Cambridge IGCSE Economics 0455 — 2012 Oct/Nov Paper 1 · Variant 1

1 On average, doctors earn more than bus drivers. Which change would be likely to reduce the earnings gap between doctors and bus drivers? A a decrease in the profits earned by bus companies B a decrease in the qualifications needed to be a doctor C an increase in demand for medical care D an increase in the number of people passing the driving test

Mark scheme: B

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2 What could reduce the ability of a trade union to gain a pay rise for its members in a shoe factory? A an increase in sales of shoe exports B a rise in the demand for shoes C a rise in the productivity of shoe workers D more people willing to work in the shoe industry

Mark scheme: D

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3 What might encourage a consumer to save rather than to spend? A being made unemployed B discounts on products C government subsidies to producers D high interest rates

Mark scheme: D

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4 Why do banknotes function as money? A They are backed by gold. B They are durable. C They are generally acceptable. D They have intrinsic value.

Mark scheme: C

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5 The table shows the proportion of income saved for different age groups. age 15 – 29 30 – 39 40 – 49 50 – 62 63+ % of income saved –34 % – 4 % 18 % 29 % –23 % What can be concluded from this data? A The 50 – 62 age group has the highest level of income. B The 50 – 62 age group saves the highest proportion of its income. C The older age groups earn more than the younger age groups. D The youngest age group spends more than the oldest age group.

Mark scheme: B

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6 Which is an external economy of scale? A availability of training facilities in local colleges B greater production from employees C increased credit facilities from banks D lower costs through bulk buying

Mark scheme: A

More questions on Firms and production

7 What is a variable cost to a firm producing bicycles? A the component parts of the bicycles B the interest on money borrowed C the rent of the bicycle factory D the salaries of the senior managers

Mark scheme: A

More questions on Firms’ costs, revenue and objectives

8 Partnerships in the United States of America (US) can now issue tradable shares and can limit the amount of money that shareholders may lose. To which type of business organisation do these changes make US partnerships similar? A co-operatives B public corporations C public limited companies D sole traders

Mark scheme: C

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9 The graphs show the average total cost (ATC) curves of four firms and how they change as output increases. Which firm has the highest fixed costs? A B C D ATC ATC cost cost cost cost $ $ $ $ ATC ATC O output O output O output O output

Mark scheme: A

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10 What is a possible advantage to the consumer of a monopoly supplier in a market? A It achieves average costs which are lower than if there were many suppliers. B It achieves profits which are higher than if there were many suppliers. C It conducts advertising campaigns to discourage competition. D It decides which retail outlets may sell and distribute its goods.

Mark scheme: A

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11 In China the government is concerned about the level of poverty and the need for more resources in the poorer regions of the country. As a result, it is increasing its expenditure there and reducing it in the wealthier regions. Which economic concept does this government policy illustrate best? A diseconomies of scale B market forces C opportunity cost D specialisation

Mark scheme: C

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12 A country with a low income per head discovers large quantities of oil, which eventually makes everybody better off. Why is the basic economic problem of scarcity not solved by this discovery? A People may not get jobs in the oil industry. B People’s wants are always changing and increasing. C Prices of oil can fluctuate on the world market. D Production of oil can damage the environment.

Mark scheme: B

More questions on The nature of the economic problem

13 Two telecommunications companies are to merge to finance investments in new technology, which will be more efficient and require smaller buildings. Three hundred workers will lose their jobs. What will happen to the factors of production used? land labour capital enterprise A fall fall rise fall B fall fall uncertain rise C rise rise rise rise D uncertain rise fall fall

Mark scheme: B

More questions on Firms and production

14 Why might a free market economy be more advantageous than a mixed economy? A Equality of income is encouraged. B In a mixed economy, governments use taxes which are inefficient. C Production is determined solely by consumer wishes. D Social costs are taken into consideration.

Mark scheme: C

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15 An international company drilled for oil in deep water and caused a major oil leakage, which affected the jobs of the fishing community. The government ordered the company to close the well and to stop drilling in the area. What are the external costs of this incident? A the costs borne by the fishing community B the costs of closing the well C the costs to the company of drilling the well in deep water D the loss of revenue when the oil company stopped drilling

Mark scheme: A

More questions on Market failure

16 A supply curve for a commodity is drawn to show how quantity supplied varies with A government taxes. B income. C tastes. D the price of the commodity.

Mark scheme: D

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17 In 2010, floods caused severe damage to wheat production. How would this be shown on a market demand and supply diagram for wheat? supply curve demand curve A no change shift to the right B shift to the left no change C shift to the left shift to the left D shift to the right shift to the left

Mark scheme: B

More questions on Price changes

18 Which is a type of market failure? A a general increase in the price of hotel rooms in busy summer seasons B an increase in house prices caused by easier borrowing for house buyers C an increase in travel time caused by a road accident D an increase in unsold goods because of a change in tastes

Mark scheme: C

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19 The market for a normal good is in equilibrium at point X. Consumers’ incomes fall and the cost of producing the good rises. In which area of the diagram will the new equilibrium be? supply A price D X B C demand O quantity

Mark scheme: D

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20 An Economics student described a typical developing country as having a large population, a low GDP per head, a relatively large primary sector and an uneven income distribution. Which of these features is not necessarily accurate? A a large population B a low GDP per head C an uneven income distribution D a relatively large primary sector

Mark scheme: A

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21 In the developing economies of southern Africa, both infant mortality and life expectancy have fallen. Life expectancy now averages only 41 years. What is the result of these changes? A Current labour supply has fallen. B Fewer primary schools are needed. C Governments will pay for more retirement pensions. D Less will need to be spent on health care.

Mark scheme: A

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22 The table shows the percentages of consumer spending on different items in four countries, which have similar geographical conditions and climate. Which country is likely to have the highest standard of living? percentage of consumer spending on each item country food housing transport A 20 30 30 B 40 25 15 C 50 20 10 D 45 20 15

Mark scheme: A

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23 A government agreed to provide $20 million to a developing country to help supply emergency aid. In which part of the current account of the balance of payments was this payment recorded? A current transfer flows B income flows C trade in goods D trade in services

Mark scheme: A

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24 In some Asian countries the cost of labour is lower than in developed countries. As a result they manufacture and export clothes to Europe, where the demand for clothes is high. The quality of these clothes, however, is not as good as some of the clothes produced in Europe. What is likely to happen in the Asian countries and to the total expenditure on clothes in Europe? change in impact in Asian countries expenditure in Europe A capital account will improve increase B current account will improve uncertain C exchange rate will fall uncertain D terms of trade will fall decrease

Mark scheme: B

More questions on Globalisation, free trade and protection

25 Which government policy would best protect the environment? A encouraging economic growth B exploiting natural resources C increasing tax on fuel D removing controls on industry

Mark scheme: C

More questions on The role of government

26 A government wishes to stimulate economic recovery. Which action will assist this? A decreasing government investment B decreasing income tax C increasing indirect taxation D increasing interest rates

Mark scheme: B

More questions on Fiscal policy

27 A country has a proportional system of taxation. A person pays $500 tax when earnings are $5000. How much tax will be paid if earnings rise to $12 000? A $120 B $500 C $1200 D $7500

Mark scheme: C

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28 The graph shows government revenue and spending in a country, as a percentage of GDP, between 2004 and 2011. 48 46 government spending 44 42 % of 40 GDP 38 36 government revenue 34 32 2004 2005 2006 2007 2008 2009 2010 2011 year What can be concluded from the graph? A The balance of payments position improved. B The borrowing of the government increased. C The economy went into recession (economic downturn). D The government budget moved from deficit to surplus.

Mark scheme: D

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29 Each year, extra cleaning staff were employed by a hotel on a temporary basis during the busy holiday period. They were not employed when the hotel was not busy. What type of unemployment occurred when the hotel was not busy? A cyclical B frictional C seasonal D technological

Mark scheme: C

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30 In the measurement of the UK’s Retail Prices Index, a greater weight was given to bottled water in 2010 than 2009. What does this change indicate? A Government statisticians checked the price change of a greater range of bottled water in 2010 than in 2009. B People spent a higher proportion of their total spending on bottled water in 2010 than in 2009. C The price of bottled water increased more in 2010 than in 2009. D There was an improvement in the quality of bottled water in 2010 compared with 2009.

Mark scheme: B

More questions on Inflation and deflation