete gaps 1, 2 and 3?

1 2 3

A buys fall rises

B buys rise falls
C sells fall rises
D sells rise falls

27 In Keynesian monetary theory, when will an increase in the supply of money not cause a fall in
interest rates?

A if bond prices are expected to rise

B if investment demand is interest-inelastic
C if the liquidity preference schedule is perfectly elastic
D if the velocity of circulation of money increases

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10

28 The diagram shows an economy in equilibrium at point X.

SRAS
price
level

AD
O real GDP

What would be most likely to cause the economy to move from point X to point Y?

A an increase in government spending on transfer payments

B an increase in income tax
C an increase in the average wage rate
D an increase in the productivity of labour

29 The table identifies pairs of possible government aims.

In which case is achievement of aim 1 likely to be consistent with the achievement of aim 2?

aim 1 aim 2

A higher foreign exchange rate lower rate of unemployment

B low rate of inflation balance of payments surplus
C more even distribution of income higher rate of saving
D rapid economic growth sustainable economic development

30 What is most likely to result from the discovery of oil reserves in a developing economy?

A a more equal distribution of income and wealth

B an increase in the competitiveness of commercial agriculture
C an increase in the exchange rate
D a reduction in the volume of imports of manufactured goods

© UCLES 2018 9708/32/O/N/18

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 9708/32/O/N/18

 www.dynamicpapers.com

Cambridge Assessment International Education

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2019
1 hour 15 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*9091355185*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 11 printed pages and 1 blank page.

IB19 11_9708_32/2RP
© UCLES 2019 [Turn over
 www.dynamicpapers.com
2

1 Some multinational oil companies extracting oil in developing countries are now required to repair
the damage they do to the environment.

Which best describes the total costs incurred by the oil companies in such circumstances?

A external costs
B private costs plus external costs
C social costs plus external costs
D social costs plus private costs

2 In an economy, no one can be made better off without making someone else worse off.

What does not necessarily follow from this?

A The conditions for allocative efficiency have been met.

B The conditions for productive efficiency have been met.
C The distribution of income is socially acceptable.
D The economy is operating at a point on its production possibility curve.

3 A government decided to approve a road building scheme because it was socially beneficial. In
making its decision it calculated private costs at $800m, private benefits at $800m and external
costs at $150m.

What must have been true about the external benefits of the scheme?

A External benefits equalled private benefits.

B External benefits exceeded external costs.
C External benefits exceeded $200m.
D There were no external benefits.

4 What is it called when a consumer’s marginal utility is greater than the price paid for the good?

A a Giffen good
B an inferior good
C consumer surplus
D producer surplus

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3

5 A consumer has $3 to spend each day on chocolate bars or toffee bars, which all cost $1 each.

The table below shows the units of additional satisfaction she gets from consuming each bar.

1st chocolate bar 2nd chocolate bar 3rd chocolate bar

16 13 10
1st toffee bar 2nd toffee bar 3rd toffee bar
14 12 9

What should she buy to maximise her total utility?

A 1 chocolate bar and 2 toffee bars

B 2 chocolate bars and 1 toffee bar
C 3 chocolate bars
D 3 toffee bars

6 The curve JK in the diagram is a consumer’s initial budget line.

G
good Y
J

O H K
good X

Which combination could cause the budget line to shift to GH?

consumer’s
price of good X
money income

A increase increase
B decrease decrease
C increase decrease
D decrease increase

© UCLES 2019 9708/32/O/N/19 [Turn over

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4

7 The diagram shows a consumer’s indifference curves (IC) for goods F and G together with the
consumer’s budget lines.

good F

Z
X
IC2
Y
IC1

O
good G

What could explain the movement from X to Z on the diagram?

A a fall in the price of G when G is an inferior good

B a fall in the price of G when F is a Giffen good
C a fall in the price of G when G is a normal good
D a fall in the price of G when G is a Giffen good

8 A firm has the choice between five levels of output. The table shows the total cost and total
revenue of producing at each output level. The firm could sell whatever output it produces.

output total cost total revenue

(units) ($) ($)

1000 8 000 10 000

2000 12 000 18 000
3000 19 000 24 000
4000 23 000 28 000
5000 25 000 25 000

The firm decides to produce 4000 units.

What is the firm’s aim?

A to maximise profit
B to maximise sales
C to maximise revenue
D to minimise average costs

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5

9 In which type of market structure are commercial banks usually found?

A perfect competition, because they all link their interest rates to that of the central bank
B perfect competition, because they offer identical products and services
C monopolistic competition, because a competitive market prevents them making excess
profits
D oligopoly, because they are affected by the actions of other banks

10 What is a condition for operating a successful cartel?

A a large number of firms in the industry

B each firm has a differentiated product
C low barriers of entry to the industry
D strictly enforced production quotas

11 Which assumption is essential for a market to be contestable?

A The market is supplied by a large number of firms.

B Firms are free to enter and leave the market.
C Firms cannot earn abnormal profits in the short run.
D Firms produce differentiated goods.

12 What is generally associated with the principal-agent problem?

A Directors prefer company growth to greater shareholder dividends.

B Managers ignore workers’ concerns about safety in the workplace.
C Shareholders determine the price of products.
D Workers go on strike against managers’ reorganisation plans.

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13 The table shows the output of chairs at a factory when different numbers of workers are
employed.

number of workers 0 1 2 3 4 5

number of chairs produced 0 7 17 26 34 40

When will diminishing marginal returns to labour set in?

A When the second worker is employed.

B When the third worker is employed.
C When the fourth worker is employed.
D When the fifth worker is employed.

14 The chart gives information about the average daily wage rate for all industries in India.

280
rupees 270
per day
260
250
240
230
220
210
200
2011 2012 2013 2014

What could have caused this trend in wage rates?

A an increase in capital-intensive production

B an increase in the number of industrial workers
C an increase in the number of people unemployed
D an increase in the productivity of labour

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7

15 A country has a negative income tax regime.

The curve NT in the diagram shows the country’s initial tax schedule.

+
NT
tax

NT1

O
income

A change in the tax rate causes the schedule to shift to NT1.

How will this affect work incentives and the after-tax distribution of income?

work distribution
incentives of income

A strengthen less equal

B strengthen more equal
C weaken less equal
D weaken more equal

16 There is a fixed supply of skilled workers in an industry. Firms can no longer find enough workers
to meet their demand for labour.

What could be a solution to the problem?

A Allow wage rates to fall as the market demands.

B Introduce work-sharing and reduce working hours.
C Make offices more attractive by adding air-conditioning.
D Provide more training courses for new recruits.

© UCLES 2019 9708/32/O/N/19 [Turn over

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8

17 A government is worried about the increasing monopsony power of employers in the wage
bargaining process.

Which policy combination is most likely to improve the wages and employment prospects of
workers?

trade union immigration national

powers controls minimum wage

A strengthen relax cut

B strengthen strengthen raise
C weaken relax cut
D weaken strengthen raise

18 What is not a source of market failure?

A imperfect information
B income inequality
C monopoly
D non-excludability

19 A government regards fresh fruit and vegetables as merit goods, and subsidises agriculture to
boost their production.

What could be a government failure arising from these subsidies?

A cheaper fresh fruit and vegetables

B land clearance reducing wildlife
C lower spending on treating dietary illnesses
D more jobs picking fruit and vegetables

20 Which type of unemployment is associated with a deficiency in aggregate demand?

A cyclical
B frictional
C structural
D voluntary

© UCLES 2019 9708/32/O/N/19

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9

21 In the diagram, OP is the equilibrium level of income and OQ the full employment level of income
in a closed economy.

expenditure
V

U C+I+G
T C+I
R C

45°
O P Q
income

What is the deflationary gap?

A PQ B RV C TV D UV

22 What represents an injection into a country’s circular flow of income?

A corporate taxes
B interest payments on government bonds
C the payment of dividends to foreign shareholders
D the repayment of bank loans

23 What will be the most likely consequence of an increase in the dependency ratio?

A a decrease in GDP per head

B a decrease in labour productivity
C an increase in the labour force
D an increase in unemployment

24 Which statement is correct?

A Economic development is necessary for economic growth.

B Economic growth and economic development are directly proportional.
C Economic growth enables economic development.
D Economic growth is always sustainable.

© UCLES 2019 9708/32/O/N/19 [Turn over

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10

25 The diagram shows a production possibility curve PPC1. The economy is initially at point X.

If the economy achieves actual economic growth but not potential growth, what would the final
position be?

capital PPC2
goods
PPC1
B
C

A
X D

O
consumer
goods

26 It has been estimated by the United Nations that the total external debt of developing countries
has been increasing by about $425 billion each year.

What is least likely to have contributed to this?

A disincentives for foreign direct investment through political instability

B increased government subsidies for the development of tourism industries
C withdrawal of multinational companies due to delays in the award of government contracts
D worsening of the terms of trade with partners in developed economies

27 The following are four conditions sometimes attached to IMF loans to developing countries.

Which condition would conflict with the ‘infant industry’ argument?

A the need to allow free trade

B the need to control inflation
C the need to have a contractionary fiscal policy
D the need to privatise government enterprises

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11

28 In which exchange rate regime would the central bank of a country be best able to pursue an
independent monetary policy to control the rate of inflation?

A a freely floating exchange rate system

B a system where the country’s currency has a targeted value in relation to the US$
C a system where the central bank buys and sells foreign currency at a fixed rate
D where the country participates in a monetary union with other countries

29 What is measured on the vertical axis of the Phillips curve?

A the rate of change of real wages

B the rate of change of take-home pay
C the rate of inflation
D the rate of interest

30 Workers in poor countries are often less productive than workers using the same technology in
rich countries.

What would be most likely to remedy this situation?

A an increase in the saving ratio in poor countries

B increased freedom of migration from poor countries to rich countries
C increased investment in education in poor countries
D the removal of trade barriers imposed by rich countries on imports from poor countries

© UCLES 2019 9708/32/O/N/19

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12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 9708/32/O/N/19

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2020
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*0933209313*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
 Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_9708_32/3RP
© UCLES 2020 [Turn over
 www.dynamicpapers.com
2

1 What is necessary to achieve Pareto efficiency?

A Both consumers and producers must be made better off.

B Everybody must be made equally better off.
C One person must benefit without anyone else being worse off.
D The welfare gains must exceed the welfare losses.

2 A local council is considering building a passenger terminal at a port so that it can benefit the
large cruise ships that dock there. It undertakes a cost–benefit analysis.

What would be included as an external cost in the local council’s cost–benefit analysis?

A the cost of a ticket for a passenger to travel on a cruise ship

B the cost of fuel to operate the cruise ships
C the costs paid by cruise ships when they dock at the port
D the cost to a fishing fleet of relocating to another port

3 The expected marginal private benefits (MPB), marginal social benefits (MSB), marginal private
costs (MPC) and marginal social costs (MSC) for the building of a new road are shown in the
diagram. The government intervenes so that the socially desirable output is achieved.

MSC

price MPC

MSB

MPB

O Q1 Q2 Q3 Q4
quantity

Which combination shows the equilibrium output without government intervention and with
government intervention?

without government with government

intervention intervention

A Q4 Q1
B Q3 Q2
C Q3 Q4
D Q4 Q1

© UCLES 2020 9708/32/O/N/20

 www.dynamicpapers.com
3

4 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

5 The diagrams show a consumer’s indifference curves (IC) and budget lines (BL) for an
inferior good and a normal good.

Which diagram shows the effect of a cut in income tax on the consumer’s choice?

A B

normal BL2 normal BL2

good good
BL1 BL1
IC2

IC2
IC1 IC1
O O
inferior good inferior good

C D

normal BL2 normal BL2

good good
BL1
IC2 BL1 IC2
IC1
IC1

O O
inferior good inferior good

© UCLES 2020 9708/32/O/N/20 [Turn over

 www.dynamicpapers.com
4

6 What is marginal cost?

A the difference between the total cost of producing n units and n – 1 units of output
B the difference between the average variable cost of producing n units and n – 1 units of
output
C the difference between the average total cost of producing n units and n – 1 units of output
D the average fixed cost of producing one more unit of output

7 The table shows the production and total cost of a firm.

production (tonnes) total cost ($)

0 20
1 30
2 35
3 40
4 45
5 50

What is the average variable cost of producing 5 tonnes of output?

A $4 B $5 C $6 D $10

8 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

© UCLES 2020 9708/32/O/N/20

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5

9 Which combination of statements about small firms and large firms is correct?

small firms large firms

A are more common in face high barriers to exit

manufacturing than in services
B are more numerous do not experience
than large ones diseconomies of scale
C can do well when each item may arise from internal
produced must be different growth or mergers
D cannot have any monopoly power cannot earn supernormal profits

10 Why might the long-run equilibrium of a profit-maximising firm in a monopolistically competitive

market differ from its short-run equilibrium?

A Advertising expenditure is possible.

B There are low barriers to entry.
C Firms experience diminishing returns.
D Innovation reduces the monopoly power of firms.

11 The diagram shows the cost and revenue curves of a monopolist.

price
MC

AC
P1

AR

O Q1
quantity
MR

What would be the aim of the firm if it chose to produce at Q1P1?

A revenue maximisation
B profit maximisation
C sales maximisation
D growth maximisation

© UCLES 2020 9708/32/O/N/20 [Turn over

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6

12 What does the ‘kinked demand curve’ model suggest about the equilibrium price in an oligopoly
market?

A It will be stable because there is little incentive for firms to change prices.
B It will be stable because there is a lot of competition.
C It will change frequently because there is a lot of competition.
D It will change frequently because price is determined by demand and supply.

13 What is the essential feature of nudge theory?

A the aim of satisficing

B the establishing of a legal requirement
C the existence of a contestable market
D the idea of persuasion

14 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

15 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

© UCLES 2020 9708/32/O/N/20

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7

16 The diagram shows the effect of the introduction of a national minimum wage, WM, in an
occupation where workers are employed by a profit-maximising monopsonist.

wage MCL
rate SL

W2 Z V
WM Y
U
W1 X

MRPL = DL

O Q1 Q3 Q2
employment

What happened to total wages received by the workers in the occupation?

A They decreased from OW2VQ2 to OWMUQ3.

B They decreased from OW2ZQ1 to OWMUQ3.
C They increased from OW1XQ1 to OWMYQ1.
D They increased from OW1XQ1 to OWMUQ3.

17 A backward-sloping supply curve of labour is one where, beyond a certain point, the supply of
labour

A decreases as the demand for labour rises.

B increases as the demand for labour rises.
C decreases as wages rise.
D increases as wages rise.

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8

18 The table shows factors that influence living standards.

Which country would be most likely to have the lowest Human Development Index (HDI)?

homicide infant
life
mean years (murder) rate mortality rate GNI per
expectancy at
of schooling (per 100 000 (per 100 000 capita (PPP$)
birth (years)
people) live births)

A 13 1 80 4 42 500
B 8 25 75 15 14 500
C 8 3 68 12 18 000
D 7 5 58 41 8 400

19 The table provides data on the Gross National Income (GNI) and the foreign aid expenditure of
selected countries in 2016.

foreign aid expenditure

country GNI (US$ billion)
(US$ billion)

Belgium 468.9 2.10

Germany 3612.1 23.84
Sweden 532.7 5.38
South Korea 1403.6 2.10

What can be concluded from the table?

A Countries with a higher GNI always spend more on foreign aid.

B Germany has the world’s highest expenditure on foreign aid.
C South Korea and Belgium spent an equal proportion of GNI on foreign aid.
D Sweden spent the highest proportion of GNI on foreign aid.

20 What would not be classified as structural unemployment?

A a car worker who is replaced by a robot on the production line

B a coal miner whose mine closes because of increased use of solar power
C a fruit picker who cannot find work in the winter months
D a textile worker whose factory closes as production moves abroad

© UCLES 2020 9708/32/O/N/20

 www.dynamicpapers.com
9

21 The diagram shows the consumption function of a country.

consumption
expenditure C2
($ bn)
C1

45°
O
income ($ bn)

What could cause the consumption function to shift upwards from C1 to C2?

A an increase in interest rates

B an increase in direct taxation
C an increase in the proportion of income saved by households
D the expectation of an increase in the rate of sales taxes

22 The accelerator principle refers to a relationship between investment and

A the level of GDP.

B changes in GDP.
C the level of interest rates.
D changes in interest rates.

23 What is included in ‘narrow money’?

notes and coins current (checking) banks’ liquid assets treasury

in circulation account deposits at the central bank bills

A    
B    
C    
D    

© UCLES 2020 9708/32/O/N/20 [Turn over

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10

24 The diagram shows three levels of the money supply (MS) and three liquidity preference
schedules. The initial money market equilibrium is X. The central bank purchases more
government securities.

Which equilibrium shows the initial impact of this purchase?

MS1 MS2 MS3

A
rate of
interest
(%) B

r X C

D LP2
LP1

O
quantity of money

25 What is an important assumption of Monetarism?

A Fiscal policy is more effective than monetary policy in reducing inflation.

B Long-term unemployment results from deficient demand.
C The interest elasticity of investment spending is low.
D The velocity of circulation is stable.

26 According to Keynesian theory, how will an increase in autonomous spending affect the value of
equilibrium income?

A Income will increase by an amount equal to the value of autonomous spending.

B Income will increase by an amount greater than the value of autonomous spending.
C Income will increase by an amount smaller than the value of autonomous spending.
D Income will not increase as a result of autonomous spending.

© UCLES 2020 9708/32/O/N/20

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11

27 Statement 1: A market economy is inherently unstable and the government must play a
stabilising role through monetary policy and fiscal policy.

Statement 2: The economy will always return to its equilibrium rate of output and unemployment
and as a result long-run aggregate supply is vertical.

Which row correctly attributes these statements to Keynesian and Monetarist theories?

statement 1 statement 2

A Keynesian Keynesian
B Keynesian Monetarist
C Monetarist Keynesian
D Monetarist Monetarist

28 The graphs below show percentage changes in money GDP and consumer prices in a country
between 2008 and 2010.

10 6
% %
4
5
2

2008 2009 2010 2008 2009 2010

% change in % change in
money GDP consumer prices

Which conclusion may be drawn from the graphs?

A Between 2009 and 2010 money GDP fell but consumer prices continued to rise.
B Money GDP and consumer prices both continued to rise throughout the period.
C In real terms GDP grew throughout the period.
D When money GDP fell, consumer prices rose.

© UCLES 2020 9708/32/O/N/20 [Turn over

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12

29 In an economy, the elasticity of demand for imported raw materials is 0.3 and the elasticity of
demand for exports is also 0.3.

Following a depreciation of the economy’s currency, what will be the impact on inflation?

change in cost push change in demand

factors will cause pull factors will
inflation to cause inflation to

A decrease decrease
B decrease increase
C increase decrease
D increase increase

30 Which combination of macroeconomic policies will most likely be successful if the aim were to
reduce unemployment and reduce inflation?

A contractionary supply-side policies and higher interest rates

B expansionary supply-side policies and reduced indirect taxes
C increased direct taxes and reduced indirect taxes
D reduced rates of interest and depreciation of exchange rate

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9708/32/O/N/20

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2021
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*6947412428*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_9708_32/2RP
© UCLES 2021 [Turn over
 www.dynamicpapers.com
2

1 Which statement best defines productive efficiency?

A It is not possible to increase profits by changing the level of production.

B It is not possible to make anyone better off without others becoming worse off.
C It is not possible to produce the level of output at a lower unit cost.
D It is not possible to produce outside the production possibility curve.

2 Medical researchers indicated that drinking too many sugary drinks is bad for health.

Government intervention to impose a tax on the sale of sugary drinks might help solve which
market failures?

negative negative over-

externalities of externalities of consumption of
consumption production demerit goods

A no yes yes
B yes yes no
C yes no yes
D yes no no

3 A government uses a cost–benefit analysis approach to infrastructure projects. It is considering

building a new railway to link a city centre to its airport. It estimates the following.

$ billion

private costs 1.0

social costs 1.7
private benefits 0.5
external benefits 1.8

What should the government decide and why?

decision reason

A do not proceed total costs exceed external benefits

B do not proceed total costs exceed total benefits
C proceed private costs exceed private benefits
D proceed social benefits exceed social costs

© UCLES 2021 9708/32/O/N/21

 www.dynamicpapers.com
3

4 A consumer currently consumes 10 units of good X and 10 units of good Y at point Z on an

indifference curve.

The consumer’s marginal utilities from consuming both good X and good Y are positive.

Which combination of good X and good Y could be on the same indifference curve as point Z?

units of units of
good X good Y

A 9 11
B 10 11
C 11 10
D 12 12

5 The diagram shows two indifference curves and two budget lines for goods X and Y. The
consumer’s initial equilibrium is point R.

good Y

Y2

Y1

IC2
R
IC1
O X1 X2
good X

There is a shift in the budget line from Y1X1 to Y2X2 and the new equilibrium for the consumer is
point S.

What can definitely be concluded about good X?

A It is a Giffen good.
B It is an inferior good.
C It is a normal good.
D It is a public good.

© UCLES 2021 9708/32/O/N/21 [Turn over

 www.dynamicpapers.com
4

6 What are the correct formulae for calculating average cost (AC) and average revenue (AR)?

AC AR

A TC TR
key
MC MR
MC = marginal cost
B TC PQ
P MR = marginal revenue

TR P = price
TC
C Q = quantity
Q Q
TC = total cost
TC TR
D TR = total revenue
Q P

7 What is always present in monopolistic competition and perfect competition in the long run?

A average revenue = average costs

B average revenue = marginal revenue
C average costs = marginal costs
D average costs = marginal revenue

8 A firm maximises its profits by maximising its total revenue.

What does this imply?

A Average fixed cost is zero.

B Average revenue is equal to average cost.
C Marginal cost is zero.
D Marginal revenue is greater than marginal cost.

9 What will happen to an industry’s supply curve if firms leave the industry?

A It will shift to the left at any given price.

B It will shift to the right at any given price.
C There will be a downward movement along the supply curve.
D There will be an upward movement along the supply curve.

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5

10 Which characteristic of a market is a reason for a firm to remain small?

A The minimum efficient scale is high.

B The potential for x-inefficiency is high.
C There are significant economies of scale.
D There is limited access to financial capital.

11 What is an example of the principal–agent problem?

A the disincentive effect for entrepreneurs of high government tax rates

B the existence of a trade union to put forward workers’ views to managers
C the lack of consumer knowledge of the quality of firms’ products
D the separation of the owners of a firm from the firm’s managers

12 The diagram shows a firm in imperfect competition.

MR AR = D MC AC
$

O RS T U
quantity

It changes its objective from profit maximisation to revenue maximisation.

What effect will this have on the firm’s output?

A decreases from T to R
B decreases from U to T
C increases from S to T
D increases from S to U

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 www.dynamicpapers.com
6

13 Which statement explains why a government decides to increase the highest rates of tax on
personal income?

A It expects total tax revenue to be unaffected by the policy change.

B It is concerned about the possibility of emigration by some high earning individuals.
C It regards equity considerations as being more important than efficiency ones.
D It wishes to switch the emphasis of its tax system from direct to indirect taxation.

14 In certain countries benefits are provided to individuals on low income. As their income rises the
benefits are reduced and income tax has to be paid.

What can result from this?

A price stabilisation
B poverty trap
C replacement ratio
D unemployment trap

15 An economy requires large inputs of steel for its building programmes. After political pressure, the
government imposes a minimum price on imported foreign steel.

When would this intervention lead to economic inefficiency?

A when it encourages domestic steel producers to achieve economies of scale

B when it prevents dumping of low-grade steel
C when it protects jobs of highly productive steel workers
D when it reduces competition for steel workers

16 What happens to economic rent and transfer earnings if the supply of labour becomes perfectly
inelastic?

A economic rent decreases; transfer earnings increase

B economic rent decreases; transfer earnings stay the same
C economic rent increases; transfer earnings decrease
D economic rent stays the same; transfer earnings decrease

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7

17 The diagram shows the effect of the introduction of a minimum wage (WM) in the labour market.

wage rate
SL

WM

WL

DL
O QL
quantity of labour

When would such a minimum wage be least beneficial to workers who are currently employed?

A if demand for the product increases

B if the elasticity of demand for the workers were high
C if the elasticity of supply for the workers were high
D if the productivity of the workers were to increase

18 Which statement about economic growth is not correct?

A Economic growth creates costs as well as benefits.

B Long-term economic growth is measured by calculating the percentage increase in GDP for
one year.
C Short-term economic growth can be represented by a shift from a point within a production
possibility curve to a point on the curve.
D Sustainable economic growth is growth that does not reduce the resources available to
future generations.

19 Why is real GDP per head thought to be an imperfect measure of welfare in developed
economies?

A frequent government manipulation and misuse of data

B no account is taken of inflation
C the restricted scope of the data’s content and coverage
D the shadow economy is greater than the official economy

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8

20 What changes are most likely to reduce the level of income inequality in an economy?

A additional government regulation of product and factor markets

B increased progressive direct taxation and decreased indirect taxation
C increased trade union power and reduced labour market flexibility
D reduced welfare benefits and increased rate of interest

21 The table gives labour market statistics for Malaysia for January to March 2019.

number
of people

employed 15m
unemployed 0.5m
not available for work 7m
population of working age 23m

What is the size of Malaysia’s labour force?

A 15m B 15.5m C 22m D 22.5m

22 What would encourage industrial expansion in a region of high unemployment?

A a rationing system for building development in that region

B an increase in taxes on investment
C a requirement that only local labour may be employed
D an end to nationally negotiated wage rates

23 An island economy has a small manufacturing base, limited mineral resources and limited
agricultural land.

Which development is most likely to lead to sustainable growth?

A building larger fishing boats to allow fishermen to enjoy economies of scale

B clearing rainforest to create agricultural land for the production of much needed foodstuffs
C training farmers and agricultural workers in new production methods to increase crop yields
D using its domestic mineral resources to give a rapid increase to manufacturing output

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9

24 The information in the table is taken from a country’s national income accounts.

$
income
(millions)

wages 8000
salaries 7000
unemployment benefit 1000
government pensions 1000
rent 3000
interest 2000

What is the value of national income in millions of dollars?

A 17 000 B 19 000 C 20 000 D 21 000

25 In a closed economy with no government sector the marginal propensity to consume is 0.6 at all
levels of income. There is an increase in private sector investment of $100 million.

What will be the increase in national income?

A $60 million B $100 million C $166 million D $250 million

26 According to liquidity preference theory, which money balances are responsive to a change in the
interest rate?

active balances idle balances

A no yes
B no no
C yes yes
D yes no

27 The bank cash deposit ratio changed from 5% to 10%.

What will be the result?

A Bank deposits will fall by 10%.

B Banks deposits will rise by 5%.
C The credit multiplier will fall by 50%.
D The credit multiplier will increase by 5%.

© UCLES 2021 9708/32/O/N/21 [Turn over

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10

28 In a developing economy, which policy is most likely to increase the rate of economic growth but
restrict economic development?

A an increase in the provision of healthcare facilities

B an increase in the school leaving age
C a removal of health and safety regulations
D the promotion of export-led growth

29 Which policy is most likely to conflict with a government’s aim of price stability in the short run?

A increasing spending on education and health

B increasing the basic rate of income tax
C limiting wage increases in the public sector
D preventing mergers of large companies

30 What is most likely to be an appropriate government action to reduce both a balance of payments
current account surplus and the rate of inflation?

A decrease the rate of interest

B devalue the currency
C increase direct taxes
D remove tariffs on imports

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9708/32/O/N/21

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 Multiple Choice October/November 2022
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*7021214421*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB22 11_9708_32/RP
© UCLES 2022 [Turn over
 www.dynamicpapers.com
2

1 What is most likely to improve the allocative efficiency of a market?

A a higher market concentration ratio

B collusion between firms in the market
C entry of new firms into the market
D mergers of firms in the market

2 The diagram shows a market in which there are negative externalities of production and positive
externalities of consumption.

cost, MSC
benefit H
E
F MPC
I
G
J MSB

MPB
O Q1 Q2
quantity

What is the marginal external cost at the free market equilibrium level of output?

A EG B EF C FG D HI

3 What could be included in a cost-benefit analysis of a project to build a road bridge connecting an
island community to the mainland?

a fall in a reduction in an increase in

an increase in
employment for travel time for incomes for the
carbon emissions
ferry services work community

A yes no no yes
B yes yes no no
C yes yes yes yes
D no no yes yes

© UCLES 2022 9708/32/O/N/22

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3

4 The table shows the levels of total and average utility at different levels of a consumer’s weekly
consumption of a product.

number consumed total average

per week utility utility

1 4 4.0
2 9 4.5
3 15 5.0
4 20 5.0
5 24 4.8
6 27 4.5

After which level of weekly consumption does the diminishing marginal utility first occur?

A 3 B 4 C 5 D 6

5 Which statement about a budget line in consumer behaviour theory is correct?

A It illustrates consumer preference between two goods.

B It illustrates combinations of two goods that consumers are able to purchase with a given
income.
C It illustrates the least cost combination of goods that yield the same level of utility.
D It illustrates the income effect of a price change.

6 When the price of a good increases, which statement is correct according to the analysis that
uses budget lines and indifference curves?

A The income and substitution effects of the price increase will work in opposite directions in
the case of a Giffen good.
B The income effect of the price increase will result in reduced consumption for all goods.
C The new equilibrium position will be where the new budget line meets the original
indifference curve.
D The price rise will be represented by a parallel shift inwards of the original budget line.

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4

7 The diagram shows a firm in an imperfectly competitive market.

Which level of output would maximise total revenue?

AR
price $
MR MC

AC

O A B C D
output

8 The diagram shows short-run average cost curves (SRAC) and the long-run average cost curve
(LRAC) for a firm.

cost
SRAC1
SRAC3
SRAC2 LRAC

O Q
output

Which statement is correct?

A When each of the three SRAC curves is U-shaped it shows the existence of economies of
scale.
B When the LRAC curve is upward-sloping beyond output OQ it shows the existence of
diseconomies of scale.
C When the minimum point of SRAC2 is below that of SRAC1 it shows the existence of the law
of variable proportions.
D When the minimum point of SRAC2 is below that of SRAC3 it shows the existence of
economies of scale.

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5

9 The diagram shows a decrease in demand for the product of a profit maximising monopolist.

cost,
revenue

I H

J
M

K MC = ATC
L G

MR2 MR1 D2 = AR2 D1 = AR1

O E F
output

Which area shows the change in the monopolist’s supernormal profit as a consequence of this
decrease in demand?

A IHGK B JMLK C IHGLMJ D IHFEMJ

10 The table shows the estimated costs for operating a new factory at the end of its first year.

costs $m

building the factory 20

raw materials including fuel 5
machinery and delivery vehicles 4
wages for workers 1

Assuming the short run is one year, what are the total variable costs?

A $1m B $6m C $10m D $30m

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6

11 A manufacturing company merged with two companies. One of these was company X that
produced a substitute product. The other was company Y that supplied its raw materials.

Which combination shows the types of merger that the manufacturing company has undertaken?

merger with merger with

company X company Y

A horizontal horizontal
B horizontal vertical
C vertical horizontal
D vertical vertical

12 Which phrase best describes the market structure illustrated by the diagram if the firm produces
at output Q1?

AC

MC

MR AR
O Q1
quantity

A a monopolistic firm in short-run equilibrium

B a monopoly making supernormal profits
C an oligopoly engaged in a price war
D a non-profit maximising state monopoly

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7

13 The government wants to regulate the consumption of a demerit good in order to increase
society’s net welfare.

In which situation will society’s net welfare increase?

A The fall in the marginal social benefit is greater than the fall in the marginal social cost.
B The fall in the marginal external cost is greater than the fall in the marginal external benefit.
C The fall in the total social benefit is greater than the fall in the total social cost.
D The fall in the total social cost is greater than the fall in the total social benefit.

14 Governments often aim to reduce income inequalities. The diagram shows the effects of using
taxation and benefits to try to achieve this aim.

100 000
average
income per
household 80 000 key
($ per year) original income
60 000
disposable income

final income
40 000

20 000

0
bottom 2nd 3rd 4th top
20% 20% 20% 20% 20%

household income

What can be concluded from the diagram about the effects of taxes and benefits?

A All income groups are better off except those originally earning more than $40 000 per year.
B Benefits paid to the lower income groups are not a burden because they are not paid out of
tax revenues.
C The average final income of the top 20% exceeds the combined final incomes of the other
groups.
D The progressive taxation system still favours the top 20% over the bottom 20% of
households.

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8

15 Which policy is likely to be the least effective means of producing a more equal distribution of
income amongst households?

A the imposition of minimum wage levels below the levels produced by the market
B the introduction of progressive personal income taxes
C the payment of benefits to low income households
D the removal of sales taxes on food consumed by lower income households

16 Which supply curve (S) indicates that eventually an individual will choose to spend more time on
leisure rather than continue working for increased wages?

A B

S
wage wage

O O
hours worked hours worked

C D

S S
wage wage

O O
hours worked hours worked

17 When is a trade union less likely to gain a large pay rise for its workers?

A It represents a large proportion of the workforce in the company.

B It represents a workforce that has an elastic demand for its labour.
C It represents a workforce that is increasing its labour productivity.
D It represents a workforce that works for a highly profitable monopoly firm.

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9

18 Which statement does not support the view that extraction of mineral resources by a foreign
company will make it more difficult for a developing economy to achieve future economic growth?

A Exports of these mineral resources will result in an appreciation of the exchange rate.
B Reduced tax rates aimed at encouraging the foreign company to invest in the country will
increase inflation.
C The foreign company will raise the skill levels of the local population through training
schemes.
D The foreign company will send profits back to its own country.

19 Growth rates can be calculated using changes in the value of GDP from year to year.

Why is real GDP considered to be a better indicator than nominal GDP for this calculation?

A Real GDP adjusts for price changes by using a base year.

B Real GDP ignores the effects of fluctuations in exchange rates on purchasing power.
C Real GDP includes changes in the size of the population.
D Real GDP measures GDP at factor cost rather than market prices.

20 Why is disaster relief money sent by non-governmental organisations to a South American

country not classified as official foreign aid?

A It does not finance a long-term investment programme.

B It does not incur payment of interest.
C It is not supplied by a government.
D Only countries in Asia and Africa are classified as developing.

21 What is a cause of seasonal unemployment?

A a general decrease in the demand for goods and services

B a lack of necessary skills in the workforce
C a temporary change in the pattern of consumers’ expenditure
D an unwillingness of workers to move to other parts of the country where there is work

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10

22 A firm initially employs 50 workers, each working 40 hours a week, and produces a total output
of 18 000 units. It then employs an additional 10 workers, again each working 40 hours, and total
output rises to 19 200 units.

Which effect does this rise in employment have on labour productivity per hour?

A decreases it by 1 unit
B decreases it by 40 units
C increases it by 120 units
D increases it by 1200 units

23 According to Keynesian theory, when will an increase in the money supply leave the level of
output unchanged?

A when there is a liquidity trap

B when the money supply increase was not anticipated
C when there is a floating exchange rate
D when there is an immediate adjustment to expectations about future price levels

24 An economy is experiencing a negative output gap.

What is most likely to happen to the inflation rate and unemployment in this economy?

inflation rate unemployment

A decreases decreases
B decreases increases
C increases decreases
D increases increases

25 What do Monetarists believe?

A Economies are naturally unstable.

B Policy makers should follow set rules targeting the money supply.
C The aggregate supply curve has a slight slope.
D Wage movements are ‘sticky’ downwards.

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11

26 Which combination of changes over time in an economy would definitely represent increased
economic growth per capita?

average total Gini

total output
price level population coefficient

A falls rises falls rises

B falls rises no change falls
C rises falls falls rises
D rises rises rises rises

27 Under which circumstances will the future burden of the national debt on a country increase the
most?

increase in the price of

change in GDP
budget deficit government bonds

A +2% of GDP +4% decreasing

B +2% of GDP +4% increasing
C +4% of GDP +2% decreasing
D +4% of GDP +2% increasing

28 Country X has a low rate of inflation and a stable currency and unemployed resources. It attracts
$25 billion of direct foreign investment.

What is most likely to be a positive benefit of the inflow of this foreign direct investment for
country X?

A Aggregate demand will be boosted through the investment multiplier.

B Country X will have to use its foreign reserves to eliminate any trade deficit.
C The balance of payments will be affected with the outflow of profits to foreigners.
D The rate of inflation will increase if country X tries to increase capacity.

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29 A country with an income tax rate X decides to increase its tax rate.

The diagram shows tax revenue will fall.

tax
revenue

O X
tax rate

Why would this happen?

A Fewer goods will be produced.

B People will work fewer hours to maintain incomes.
C Prices will rise.
D There will be an increase in tax avoidance.

30 What are the labels on the axes of a Phillips curve diagram?

vertical axis horizontal axis

A inflation rate unemployment level

B inflation rate unemployment rate
C price level unemployment level
D price level unemployment rate

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9708/32/O/N/22

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 A Level Multiple Choice October/November 2023
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*2335296378*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 11_9708_32/2RP
© UCLES 2023 [Turn over
 www.dynamicpapers.com
2

1 The diagram shows the total utility of consumers Y and Z when each consumes bars of
chocolate.

70 consumer Y
65
total
55
utility
45
40
consumer Z

20

0
0 1 2 3 4
number of bars

What is the difference in the marginal utility of consumers Y and Z when each consumes four
bars of chocolate?

A 0 B 5 C 10 D 30

2 When choosing to buy two products, the satisfaction gained by the consumption of different
combinations of these two products can be represented by an indifference curve.

Which statement about such an indifference curve diagram is correct?

A The range of indifference curves shows the combination of products a consumer can
purchase with a given income.
B If an indifference curve is a downward-sloping straight line, the principle of diminishing
marginal utility must be operating.
C Indifference curves never cross, because this means that a consumer would be indifferent
between combinations of two goods, even when one combination provides more of each
good.
D The gap between indifference curves is always constant.

3 Negative externalities, such as air pollution due to car emissions, can cause damage to people’s
health in cities.

Which response is most likely to occur from this situation?

A car manufacturers will automatically bear any external costs

B market failure will be resolved when private costs equal external costs
C most people will decide to use buses rather than cars
D some form of government intervention to improve economic efficiency

© UCLES 2023 9708/32/O/N/23

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3

4 The merger of two large firms in the Singapore market supplying taxis and private hire vehicles
resulted in a single firm with 80% of the market. The remaining 20% of the market consisted of
thousands of independent taxi drivers.

Which statement best describes what has effectively occurred in the market structure?

A The market has become monopolistically competitive.

B The market has changed from an oligopoly to a monopoly.
C The market has changed from perfect competition to an oligopoly.
D The market remains an oligopoly.

5 The diagram shows the cost and revenue curves of a profit-maximising, monopolistically
competitive firm in long-run equilibrium.

costs, AC
revenue MC

AR
MR
O Q
output

Which statement correctly describes the performance of this firm?

A It is allocatively efficient.
B It is making abnormal losses.
C It is making abnormal profits.
D It is making normal profits.

6 A firm changes its aim and chooses to produce where marginal revenue (MR) is zero instead of
where MR is equal to marginal cost (MC).

Which explanation for this is not correct?

A The firm wishes to increase sales.

B The firm wishes to increase its output.
C The firm wishes to reduce prices.
D The firm wishes to gain more profits.

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4

7 A firm operating in the airline industry uses third degree price discrimination.

Which condition is most likely to allow this to happen?

A Consumers are able to buy cheaply and then sell the product at a higher price.
B Price elasticity of demand is the same for all consumers in the market.
C The firm faces a perfectly elastic demand curve.
D The firm is able to keep the different market segments separate.

8 What is not an example of a moral hazard?

A People with a higher risk of unemployment are more likely to undertake training.
B People with free dental care are less likely to take care of their teeth with good oral hygiene.
C People with insurance against car theft are more likely to park their car in high crime areas.
D People with unemployment benefits are less likely to undertake retraining if they become
unemployed.

9 In recent years, the fuel cost of operating a jet aircraft has declined. Over the same period,
improved design has led to much quieter aircraft.

How would this affect the marginal private cost (MPC) and the marginal external cost (MEC) of air
travel?

A a downward shift of both the MPC and the MEC curves

B a downward shift of the MPC curve and a movement left along the MEC curve
C a movement left along both the MPC and the MEC curves
D a movement left along the MPC curve and a downward shift of the MEC curve

10 Firm K operates in a competitive market. Firm L is a monopsony employer. Both firms are
operating at an equilibrium level of output.

Trade unions are introduced with the result that wages in each firm are increased.

What is the likely effect on each firm if trade unions enter the labour market?

firm K firm L

A employment will decrease employment will decrease

B employment will decrease employment will increase
C employment will increase employment will decrease
D employment will increase employment will increase

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5

11 A backward-sloping supply curve of labour is one where, beyond a certain point, the supply of
labour

A decreases as the demand for labour rises.

B increases as the demand for labour rises.
C decreases as wages rise.
D increases as wages rise.

12 What is the economic result of a universal basic income (UBI)?

reduces the improves

incentive to work equality

A no no
B no yes
C yes no
D yes yes

13 Which combination of fiscal policy measures would be most effective in reducing income
inequality?

top rates of value of state

indirect taxes
income tax benefits

A increase increase increase

B increase reduce increase
C reduce increase reduce
D reduce reduce reduce

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6

14 At present, motorists who drive their cars within area 1 on the map pay a daily congestion charge
of $8.

Y
Z

area 1

area 2

Which car journeys would decrease in number if the congestion charge area were extended to
include area 2?

A journeys from point X to point Z

B journeys from point X to point Y
C journeys from point Y to point Z
D journeys from point Z to point Y

15 What is most likely to lead to an increase in the size of the national income?

A a fall in interest rates on savings accounts

B a fall in the prices of imported goods
C a decrease in government spending
D an increase in direct taxes

16 Which government policy is most likely to improve occupational mobility?

A decreased income tax rates

B increased government spending on education and training
C increased government spending on infrastructure
D increased subsidies to firms to employ school leavers

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7

17 The table shows the marginal propensity to consume (MPC), marginal propensity to save (MPS),
marginal rate of taxation (MRT) and marginal propensity to import (MPM) for a four-sector
economy.

value

MPC 0.5
MPS 0.2
MRT 0.2
MPM 0.1

What is the size of the multiplier?

A 1 B 2 C 5 D 10

18 What is likely to happen when the productive capacity of a free enterprise economy increases
over a long period of time?

A Future generations will be less well-off than present generations.

B Increasing the production of one good cannot be done without decreasing the production of
another.
C Individuals will have more choices due to a wider range of consumer goods.
D Rising levels of output will cause per capita incomes to equalise.

19 The accelerator principle refers to a relationship between investment and

A the level of GDP.

B changes in GDP.
C the level of interest rates.
D changes in interest rates.

20 What is likely to be the effect of an increase in the budget deficit?

A an increase in effective demand

B an increase in unemployment
C a reduction in inflation
D a reduction in the volume of spending

© UCLES 2023 9708/32/O/N/23 [Turn over

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8

21 The table gives details of the inflation and unemployment rates for different countries in 2008 and
2011.

inflation rate unemployment rate

country (% per annum) (% of workforce)
2008 2011 2008 2011

Canada 2.38 2.89 6.15 7.47

France 3.16 2.29 7.81 9.68
Germany 2.75 2.48 7.60 5.98
Japan 1.37 –0.28 3.99 4.55

Which countries experienced a trade-off between their inflation and unemployment rates?

A Canada and Germany

B Canada only
C France and Japan
D France only

22 Which government policy would boost economic growth but not necessarily promote economic
development?

A creating a more equal distribution of income and wealth

B diverting government spending from industry to education
C encouraging the extraction of finite natural resources
D introducing tighter controls on air pollution

23 Which policy measure to encourage economic growth might be based on the concept of the
Laffer curve?

A cuts in direct taxes

B exchange rate depreciation
C investment subsidies
D quantitative easing

© UCLES 2023 9708/32/O/N/23

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9

24 The exchange rate of an economy appreciates.

Assuming that the Marshall–Lerner condition holds in this economy, what is the likely outcome for
imported inflation and unemployment?

imported inflation unemployment

A falls falls
B falls rises
C rises falls
D rises rises

25 Which characteristics are most commonly found in low-income countries?

capital-output
saving ratio
ratio

A low low
B high low
C low high
D high high

26 What has not accompanied global economic growth over the last 25 years?

A a depletion of non-renewable resources

B decreased international trade
C growing urbanisation
D increased atmospheric pollution

27 When assessing income distribution in an economy, which change in the Gini coefficient
suggests that a country is distributing its income more equally?

A It has moved closer to one.

B It has moved closer to zero.
C It has moved from negative to positive.
D It has moved from positive to negative.

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10

28 In 2021, a very large cargo ship carrying over 18 000 cargo containers blocked the Suez Canal
for seven days. It delayed over 350 other cargo ships, causing shortages of products in markets
around the world as supplies were disrupted.

Which consequence of globalisation is best illustrated by this event?

A cheaper products for consumers

B greater choice of products for consumers
C increased interdependence between countries
D increased migration of labour between countries

29 The table shows data for Namibia and Spain from 2014 to 2017.

Namibia Spain
2014 2017 2014 2017
real GDP per capita ($) 6113 6013 29 399 32 283
health spending per capita ($) 452 447 2 671 2 506
(assuming constant price levels)

What can be concluded about whether there has been an increase in economic growth and
economic development in Namibia and Spain between 2014 and 2017?

economic economic
growth development

A Namibia only Namibia only

B Spain only Namibia and Spain
C Spain only neither country
D neither country Spain only

© UCLES 2023 9708/32/O/N/23

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11

30 The graphs show the Human Development Index (HDI) and its component parts for Zimbabwe.

Human Development Index education index

0.55 0.6

0.5 0.55
0.5
0.45
0.45
0.4
0.4
0.35 0.35
0.3 0.3
0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
year year

life expectancy GNI per capita, ppp (2011 ppp)

0.55 0.6

0.5 0.55
0.5
0.45
0.45
0.4
0.4
0.35 0.35
0.3 0.3
0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
year year

Between years 3–7, which components of HDI have comparable changes to its overall change?

A education, GNI per capita and life expectancy

B education and GNI per capita only
C education and life expectancy only
D GNI per capita and life expectancy only

© UCLES 2023 9708/32/O/N/23

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12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9708/32/O/N/23

 www.dynamicpapers.com

Cambridge International AS & A Level

ECONOMICS 9708/32
Paper 3 A Level Multiple Choice October/November 2024
1 hour 15 minutes

You must answer on the multiple choice answer sheet.

*7536110336*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB24 11_9708_32/4RP
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1 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

2 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.

3 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

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4 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

5 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.

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6 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

7 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

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8 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

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

9 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

10 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

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11 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.

12 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.

13 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

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14 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

15 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.

16 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

17 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

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18 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.

19 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

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20 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

21 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

22 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.

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23 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.

24 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

25 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

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26 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

27 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

28 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

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29 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.

30 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.

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