Cambridge IGCSE Economics 0455 — 2006 May/June Paper 1 · Variant 1

Question 1

1 Construction companies are building new houses on land previously used for farming. What is the opportunity cost to society of this activity? A improved living conditions B less congestion in city centres C more homes for new homeowners D some farm output

Accepted Answer

D

Question 2

2 What is most likely to cause queues of consumers to appear regularly outside shops in a planned economy? A the failure of money to act as a unit of account B the inefficient operation of the market system C the misallocation of resources by the government D the rising opportunity cost of shopping

Accepted Answer

C

Question 3

3 What is regarded as a factor of production? A capital B interest C profit D rent

Accepted Answer

A

Question 4

4 Although people may satisfy their basic needs there is always something more they want. To what economic issue does this statement refer? A exchange B market forces C scarcity D income distribution

Accepted Answer

C

Question 5

5 Which source of finance cannot be used by a private company? A a bank loan B a bank overdraft C an issue of shares on the Stock Exchange D retained profits

Accepted Answer

C

Question 6

6 What best describes a multi-national company? A a company that is owned by the government B a company that has many shareholders C a company that trades internationally D a company that produces in more than one country

Accepted Answer

D

Question 7

7 Kimberly-Clark Corporation manufactures many products, including Kleenex paper handkerchiefs. It has operations in 43 countries. What is not a reason why a company might decide to have operations in more than one country? A availability of raw materials B local markets can be served C transport is a high proportion of costs D trade union pressure

Accepted Answer

D

Question 8

8 Which factor would cause a shift in the supply curve for a good? A a fall in the price of the good B a fall in the price of its raw materials C an increase in the quantity consumed D an increase in consumers’ incomes

Accepted Answer

B

Question 9

9 The price of a good is temporarily above the market equilibrium price. What must happen for the market to be brought back to equilibrium? quantity demanded quantity supplied A rises rises B rises falls C falls rises D falls falls

Accepted Answer

B

Question 10

10 What is not held constant in calculating a demand schedule? A the incomes of consumers B the prices of complementary goods C the price of the good itself D the tastes of consumers

Accepted Answer

C

Question 11

11 The diagram shows the supply and demand curves for a good. The market is in equilibrium at point X. supply V W T X price Y Z demand O quantity What would be the excess supply at price T? A TV B VW C VZ D WY

Accepted Answer

B

Question 12

12 The diagram shows the demand and supply curves for digital cameras. The original equilibrium point is X. What will be the new equilibrium point if these cameras become more fashionable and the rate of sales tax rises? supply B A X C price D demand O quantity

Accepted Answer

B

Question 13

13 In 2002 in Paris there was a decrease in demand for theatre tickets. What might have caused this? A a decrease in fares on public transport in Paris B a decrease in the number of tourists in Paris C an increase in the number of jobs available in Paris D an increase in the subsidy given to theatres in Paris

Accepted Answer

B

Question 14

14 Why is a surgeon likely to have a higher wage rate than a hospital porter? A The surgeon has been in the job a longer time. B The surgeon has a longer training period. C The surgeon is older. D The surgeon is in a trade union.

Accepted Answer

B

Question 15

15 What is an advantage for a worker in part-time rather than full-time employment? A a higher wage B greater employment protection C more opportunity for other activities D greater chance of promotion

Accepted Answer

C

Question 16

16 Which factor is likely to cause an increase in people’s savings? A an increase in tax rates B an increase in the interest rate C a reduction in economic uncertainty D a reduction in real wages

Accepted Answer

B

Question 17

17 On completing your studies, you decide you want to work in an organisation that is big enough to give you a chance of promotion but where weekend or shift work will not normally be required. Which would be the best one to choose? A a dental surgery B a hairdressing salon C an income tax office D a newspaper publisher

Accepted Answer

C

Question 18

18 A firm’s average revenue is $10. It sells 2000 units. What is the firm’s total revenue and the price of the product? Total revenue ($) Price ($) A 10 10 B 2 000 200 C 20 000 10 D 20 000 200

Accepted Answer

C

Question 19

19 The table shows the demand schedule for maize. price per kilo quantity demanded ($) (kilos per day) 3 300 4 240 5 200 6 150 7 140 8 100 What will happen if price rises from $5 to $6 per kilo? A Total revenue will rise. B Demand will rise. C Total revenue will fall. D Total costs will rise.

Accepted Answer

C

Question 20

20 What is a variable cost for a firm? A the cost of raw materials B the interest payments on loans C the rent of the factory D the insurance on the factory buildings

Accepted Answer

A

Question 21

21 What advantage does a company risk losing when it expands? A access to finance B national reputation C personal contact D skilled labour

Accepted Answer

C

Question 22

22 A firm adds up the costs of rent, insurance and initial investment in machinery. It then divides that total by the number of units produced. What has been calculated? A average fixed cost B average revenue C average total cost D average variable cost

Accepted Answer

A

Question 23

23 What might a government decrease if it wished to slow down the rate of growth in an economy? A expenditure on defence B goods and services (value added) tax C interest rates D the rate of income tax

Accepted Answer

A

Question 24

24 What is most likely to cause the government to have a budget surplus? A a decrease in government spending B a decrease in private sector investment C an increase in unemployment D an increase in the wages of public sector employees

Accepted Answer

A

Question 25

25 Which aim of government policy is most likely to be achieved by an increase in interest rates? A economic growth B greater equality of income C full employment D price stability

Accepted Answer

D

Question 26

26 What may a government change when it uses monetary policy? A budget deficit B minimum lending rate C regional assistance D rate of income tax

Accepted Answer

B

Question 27

27 When is a tax progressive? A when some goods have a higher tax than others B when the tax is on incomes rather than on goods or services C when the rate of tax increases as income increases D when the tax is linked to the rate of inflation

Accepted Answer

C

Question 28

28 The table gives the price of a paperback book as printed on its back cover. United Kingdom £6.99 Canada $11.99 (Canadian dollars) Australia $14.99 (Australian dollars) New Zealand $20.95 (New Zealand dollars) What is needed to make a clear comparison of the price in the four countries? A consumer price indices B exchange rates C indirect tax rates D inflation rates

Accepted Answer

B

Question 29

29 The table shows some data about an economy. Year 1 Year 2 rate of inflation 2 % 3.5 % personal incomes +2 % +2.5 % What happened between Year 1 and Year 2? A Both prices and real incomes fell. B Both prices and real incomes rose. C Prices rose but real incomes fell. D Prices fell but real incomes rose.

Accepted Answer

C

Question 30

30 What would contribute to a fall in the value of the UK pound (£)? A a fall in interest rates in other countries B a rise in the number of foreign tourists visiting the UK C the removal of import tariffs by the USA D the value of UK imports increasing more than the value of UK exports

Accepted Answer

D

Question 31

31 What is meant by the depreciation of a currency? A a fall in its external value B a fall in its internal value C a rise in its external value D a rise in its internal value

Accepted Answer

A

Question 32

32 In 2003 Japan experienced a decline in economic output. What might cause a decline in economic output? A a decrease in income tax B a decrease in sales tax C an increase in unemployment D an increase in company investment

Accepted Answer

C

Question 33

33 What is the most likely cause of population migration to cities in developing countries? A an ageing population B higher unemployment rates in cities C higher wages in cities D higher land values in cities

Accepted Answer

C

Question 34

34 The table gives information on standards of living in four countries. life expectancy at birth adult literacy % labour force in (years) rate % agriculture Brazil 66.5 82.4 23 India 60.7 50.6 64 Rwanda 47.2 58.0 92 Uganda 44.7 59.7 85 On the basis of this information which country has the highest standard of living? A Brazil B India C Rwanda D Uganda

Accepted Answer

A

Question 35

35 What is likely to be higher in a developing country, such as Kenya, than in a developed country, such as Switzerland? A birth rate B GDP per head C life expectancy D net investment per head

Accepted Answer

A

Question 36

36 What is likely to happen as a developing country becomes more developed? A A higher percentage of children will attend school. B Infant mortality will rise. C Life expectancy will fall. D The agricultural sector will increase in importance.

Accepted Answer

A

Question 37

37 Nigeria decides to introduce a policy that limits imports of Japanese cars to 15 % of the total market. What is this policy called? A an embargo B a quota C a subsidy D a tariff

Accepted Answer

B

Question 38

38 The central area of a country produces tea for which it has an ideal climate. The coastal area produces coconuts because its climate is different. Assuming there is no change in market conditions, what will happen if this country subsequently produces only tea in both areas? A It will increase its costs of production. B It will increase the productivity of its land. C It will increase its total income. D It will make the best use of its resources.

Accepted Answer

A

Question 39

39 What might encourage international specialisation between countries? A free trade B inefficiencies in production C labour immobility D tariffs

Accepted Answer

A

Question 40

40 The following is a headline from a newspaper. USA to impose tariffs of 40 % on imported steel What is the most likely result of these tariffs? A a fall in the cost of producing cars in the USA B a fall in the exports of steel from the USA C a rise in employment in the USA’s steel industry D a trade deficit for the USA

Accepted Answer

C

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · Construction companies are building new houses on land previously used for farming

Q2 · What is most likely to cause queues of consumers to appear regularly outside shops in a…

Q3 · What is regarded as a factor of production?

Q4 · Although people may satisfy their basic needs there is always something more they want

Q5 · Which source of finance cannot be used by a private company?

Q6 · What best describes a multi-national company?

Q7 · Kimberly-Clark Corporation manufactures many products, including Kleenex paper…

Q8 · Which factor would cause a shift in the supply curve for a good?

Q9 · The price of a good is temporarily above the market equilibrium price

Q10 · What is not held constant in calculating a demand schedule?

Q11 · The diagram shows the supply and demand curves for a good

Q12 · The diagram shows the demand and supply curves for digital cameras

Q13 · In 2002 in Paris there was a decrease in demand for theatre tickets

Q14 · Why is a surgeon likely to have a higher wage rate than a hospital porter?

Q15 · What is an advantage for a worker in part-time rather than full-time employment?

Q16 · Which factor is likely to cause an increase in people’s savings?

Q17 · On completing your studies, you decide you want to work in an organisation that is big…

Q18 · A firm’s average revenue is $10

Q19 · The table shows the demand schedule for maize

Q20 · What is a variable cost for a firm?

Q21 · What advantage does a company risk losing when it expands?

Q22 · A firm adds up the costs of rent, insurance and initial investment in machinery

Q23 · What might a government decrease if it wished to slow down the rate of growth in an…

Q24 · What is most likely to cause the government to have a budget surplus?

Q25 · Which aim of government policy is most likely to be achieved by an increase in interest…

Q26 · What may a government change when it uses monetary policy?

Q27 · When is a tax progressive?

Q28 · The table gives the price of a paperback book as printed on its back cover

Q29 · The table shows some data about an economy

Q30 · What would contribute to a fall in the value of the UK pound (£)?

Q31 · What is meant by the depreciation of a currency?

Q32 · In 2003 Japan experienced a decline in economic output

Q33 · What is the most likely cause of population migration to cities in developing countries?

Q34 · The table gives information on standards of living in four countries

Q35 · What is likely to be higher in a developing country, such as Kenya, than in a developed…

Q36 · What is likely to happen as a developing country becomes more developed?

Q37 · Nigeria decides to introduce a policy that limits imports of Japanese cars to 15 % of the…

Q38 · The central area of a country produces tea for which it has an ideal climate

Q39 · What might encourage international specialisation between countries?

Q40 · The following is a headline from a newspaper

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