Cambridge IGCSE Economics 0455 — 2006 May/June Paper 3 · Variant 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 2 If a planned economy became a mixed economy, which industry would be most likely to remain under government control? A agriculture B coal mining C defence D motor car production 3 A boat owner employs a crew to catch fish to sell on the market. Which factors of production are involved in this activity? A labour, capital and enterprise only B land, labour and capital only C land, labour and enterprise only D land, labour, capital and enterprise 4 What is the most likely outcome of increased specialisation in a water bottling plant? A higher costs per bottle B higher wage rates C increased job satisfaction D increased output of bottles of water 5 What is a characteristic of a public corporation? A It issues shares to the general public. B It is owned by the government. C Its objective is to maximise profits. D It is owned by more than twenty shareholders. 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 7 What is usually a function of a trade union? A to determine the amount of dividend paid B to negotiate wage levels with employers C to recommend redundancies D to take responsibility for organising sales of companies’ products 8 Tea and sugar are complementary goods. What will happen if the price of tea falls, other things being equal? A The demand curve for sugar will move to the right. B The demand curve for tea will move to the right. C The price of sugar will fall. D The supply curve of sugar will move to the left. 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 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 11 As petrol prices increase, demand for petrol remains constant. What does this say about the price elasticity of petrol? A The demand is price-elastic. B The demand is price-inelastic. C The supply is price-elastic. D The supply is price-inelastic. 12 The price elasticity of demand for a good is unitary. What would be the effect of a 1 % fall in its price? A to increase total revenue by 0.1 % B to leave quantity demanded unchanged C to leave total revenue unchanged D to reduce quantity demanded by 1 % 13 What is an important influence on price elasticity of demand? A average earnings B tastes of consumers C the cost of living D the number of close substitutes 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. 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

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