Cambridge International (CAIE) A-level Paper 3, March 2025

1. Aaverage cost
2. Baverage fixed cost
3. Caverage variable cost
4. Dmarginal cost

TopicTypes of cost, revenue and profit, short-run and long-run production

1. Aa firm incurring a loss by selling goods at prices below the average cost
2. Ba guaranteed price that results in the accumulation of unsold stocks
3. Clow income earners being unable to buy high-priced goods
4. Dunder-provision of a socially desirable good

TopicEfficiency and market failure

1. Aa high concentration ratio
2. Ba limit-pricing policy
3. Chigh fixed costs
4. Dlow barriers to entry

TopicDifferent market structures

1. AX+Y+Z
2. BY
3. CY+Z
4. DZ

TopicDiffering objectives and policies of firms7.5 Types of cost, revenue and profit, short-run and long-run production

1. ANegative income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
2. BNegative income effect and substitution effect move in the same direction, leading to a flatter demand curve.
3. CPositive income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
4. DPositive income effect and substitution effect move in the same direction, leading to a flatter

TopicIndifference curves and budget lines

1. Afrom K to M
2. Bfrom M to N
3. Cfrom M to L
4. Dfrom N to L

TopicEfficiency and market failure7.4 Private costs and benefits, externalities and social costs and benefits

1. Aallocative efficiency: improves; dynamic efficiency: improves; productive efficiency: improves
2. Ballocative efficiency: unchanged; dynamic efficiency: improves; productive efficiency: improves
3. Callocative efficiency: improves; dynamic efficiency: unchanged; productive efficiency: unchanged
4. Dallocative efficiency: unchanged; dynamic efficiency: unchanged; productive efficiency: improves

TopicEfficiency and market failure7.5 Types of cost, revenue and profit, short-run and long-run production7.6 Different market structures

1. Adecreased maximum price causing producers to leave the market
2. Bhigher guaranteed price encouraging suppliers to overproduce
3. Cincreased minimum wage leading to employers dismissing workers
4. Dincreased subsidies encouraging the consumption of a socially desirable product

TopicGovernment failure in microeconomic intervention

1. Awhen a country’s income tax system is made more progressive
2. Bwhen someone is made better off without making someone else worse off
3. Cwhen the best use is made of scarce resources
4. Dwhen there is an increase in the Gini coefficient

TopicEquity and policies towards income and wealth redistribution7.3 Efficiency and market failure

1. AFirms have a financial incentive to reduce pollution.
2. BIt is relatively hard to administer and monitor this tax scheme.
3. CSome firms cause less pollution than others.
4. DTaxes on pollution reduce negative production externalities.

TopicPrivate costs and benefits, externalities and social costs and benefits8.1 Government policies to achieve efficient resource allocation and correct market failure

1. Aa specific tax instead of an ad valorem tax was introduced
2. Bfewer drinks than originally forecast contained sugar
3. Cmost retailers did not increase the price of soft drinks
4. Dthe demand for soft drinks was price inelastic

TopicGovernment policies to achieve efficient resource allocation and correct market failure

1. AAward public sector workers pay increases below the rate of inflation.
2. BEncourage private sector pay awards to be in line with company profits.
3. CIntroduce a minimum hourly wage for non-unionised, low-paid workers.
4. DRemove any restrictions on trade unions to bargain for wages.

TopicLabour market forces and government intervention

1. Amarginal physical product × marginal revenue
2. Bmarginal physical product ÷ price
3. Ctotal physical product × marginal cost
4. Dtotal physical product ÷ marginal cost

TopicLabour market forces and government intervention

1. AHer economic rent as a teacher is $5000.
2. BHer economic rent as an accountant is $10 000.
3. CHer transfer earnings as a teacher are $30 000.
4. DHer transfer earnings as an accountant are $15 000.

TopicLabour market forces and government intervention9.3 Employment and unemployment

1. Ahow changes in consumption lead to changes in income
2. Bhow changes in income lead to changes in consumption
3. Chow changes in income lead to changes in investment
4. Dhow changes in investment lead to changes in income

TopicThe circular flow of income

1. Aa positive output gap
2. Ba recession
3. Cactual economic growth
4. Dpotential economic growth

TopicEconomic growth and sustainability

1. Aa move to monthly rather than weekly salary payments by firms
2. Ban increase in interest rates
3. Can increase in the use of cash machines to reduce money balances held
4. Da decrease in the use of credit cards by individuals

TopicMoney and banking

1. Aa decrease in income tax that increases aggregate demand
2. Ba decrease in unemployment benefit
3. Can increase in retraining schemes for the unemployed
4. Dmore advertising of employment vacancies in the economy

TopicEmployment and unemployment

1. A$40 million
2. B$160 million
3. C$260 million
4. D$840 million

TopicThe circular flow of income9.2 Economic growth and sustainability9.3 Employment and unemployment

1. Ainternal value of money: falls; external value of money: falls
2. Binternal value of money: falls; external value of money: rises
3. Cinternal value of money: rises; external value of money: falls
4. Dinternal value of money: rises; external value of money: rises

TopicMoney and banking

1. Agiving subsidies to producers
2. Bincreasing government spending
3. Clowering direct taxes
4. Dlowering interest rates

TopicEffectiveness of policy options to meet all macroeconomic objectives

1. Aa decrease in tax revenue
2. Bexport-led growth
3. Crepayment of debts to other countries
4. Dthe import of new technology

TopicPolicies to correct disequilibrium in the balance of payments

1. Aan increase in domestic inflation
2. Ban increase in domestic interest rates
3. Can increase in incomes abroad
4. Dan increase in tourists visiting the country

TopicExchange rates

1. AThe currency will depreciate, increasing exports and reducing the trade deficit.
2. BThe increase in real output will be limited as the value of the multiplier is low.
3. CThe money supply will fall, leading to a reduction in aggregate demand.
4. DThere will be a decrease in the rate of interest, causing demand-pull inflation.

TopicEffectiveness of policy options to meet all macroeconomic objectives9.3 Employment and unemployment

1. Acurrent account: official reserve assets and; financial account: trade in services and transactions
2. Bcurrent account: primary income and; financial account: official reserve assets and
3. Ccurrent account: trade in goods and; financial account: foreign direct investment and
4. Dcurrent account: trade in services and; financial account: portfolio investment and

TopicPolicies to correct disequilibrium in the balance of payments

1. AAverage incomes are higher in country X than in country Z.
2. BCountry X is the least developed country.
3. CIncome is equally distributed in country Y.
4. DThe distribution of income in country Y is more even than in country X.

TopicEconomic development8.2 Equity and policies towards income and wealth redistribution9.2 Economic growth and sustainability

1. Aan improvement in labour productivity
2. Ban improvement in the quality of capital and technology
3. Can increase in birth rate and a fall in death rate
4. Dan increase in the availability of natural resources

TopicCharacteristics of countries at different levels of development

1. Acooking fuel
2. Belectricity
3. Cmedication
4. Dwater

TopicEconomic development

1. Afacilitating free trade among member countries
2. Bproviding assistance to member countries to plan fiscal policies
3. Cproviding bailout packages to countries facing external account challenges
4. Dproviding monetary assistance to member countries to build infrastructure

TopicRelationship between countries at different levels of development

1. ACapacity to benefit from transfer of communications technology has increased.
2. BInvestment in infrastructure has created transport links and port facilities.
3. COver-reliance on technical assistance has impaired local initiatives and innovation.
4. DProjects for education and training have helped to enhance the supply side.

TopicRelationship between countries at different levels of development11.4 Characteristics of countries at different levels of development