Economics

Cambridge International AS & A level

CANDIDATE
NAME

CANDIDATE CANDIDATE
GRADE-DIVISION
A - Commerce
ROLL NUMBER

Economics
Paper 3 Multiple Choice

Term 1 EXAMINATION OCTOBER 2023

Time: 1 hour 15 minutes
Marks: 30

You must answer on the multiple choice answer sheet.

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, center 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.
 You may use a calculator.

INFORMATION
●The total mark for this paper is 30.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 9 pages.

OCTOBER 2023 Page 1 of 9

Q1. [01]
Over time the average total cost curve of a firm is lowered. Which form of efficiency does this T2
represent?
A. allocative
B. dynamic
C. Pareto
D. productive

Q2 [01]
The table shows the results of a cost-benefit analysis of the construction of a new airport. T3
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

Q3. [01]
T3

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

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 2 of 9

Q4 [01]
T3

Q5 [01]
What is correct about cartels? T2
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.

Q6 [01]
A firm that controlled over 50% of the market successfully merges with its main competitor to form T2
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

Q7 [01]
Recent research has shown that consumption of some foods might be harmful. A government T2
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

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 3 of 9

Q8 [01]
What would be most likely to cause the demand for labour in an industry to be inelastic? T2
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.

Q9 [01]
Which influence is least likely to promote sustainable economic growth in a developing economy? T3
A. high saving rates
B. involvement in free trade
C. protected property rights
D. rapid population growth

Q10 [02]
Which policy by developed economies would be most beneficial for developing economies? T3
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
Q11 [01]
What can be deduced about an economy where no-one can be made better off without making T3
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.

Q12 [01]
What is equivalent to social benefits? T2
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

Q13 [01]
How can the concept of marginal utility explain the shape of the downward sloping demand curve? T3
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.

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 4 of 9

Q14 [01]
T4

Q15 [01]
Small farmers supply all their rice production to a single buyer. Which term best describes this T2
market structure?
A. monopolistic
B. monopoly
C. monopsony
D. perfect competition

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 5 of 9

Q16 [01]
T4

Q17 [01]
In many developed economies, large and small firms often exist side by side in the same industry. T3
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.

Q18 [01]
A government wishes to reduce the negative externalities caused by the use of coal. Which policy T4
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.
Q19 [01]
Rapid economic growth is claimed by some to harm the environment. Which outcome would not T3
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

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 6 of 9

Q20 [01]
T2

Q21 [01]
T3

Q22 [01]
What is likely to help create dynamic efficiency? T3
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.

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 7 of 9

Q23 [01]
T2

Q24 [01]
The world’s largest pharmaceutical companies developed and distributed an effective vaccine to T3
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

Q25 [01]
The result of a cost-benefit analysis of a proposed government road-building project is that there will T3
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.

Q26 [01]
T3

T1/ECO/P3/ 30/10/23 OCTOBER 2023 Page 8 of 9

Q27 [01]
A government wishes to reduce the use of cars in cities. T2
Which policy should be used?
A. a decrease in parking charges
B. lowering tax on petrol (gasoline)
C. restricting cycling
D. subsidising public transport

Q28 [01]
What is most likely to be the biggest contribution to sustainable economic growth in a developed T2
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

Q29 [01]
Which cause of economic growth would involve the least cost for present and future generations of T3
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

Q30 [01]
A good is most suitable to be provided by the market if it is – T1
A. excludable and non-rival.
B. excludable and rival.
C. non-excludable and non-rival.
D. non-excludable and rival.

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