Paper 3: A Level Multiple Choice · 9708/32
Cambridge International (CAIE) A-level Paper 3, June 2024
All 30 multiple choice questions from Cambridge International (CAIE) A-level Paper 3 (June 2024), A Level Multiple Choice. Each question shows its marks and topic, and opens the question paper and mark scheme at the right page.
Q1
The table shows the total utility gained by a consumer from the consumption of water. What can be concluded from this table?
- AMarginal utility increases as consumption increases.
- BThe consumer cannot switch expenditure to another product to increase total utility.
- CThe marginal utility of the 3rd unit is 8.
- DThe marginal utility of the 5th unit is 2.
Show the answer
The answer is C.
TopicUtility
Q2
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. 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?
- Aproduct X: 5; product Y: 10
- Bproduct X: 5; product Y: 20
- Cproduct X: 10; product Y: 10
- Dproduct X: 20; product Y: 10
Show the answer
The answer is C.
Q3
Which combination of costs and benefits will lead to an increase in net social costs?
- Aprivate benefits: falls; external benefits: falls; private costs: no change; external costs: no change
- Bprivate benefits: no change; external benefits: increases; private costs: falls; external costs: no change
- Cprivate benefits: no change; external benefits: increases; private costs: falls; external costs: falls
- Dprivate benefits: increases; external benefits: increases; private costs: no change; external costs: falls
Show the answer
The answer is A.
TopicPrivate costs and benefits, externalities and social costs and benefits
Q4
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)?
- AMC: fall then rise; ATC: fall then rise; AFC: fall
- BMC: fall then rise; ATC: rise then fall; AFC: rise
- CMC: rise then fall; ATC: fall then rise; AFC: fall
- DMC: rise then fall; ATC: rise then fall; AFC: rise
Show the answer
The answer is A.
TopicTypes of cost, revenue and profit, short-run and long-run production
Q5
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?
- Aair transportation
- Bhairdressing
- Csteel production
- Dwheat farming
Show the answer
The answer is D.
Q6
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. The firm decides to produce 4000 units. What is the firm’s aim?
- Ato maximise profit
- Bto maximise sales
- Cto maximise revenue
- Dto minimise average costs
Show the answer
The answer is C.
Q7
The diagram shows the costs and benefits of producing steel in a free market. Which area measures the deadweight loss of economic welfare?
- ARTS
- BRUS
- CTUS
- DYTUS
Show the answer
The answer is A.
Q8
What is likely to make it more difficult for a small firm to survive?
- Aincreased preference on the part of consumers for distinctive non-standardised products
- Breductions in the rate of interest charged by commercial banks
- Cthe absence of effective barriers to the entry of potential competitors
- Dthe existence of decreasing returns to scale
Show the answer
The answer is C.
Q9
A market structure in which a small number of firms face competition from potential entrants. What does this describe?
- Aa contestable market
- Ba monopoly
- Cmonopolistic competition
- Dperfect competition
Show the answer
The answer is A.
Q10
What is an example of backward vertical integration?
- Aa bakery buying a wheat farm
- Ba car manufacturer buying a car showroom
- Ca vineyard buying an apple orchard
- Dtwo rival supermarkets joining together
Show the answer
The answer is A.
Q11
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?
- Aa quota to limit the production of the good
- Ba regulation to ban the production of the good
- Ca tax on the production of the good
- Da tradable pollution permit system for producers of the good
Show the answer
The answer is B.
TopicGovernment policies to achieve efficient resource allocation and correct market failure
Q12
The table shows the annual percentage change in the output per worker employed for four nationalised industries before and after privatisation. What can be concluded about the effect of privatisation?
- AEmployment fell in the railway industry.
- BEmployment was unchanged in the telecommunications industry.
- COutput was greatest in the electricity supply industry.
- DWorkers became less efficient in the shipbuilding industry.
Show the answer
The answer is D.
TopicGovernment policies to achieve efficient resource allocation and correct market failure
Q13
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?
- Aa reduction in working hours available
- Ba shift in the country’s economy to the service sector
- Ca subsidised lunch is made available
- Dan increase in the number of jobs available
Show the answer
The answer is C.
Q14
When will a profit-maximising firm employ the optimum number of workers?
- Awhen the average revenue product of labour equals the average cost of hiring workers
- Bwhen the marginal revenue product of labour equals the average cost of hiring workers
- Cwhen the marginal revenue product of labour equals the marginal cost of hiring workers
- Dwhen the marginal revenue product of labour equals the trade union supplied cost of workers
Show the answer
The answer is C.
Q15
The diagram shows the labour market for farm workers in New Zealand. Which areas represent the economic rent and transfer earnings of the farm workers?
- Aeconomic rent: GFK; transfer earnings: GHOJ
- Beconomic rent: GHOJ; transfer earnings: GJK
- Ceconomic rent: GJK; transfer earnings: GJF
- Deconomic rent: GJK; transfer earnings: GHOJ
Show the answer
The answer is D.
Q16
What is not a function of a commercial bank?
- Ato help firms raise finance
- Bto hold cash on deposit for firms
- Cto lend money to households
- Dto provide savings accounts
Show the answer
The answer is A.
TopicMoney and banking
Q17
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?
- A19.4% of the economy is working illegally.
- B23.4% of the age group is economically inactive.
- C80.6% of the age group is economically active.
- DThe data is inaccurate.
Show the answer
The answer is C.
Q18
Which statement relating to unemployment benefits provided by a government is not valid?
- AThey allow firms to dismiss workers as unemployment benefits provide support to unemployed workers.
- BThey force firms to raise wages to encourage workers to work rather than relying on unemployment benefits.
- CThey provide a safety net to workers which might reduce their efforts to find a suitable job.
- DThey increase government spending and force it to raise taxes.
Show the answer
The answer is B.
Q19
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?
- Aa 5% increase in the MPC together with a 5% fall in the MRT
- Ba 5% increase in the MPM together with a 5% fall in the MRT
- Ca 5% increase in the MPS together with a 5% fall in the MPM
- Da 5% increase in the MRT together with a 5% fall in the MPS
Show the answer
The answer is A.
Q20
The diagrams show the performance of an economy using different measures.
- APrices will increase significantly as the economy grows in the near future.
- BSupply-side policies would be the best option to encourage economic growth.
- CThe economy is currently experiencing a deflationary gap.
- DThere are shortages of skilled labour throughout the economy.
Show the answer
The answer is C.
TopicEffectiveness of policy options to meet all macroeconomic objectives
Q21
Which row correctly identifies the characteristics of an economy experiencing the liquidity trap?
- Arate of economic growth: high; rate of inflation: high; rate of interest: low
- Brate of economic growth: low; rate of inflation: high; rate of interest: low
- Crate of economic growth: low; rate of inflation: low; rate of interest: low
- Drate of economic growth: low; rate of inflation: low; rate of interest: high
Show the answer
The answer is C.
TopicMoney and banking
Q22
Which combination of policies would be most likely to bring a country out of recession?
- Aexpansionary fiscal and monetary policy as well as supply-side policies
- Bexpansionary fiscal policy and tight monetary policy
- Ctight fiscal and monetary policy
- Dsupply-side policies alone
Show the answer
The answer is A.
TopicEffectiveness of policy options to meet all macroeconomic objectives
Q23
The inflation rate in a country increased. Which effect would this most likely have on the country’s balance of payments?
- Aan improvement in the current account balance
- Ban increase in price competitiveness
- Can increase in export revenue
- Dan increase in import expenditure
Show the answer
The answer is D.
TopicPolicies to correct disequilibrium in the balance of payments
Q24
A government uses monetary policy and fiscal policy to solve a problem of deflation. Which policy combination is likely to be the most successful?
- Amonetary policy: increasing interest rates; fiscal policy: contractionary
- Bmonetary policy: increasing interest rates; fiscal policy: expansionary
- Cmonetary policy: reducing interest rates; fiscal policy: contractionary
- Dmonetary policy: reducing interest rates; fiscal policy: expansionary
Show the answer
The answer is D.
TopicEffectiveness of policy options to meet all macroeconomic objectives
Q25
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. Based on the information given, what is the most likely reason why Argentina achieved a higher % change in the unemployment rate than Chile?
- AArgentina had a greater % change in GDP growth.
- BChile’s performance on the current account balance was worse.
- CEach country had a weak exchange rate against the US dollar.
- DWage increases in each country were linked to their respective rates of inflation.
Show the answer
The answer is A.
Q26
A measure encourages consumers to change spending on imports to spending on domestically produced goods. What does this describe?
- Aan expenditure-reducing policy
- Ban expenditure-switching policy
- Cthe law of comparative advantage
- Dthe Marshall–Lerner condition
Show the answer
The answer is B.
TopicPolicies to correct disequilibrium in the balance of payments
Q27
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?
- Aif the combined price elasticity of demand for exports and imports is greater than 1
- Bif the combined price elasticity of demand for exports and imports is less than 1
- Cif the income elasticity of demand is less than 1
- Dif other countries decide to impose tariffs on all imported goods and services
Show the answer
The answer is A.
TopicExchange rates11.1 Policies to correct disequilibrium in the balance of payments
Q28
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?
- Acurrent account: improves; financial account: improves
- Bcurrent account: improves; financial account: worsens
- Ccurrent account: worsens; financial account: improves
- Dcurrent account: worsens; financial account: worsens
Show the answer
The answer is C.
TopicRelationship between countries at different levels of development11.1 Policies to correct disequilibrium in the balance of payments
Q29
The table gives information about the population of three countries in a given year. Which conclusion can be drawn about the countries in the table in that year?
- AChina had the highest percentage of children who died in infancy.
- BPeople in Hong Kong lived the longest.
- CSingapore had the largest number of people aged over 16.
- DThe population of Singapore was expected to fall in the next five years.
Show the answer
The answer is A.
TopicCharacteristics of countries at different levels of development
Q30
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?
- AGross Domestic Product per head
- BGross National Product per head
- CHuman Development Index
- DMeasure of Economic Welfare
Show the answer
The answer is D.
TopicEconomic development
Question text is quoted from the question papers, © Cambridge University Press & Assessment (UCLES), for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.