Cambridge IGCSE Economics 0455 — 2016 May/June Paper 1 · Variant 2

Question 1

1 What economic concept must be at work when there is movement by a country along its production possibility curve? A economies of scale B equilibrium price C maximum profit D opportunity cost

Accepted Answer

D

Question 2

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 20 40 60 80 100 120 earnings $ The person decides to take a job that gives more leisure time. What is the opportunity cost to the individual of moving from position Y to position X? A $20 B $80 C 4 hours of leisure per day D 12 hours of leisure per day

Accepted Answer

A

Question 3

3 What is the best example of the existence of the economic problem? A A government provides accommodation for all those who are homeless. B A police force has a lengthening list of unsolved crimes. C Janitha hands her homework in at the last permitted deadline. D Musa completes his journey without putting petrol in his car.

Accepted Answer

B

Question 4

4 A government taxes the production of cars. What is likely to decrease? A the cost of supplying cars B the price of cars C the revenue for the government D the supply of cars at every price

Accepted Answer

D

Question 5

5 Which pair of economic institutions is most likely found in a market economy? A free accident and emergency hospitals and charities B partnerships and public corporations C stock exchange and monopolies D trade unions and local government schools

Accepted Answer

C

Question 6

6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the proposal would create hundreds of jobs, be profitable for the shops but cause major traffic congestion. What economic concepts are directly involved in this statement? A external cost and private benefit B income distribution and inelastic demand C private investment and a decrease in supply D social benefit and perfect competition

Accepted Answer

A

Question 7

7 The diagram shows the price of a product during year 1 and year 2. price ($) O year 1 year 2 Which changes in demand and supply are consistent with the price behaviour in year 2? demand supply A falls by 5% falls by 10% B falls by 10% falls by 5% C unchanged falls by 10% D rises by 15% falls by 5%

Accepted Answer

B

Question 8

8 A trade union agrees on a ‘closed shop’ policy with employers in an industry. How does this operate? A All workers will be members of the trade union. B Employment will be open only to skilled workers. C The employers cannot make workers redundant. D Workers cannot move between employers.

Accepted Answer

A

Question 9

9 When will a central bank act as lender of last resort to a commercial bank? A when a commercial bank faces a liquidity crisis B when a commercial bank fails to make a profit C when a commercial bank needs to raise share capital D when a commercial bank reduces its lending rates

Accepted Answer

A

Question 10

10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a legal minimum wage. An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2. D1 S1 S2 W wage ($) S1 D1 S2 0 1 2 3 4 5 6 7 8 9 10 labour (millions) How many people will be employed if the minimum wage legislation is then abolished? A 4 million B 5 million C 6 million D 7 million

Accepted Answer

D

Question 11

11 The table shows how three people spend their income. person X person Y person Z food, clothing and housing 35% 50% 20% entertainment and leisure 25% 20% 40% luxury goods 40% 30% 40% For these three people, what is the most likely order of income, from lowest income to highest income? A X → Y → Z B Y → X → Z C Y → Z → X D Z → X → Y

Accepted Answer

B

Question 12

12 How does a firm guarantee that it makes the maximum profit? A by maximising the difference between its total revenue and total cost B by maximising the number of goods that it sells C by minimising the number of goods that it keeps in stock D by minimising the difference between average revenue and average cost

Accepted Answer

A

Question 13

13 Two firms agree to integrate their activities. What must result? A a change in their ownership structure B a lowering of average costs of production C a move from national to international markets D a reduction in the level of market risk

Accepted Answer

A

Question 14

14 The table shows the units of factors of production that a firm needs to employ for two different levels of output. land labour capital output 6 8 4 100 9 12 6 200 What is the firm experiencing? A constant returns to scale B economies of scale C external diseconomies of scale D external economies of scale

Accepted Answer

B

Question 15

15 By 2014, government subsidies for the Chinese steel industry led to 200 million tonnes of excess output. The diagrams show the market for Chinese steel. Which would represent the position after the subsidy but before the market adjusted? A B price price ($) ($) 0 100 300 0 100 200 400 output (million tonnes) output (million tonnes) C D price price ($) ($) 0 100 200 300 0 100 200 400 output (million tonnes) output (million tonnes)

Accepted Answer

C

Question 16

16 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

Accepted Answer

B

Question 17

17 A government fixes the rate of income tax at $0.20 per dollar earned. What describes this type of taxation? A indirect B progressive C proportional D regressive

Accepted Answer

C

Question 18

18 A government introduces a law to reduce the restrictive practices of trade unions. What would be the most likely purpose of this law? A to change from a mixed to a planned economy B to ensure a fairer distribution of earnings C to increase competition in labour markets D to reduce government expenditure on job training

Accepted Answer

C

Question 19

19 The table shows a government’s receipts from taxation. $m air passenger duty 10 company profits tax 100 import duty 75 income tax 200 inheritance tax 50 sales tax (VAT) 300 What is the total amount of revenue raised by indirect taxes? A $300 m B $350 m C $385 m D $435 m

Accepted Answer

C

Question 20

20 What would best indicate the start of an economic boom? A negative growth of Gross Domestic Product B rising interest rates C rising levels of employment D steadily falling price levels

Accepted Answer

C

Question 21

21 A country has a very high Gross Domestic Product and a small population but has a low standard of living. What may be the cause of this low standard of living? A There is a high inequality of income distribution and a high provision of merit goods. B There is a high inequality of income distribution and a limited provision of merit goods. C There is equality of income distribution and a high provision of merit goods. D There is equality of income distribution and a low provision of merit goods.

Accepted Answer

B

Question 22

22 The table gives information about three economic indicators in four countries. inflation interest rates unemployment % % % country W 1.4 3.4 10.2 country X 3.7 8.7 12.3 country Y 3.6 7.3 14.2 country Z 2.1 6.0 7.7 What may be concluded from this information? A Countries with higher inflation have higher interest rates. B Countries with higher interest rates have lower unemployment. C The country with the lowest inflation had the highest unemployment. D The country with the lowest unemployment had the lowest inflation.

Accepted Answer

A

Question 23

23 The weight for a product in the consumer price index was increased. What is most likely to have caused this adjustment? A The product has become more expensive to produce. B The product has been offered for sale in more retail outlets. C The product has improved in quality and performance. D The product has taken a bigger share of consumers’ income.

Accepted Answer

D

Question 24

24 China is classified as a developing country. Recently, contributions to its Gross Domestic Product (GDP) were agriculture 10%, construction 13%, manufacturing 32% and services 45%. Which contribution to GDP usually decreases first when countries move to a higher level of development? A agriculture B construction C manufacturing D services

Accepted Answer

A

Question 25

25 Some people think that the debts and interest payments of the poorest countries in the world should be cancelled. What might be a disadvantage for the poorest countries if this were done? A International banks might be less willing to give loans to poor countries. B Interest payments to the lenders would fall. C The standard of living of people in the poorest countries would fall. D Trade between the poorest countries and the rest of the world would increase.

Accepted Answer

A

Question 26

26 Which country is likely to have the highest standard of living? infant mortality birth rate death rate life expectancy rate A 41 20 31 49 B 32 14 29 59 C 25 6 25 79 D 25 5 22 79

Accepted Answer

D

Question 27

27 What might cause the balance on the current account of Mauritius to improve? A increased purchases of coffee from Kenya B increased transport of Mauritian goods in Greek ships C increased spending by Mauritians on holidays in South Africa D increased spending by tourists in Mauritian hotels

Accepted Answer

D

Question 28

28 A country says that it wishes to increase its trade protection policies. What might that involve? A conservation of resources and taxes on external costs B eliminating waste in the use of resources and grants to multinational companies C increased self sufficiency and increased tariffs D price controls and increased regulations on domestic monopoly industries

Accepted Answer

C

Question 29

29 It has been suggested that all countries producing arms should ban the export of weapons and cut production in order to reduce the risk of war. What would happen if this occurred? A The balance of payments on current account of countries exporting weapons would immediately improve. B The price of existing weapons would fall. C There would be a risk of structural unemployment in countries that are major producers of weapons. D There would be no overall effect on the balance of payments as countries would produce their own weapons.

Accepted Answer

C

Question 30

30 The US currently trades in oil with the UK. The discovery of new oil and gas deposits in the US will mean that its oil imports decrease and its oil exports increase. From the initial equilibrium point of X, which letter indicates the new equilibrium point for the US exchange rate? S1 B A S price of $ X S2 C D D1 D D2 O quantity of $

Accepted Answer

B

Cambridge IGCSE Economics 0455 — 2016 May/June Paper 1 · Variant 2

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · What economic concept must be at work when there is movement by a country along its…

Q2 · The diagram shows the choices for an individual between leisure and earnings

Q3 · What is the best example of the existence of the economic problem?

Q4 · A government taxes the production of cars

Q5 · Which pair of economic institutions is most likely found in a market economy?

Q6 · Developers want to increase the size of a major retail shopping area in a city

Q7 · The diagram shows the price of a product during year 1 and year 2

Q8 · A trade union agrees on a ‘closed shop’ policy with employers in an industry

Q9 · When will a central bank act as lender of last resort to a commercial bank?

Q10 · In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour

Q11 · The table shows how three people spend their income

Q12 · How does a firm guarantee that it makes the maximum profit?

Q13 · Two firms agree to integrate their activities

Q14 · The table shows the units of factors of production that a firm needs to employ for two…

Q15 · By 2014, government subsidies for the Chinese steel industry led to 200 million tonnes of…

Q16 · A government wishes to stimulate economic recovery

Q17 · A government fixes the rate of income tax at $0.20 per dollar earned

Q18 · A government introduces a law to reduce the restrictive practices of trade unions

Q19 · The table shows a government’s receipts from taxation

Q20 · What would best indicate the start of an economic boom?

Q21 · A country has a very high Gross Domestic Product and a small population but has a low…

Q22 · The table gives information about three economic indicators in four countries

Q23 · The weight for a product in the consumer price index was increased

Q24 · China is classified as a developing country

Q25 · Some people think that the debts and interest payments of the poorest countries in the…

Q26 · Which country is likely to have the highest standard of living?

Q27 · What might cause the balance on the current account of Mauritius to improve?

Q28 · A country says that it wishes to increase its trade protection policies

Q29 · It has been suggested that all countries producing arms should ban the export of weapons…

Q30 · The US currently trades in oil with the UK

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