Cambridge AS & A Level Economics 9708/32 is the May/June 2026 Paper 3 (A Level Multiple Choice), variant 2. It is an A Level component with 30 questions worth one mark each, and it lasts 1 hour 15 minutes. Every question is compulsory. The biggest single area was money, unemployment and macroeconomic policy with 10 questions, and the paper leaned on diagrams and data: indifference curves, the Laffer curve, a Phillips curve shift and two time-series graphs. This guide gives the official answer for every question, the topic it tested and the working for the two calculations. The paper and its mark scheme are free on the Tutopiya Learning Portal.

For an overview of all four 9708 papers from this series, see A Level Economics 9708 May/June 2026 past papers: what came up and how it was marked.

9708/32 at a glance

Syllabus area	Questions	Number of questions
Consumer and firm behaviour	1, 2, 3, 5, 6, 7	6
Market failure, labour and income distribution	4, 8–12	6
Money, unemployment and macroeconomic policy	13–21, 24	10
The open economy and development	22, 23, 25–30	8
Total		30

Each correct answer scores one mark, so the total is 30. Answers go on a multiple choice answer sheet in soft pencil.

Answer key and topic for every question

Question	What it tested	Answer
1	Utility maximisation under the equi-marginal principle	C
2	Likely reason for a firm to remain small	D
3	Effect of better transport links on a firm’s ATC	B
4	Which good is not causing market failure (cost and benefit table)	B
5	Condition for profitable price discrimination	A
6	Change in monthly profit if a firm shuts down	B
7	Indifference curve diagram after a change in the price of wheat	C
8	Definition of economic rent	A
9	Tax allowance and benefit changes for a fairer income distribution	C
10	Advantage of property rights for river pollution	A
11	Tax on a firm producing toxic fumes	B
12	What lets a union raise wages without cutting jobs	D
13	Broad money and narrow money	A
14	What T stands for in MV = PT	D
15	Unemployment type with a negative output gap	A
16	Multiplier with a tax rate and a propensity to consume	B
17	What does not raise the natural rate of unemployment	D
18	Employment, unemployment and real GDP all rising	B
19	Hoarding cash at very low interest rates	B
20	Axis labels on the Laffer curve	C
21	Conclusion from consumer price and unemployment graphs	C
22	Likely result of a cut in interest rates	D
23	What falls after two years of falling real GDP	C
24	Meaning of an outward Phillips curve shift	A
25	Controlling a falling currency and improving the current account	B
26	Why a depreciation first worsens the trade balance	D
27	Conclusion from GNI per capita and HDI data	A
28	Fiscal policy that diversifies Angola’s economy	D
29	What happens as a country develops	A
30	Effect of FDI on the balance of payments	C

What the paper tested, topic by topic

Consumer and firm behaviour (Questions 1, 2, 3, 5, 6 and 7)

• Shutdown (Question 6): revenue is 20 000 × $2 = $40 000 a month. Variable costs are 20 000 × $1.50 = $30 000, and fixed costs $5000, so profit is $5000. If the firm shuts down, revenue and variable costs disappear but the $5000 fixed cost remains, so it makes a $5000 loss. The change in profit is 5000 − (−5000) = $10 000. Answering $5000 means you stopped at the current profit.
• Indifference curves (Question 7): budget line 2 pivots inwards on the wheat axis, so the price of wheat has risen, yet T has slightly more wheat than S. A good whose consumption rises with its price is a Giffen good. The dashed line through W is parallel to budget line 1, so S to W reflects the change in real income at the original relative prices: the income effect. That rules out D, because for a Giffen good the income effect outweighs the substitution effect.
• Transport links (Question 3): better infrastructure lowers the firm’s costs at every output, so ATC1 shifts down to ATC2. At the unchanged output Q1, average total cost falls to C3. C4 would need the firm to move to Q2 as well.
• Utility and pricing (Questions 1 and 5): the equi-marginal principle is that marginal utility per dollar is equal across products. Price discrimination is profitable only if the markets have different price elasticities of demand.
• Small firms (Question 2): a small firm can offer more personal customer service. The other options are reasons to grow.

Market failure, labour and income distribution (Questions 4 and 8–12)

• Cost and benefit table (Question 4): add private and external values to get social ones. For good B, marginal social cost is 10 + 5 = 15 and marginal social benefit is 5 + 10 = 15. They are equal, so B is the allocatively efficient output and causes no market failure. For A, MSC is 15 and MSB 10; for C, 20 and 25; for D, 15 and 20.
• Toxic fumes (Question 11): a tax equal to XY, the gap between MSC and MPC, makes the firm pay the external cost, so it internalises the external cost and output falls from Q1 to the socially efficient Q2.
• Property rights (Question 10): once rights to the river are defined, people harmed by pollution can claim compensation. It does not always make the polluter pay or stop pollution completely.
• Labour market (Questions 8 and 12): economic rent is the payment above the minimum needed to keep a worker in that employment (transfer earnings). A union can win higher wages without job losses if demand for the product is increasing, because that shifts the demand for labour outwards. Elastic demand for labour or the product, or labour being a large share of costs, all make job losses more likely.
• Fairer distribution (Question 9): raising the tax-free allowance helps lower earners most, and increasing means-tested benefits targets help at low-income households. Cutting either works the wrong way, and universal benefits go to everyone, rich or poor.

Money, unemployment and macroeconomic policy (Questions 13–21 and 24)

• Multiplier with tax (Question 16): households pay $0.20 tax on each extra $1, keeping $0.80, and spend three quarters of that: 0.75 × 0.80 = 0.60. The multiplier is 1 ÷ (1 − 0.60) = 1 ÷ 0.40 = 2½. Ignoring the tax gives 1 ÷ 0.25 = 4, which is not an option, so the tax must be included.
• Money (Questions 13 and 14): both broad and narrow money can act as a store of value. In MV = PT, T is the total volume of transactions.
• Unemployment (Questions 15, 17 and 18): a large negative output gap with demand below full employment points to cyclical unemployment. Job losses from a general decline in activity are also cyclical, so they do not raise the natural rate, whereas skills mismatch, minimum wages and searching on savings can. Employment, unemployment and real GDP all rising together means the labour force has grown (potential growth) and output has risen (actual growth).
• Liquidity trap (Question 19): hoarding cash rather than spending or investing even at very low interest rates is the liquidity trap.
• Laffer curve (Question 20): the tax rate goes on the horizontal axis and tax revenue on the vertical axis. Revenue is zero at a 0% rate and again at a 100% rate.
• Reading the graphs (Question 21): the consumer price line shows the percentage increase on a year earlier, and it stays above zero in every year. Prices therefore rose throughout, even though the rate of inflation fell to its lowest point in 2004. Option B confuses the inflation rate with the price level, and the unemployment graph shows a percentage of the labour force, not the number unemployed.
• Phillips curve (Question 24): an outward shift from X1 to X2 means every inflation rate now goes with more unemployment, which reflects a higher natural rate of unemployment.

The open economy and development (Questions 22, 23 and 25–30)

• Interest rates (Question 22): a cut in interest rates makes the country less attractive for short-term deposits, so hot money flows out. Consumption and investment would rise, not fall, and the currency would tend to depreciate.
• Falling real GDP (Question 23): two years of falling output means weak demand, so demand-pull inflation falls. Cyclical unemployment rises.
• Exchange rate policy (Question 25): fixing the currency instead of letting it float stops the slide being left to the market, and setting it below the current value keeps exports competitive, helping the current account.
• J-curve (Question 26): right after a depreciation, export volumes cannot rise quickly if the supply of exports is price inelastic, while imports cost more straight away, so the trade balance first gets worse.
• Living standards (Question 27): Australia had the lower GNI per capita (PPP $48 085 against $63 826) but the higher HDI (0.944 against 0.926), so the data supports a higher living standard in Australia. It says nothing about inflation or population, and per capita figures cannot show which country has the larger total national income.
• Angola (Question 28): subsidising a partnership to build tourist hotels is fiscal policy and moves the economy away from oil. Lower interest rates are monetary policy, relaxing regulations is not fiscal, and supporting oil does the opposite of diversifying.
• Development and FDI (Questions 29 and 30): as countries develop, the share of the workforce in services rises. FDI is a credit in the financial account when it arrives; its long-run effect on the current account is uncertain, because profits may be sent home while exports may grow.

Where the marks are on 9708/32

• Macroeconomics and the open economy carried 18 of the 30 marks. Money, unemployment and policy made up 10 and the international and development questions 8.
• Microeconomics was worth 12 marks, split evenly between consumer and firm behaviour and market failure and labour.
• Only two questions needed a real calculation: the shutdown decision (6) and the multiplier with tax (16). Question 4 needed quick addition across a table.
• Seven questions turned on a diagram or graph: the ATC curves (3), the indifference curves (7), the toxic fumes diagram (11), the Laffer curve (20), the price and unemployment graphs (21), the Phillips curve (24) and the GNI and HDI table (27).
• Two questions were framed as negatives: “not causing market failure” in Question 4 and “not likely to increase the natural rate” in Question 17.

How to self-mark 9708/32

1. Check each answer against the key above or the official mark scheme. Count one mark per correct letter.
2. Tag every wrong answer by topic, using the at-a-glance table, to see which area is costing the most.
3. Tag it by reason too: knowledge (for example, economic rent or the Laffer curve axes), misread (the “not” in Questions 4 and 17, or rate of inflation against price level in Question 21) or calculation (forgetting fixed costs in Question 6 or the tax in Question 16).
4. Redraw every diagram you got wrong, especially the indifference curve diagram: mark the substitution and income effects and say which way each moves wheat consumption.
5. Revise knowledge gaps first, then re-sit the questions you guessed, even those you got right.

Sit 9708/32 as a timed mock

You have 75 minutes for 30 questions, two and a half minutes each. Use two passes: answer the definitions and recall questions first, mark the diagram and data questions, then come back to them.

Block	Questions	Time
Consumer and firm behaviour, market failure	1–12	30 minutes
Money, unemployment and policy	13–21	20 minutes
Open economy, Phillips curve and development	22–30	18 minutes
Second pass and check the answer sheet	–	7 minutes

The first block is the longest because it holds the shutdown calculation, the cost and benefit table and the indifference curve diagram.

Other May/June 2026 9708 papers

• 9708 Paper 12 (AS Level Multiple Choice)
• 9708 Paper 22 (AS Level Data Response and Essays)
• 9708 Paper 42 (A Level Data Response and Essays)

Practise and download

• Download 9708/32 and its mark scheme on the Learning Portal →
• All 9708 May/June 2026 papers: overview and marking patterns
• Try a free A Level Economics quiz

Need help with a 9708 topic? Book a free trial lesson with an A Level Economics tutor →

Frequently asked questions

What topics were on 9708 Paper 32 May/June 2026? +

The A Level content. Consumer and firm behaviour had 6 questions, market failure, labour and income distribution 6, money, unemployment and macroeconomic policy 10, and the open economy and development 8, including the J-curve, GNI per capita against the HDI and FDI.

How many marks is 9708/32 and how long is it? +

It has 30 multiple choice questions, one mark each, for a total of 30 marks. You have 1 hour 15 minutes and you may use a calculator.

Is 9708/32 an AS or A Level paper? +

It is Paper 3, the A Level multiple choice paper. Full A Level candidates sit it with Paper 4 as well as the AS Papers 1 and 2.

What was the answer to the multiplier question on 9708/32? +

B, 2½. Households keep $0.80 of each extra $1 of gross income and spend three quarters of that, so they spend $0.60. The multiplier is 1 ÷ (1 − 0.6) = 2.5.

What was the answer to the shutdown question on 9708/32? +

B, $10 000. The firm earns $40 000 a month, pays $30 000 in variable costs and $5000 in fixed costs, so it makes $5000 profit. If it shuts down it still pays the $5000 fixed cost, a loss of $5000, so profit falls by $10 000.

Where can I download 9708/32 May/June 2026 and its mark scheme? +

Both are free to download and print on the Tutopiya Learning Portal, on the Cambridge AS & A Level Economics 9708 past papers page.

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