Cambridge IGCSE Economics 0455 — 2010 May/June Paper 3 · Variant 1

1 (a) Why is Jamaican Blue Mountain coffee called ‘black gold’? .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (b) Why might some people involved in coffee production not think of coffee as similar to gold? 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.......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[3] (c) Discuss whether Jamaica should be pleased that such a large amount of coffee is sold to one country, Japan. .......................................................................................................................................... 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.......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[5] (d) Explain the difference between variable cost and fixed cost and identify what happened to Starbucks’ fixed and variable costs in 2007. .......................................................................................................................................... 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.......................................................................................................................................... ......................................................................................................................................[6] (e) The extract says that Starbucks had a bad year. As a researcher, you are asked to assess whether this is correct. Discuss whether the evidence in the extract supports this claim and suggest what other information you might require. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... 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.......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ....................................................................................................................................[10] [Total: 26] The extract ‘Charging some cars extra to enter London may raise, not lower, pollution’ will be needed for this question.

Mark scheme: 1 (a) 1 mark for it is the most expensive coffee in the world. 1 mark for it sells at US$125 a kilogram. 1 mark for it sells for four times the average price of a good coffee blend. 1 mark for it earns Jamaica US$38 million from trade / brings a large amount of money into the economy. Note: maximum of 2 marks. 1 mark in total for a less specific response. For example, it is expensive / sells for a high price / has a high value. [2] (b) 1 mark for workers have to work long hours. 1 mark for workers have poor working conditions. 1 mark for workers receive low pay. Note: nothing for just copying out the extract. [3] (c) Up to 3 marks why they may be pleased. For example; • provides a secure market • large sales provide high profits / GDP • large sales bring in export revenue • large sales provide employment. Note: 3 full marks may be gained for 1 reason which is well-explained. Up to 3 marks why they may not be pleased. For example; • There is a risk of being reliant on one country as Jamaica may lose a considerable amount of revenue should Japanese incomes fall / should tastes change. • Japan may use buying power to reduce the price of coffee. No marks for improved international relations. Note: 3 full marks may be gained for 1 reason which is well-explained. [5] (d) Up to 2 marks for defining variable cost: 1 mark for a cost that changes / varies. 1 mark for reference to the link to changing output. Up to 2 marks for defining fixed cost: 1 mark for a cost that does not change. 1 mark for reference to the link to changing output / short run. 1 mark for fixed cost rose as more stores were opened. 1 mark for variable cost rose as sales increased / cost of milk rose. [6] IGCSE – May/June 2010 0455 31 (e) Up to 2 marks for considering why Starbucks may have had a bad year: • opening fewer stores than planned • costs rose • increased competition • share price fell • number of US customers fell • customers coming from lower income groups. Up to 2 marks for considering why Starbucks may have had a good year: • still opening new stores • able to raise prices to cover higher costs • profits rose in the third quarter • sales increased worldwide / number of global customers rose • average amount spent increased. Up to 2 marks for a conclusion: • performance varied over the year • whilst the US had problems, the global performance was better. Up to 4 marks for suggesting what other information might be required: • profits in previous years • costs in previous years • revenue in previous years • share price trends • performance of competitors. Up to 2 marks for research methods / how information might be found. Note: maximum of 10 marks. [10] IGCSE – May/June 2010 0455 31

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2 (a) Define the term social cost. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (b) Explain how the use of cars causes a social cost. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[4] (c) You are asked to make a decision on whether the proposal to increase the charge on some vehicles is worthwhile. Discuss whether the information you have been given is sufficient to say whether an increase in charges is worthwhile. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ..........................................................................................................................................

Mark scheme: 2 (a) 2 marks for private plus external costs. 2 marks for the total cost imposed on society of an economic activity. 1 mark for total cost / cost to society / harmful effects. Note: maximum of 2 marks. [2] (b) 1 mark for use causes private costs. 1 mark for an example of a private cost involved, for example, fuel, insurance, repairs. 1 mark for use causes external costs. 1 mark for an example of an external cost involved, for example, pollution, congestion, accidents. [4] (c) Up to 2 marks for assuming that the information is sufficient and so discussing whether the proposal is worthwhile. Up to 3 marks for recognising that the information comes from a biased source i.e. Land Rover, which has a vested interest as it makes large cars. Up to 7 marks given for recognising that there is not enough information / that the information is unclear. Credit should be given for identifying the information needed / why the information is unclear and for explaining why more / clearer information would be useful. To gain the full 7 marks, at least 2 pieces of information have to be explained. For example; • No figure given for the social cost caused by vehicles travelling into London. • No information on the difference in social cost caused by large and small cars. • Lack of information on how much the charge would increase. • No information on how responsive drivers are likely to be to an increase in the charge. • No information on how London uses the revenue it receives from the congestion charge. • No information on the social costs and benefits of the old scheme which could be used to make a comparison. • No information on the effect the scheme may have on the demand for cars and the knock-on effect that this could have on employment. Note: maximum of 8 marks. [8]

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