Cambridge IGCSE Economics 0455 — 2007 Oct/Nov Paper 3 · Variant 1

1 What is found in a market economy but not a command economy? A division of labour B economies of scale C money as a store of value D the profit motive 2 The diagram shows the choices for an individual between leisure and earnings. 24 20 16 hours of leisure X 12 per day Y 8 4 0 0 20 40 60 80 100 120 earnings $ What is the opportunity cost to the individual of the extra earnings when moving from position X to position Y? A $20 B $80 C 4 hours of leisure per day D 8 hours of leisure per day 3 There are more people in developing countries who cannot read or write than in developed countries. What can be concluded from this? A Developed countries will use more labour than capital as it is skilled. B In developing countries, factors of production are not used to their maximum potential. C Less money needs to be spent on education in developed countries than in developing countries. D Production in developing countries is likely to rely more on capital than labour. 4 In wartime conditions, cigarettes have been used as money. What disadvantage do cigarettes have for trading compared with notes and coins? A They cannot act as a medium of exchange. B They have no intrinsic value. C They lack durability. D They make a double coincidence of wants necessary. 5 Which economic question is least likely to arise as a result of scarcity? A For whom shall we produce? B How shall we produce? C What shall we produce? D When shall we produce? 6 In most countries which organisation controls the banking system? A central bank B commercial bank C investment bank D World Bank 7 What advantage is gained by a company that becomes a multi-national? A It avoids trade barriers. B It reduces its fixed costs. C It simplifies its management structure. D It makes communication easier. 8 Which pair of economic institutions would be found in a command economy? A central bank and public companies B public corporations and central bank C public corporations and stock exchange D stock exchange and public companies 9 What is the main purpose of a trade union? A to achieve profit maximisation B to encourage free trade C to promote private ownership of industry D to protect the interests of its members 10 The graph shows changes in house prices in a developed country. 10 % change in 5 house prices 0 February March April May June July 2002 What might have caused these changes in prices? A an increase in government subsidies to house builders B an increase in income C an increase in the supply of houses D an increase in unemployment 11 Sometimes travel companies advertise holidays at prices below cost. What might be a reason for this? A an excess demand for holidays B an excess supply of holidays C a price inelastic demand for holidays D insufficient competition in the holiday market

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