Cambridge IGCSE Economics 0455 — 2016 May/June Paper 1 · Variant 3

Question 1

1 Which statement about a production possibility curve is correct? A A production possibility curve is an alternative name for an industry supply curve. B A production possibility curve is an economic model of potential output. C A realistic production possibility curve must be drawn as a straight line. D A production possibility curve applies only to an economy’s production of goods.

Accepted Answer

B

Question 2

2 Which firm is likely to find it most difficult to expand the use of its main factor of production? A a farm growing crops in extensive fields B a technology firm dependent on risky innovations C a textile firm making use of labour-intensive systems D an engineering firm relying upon capital-intensive methods

Accepted Answer

A

Question 3

3 The diagram shows the choices for an individual between leisure and earnings. 18 15 12 hours of leisure X 9 per day Y 6 3 0 10 20 30 40 50 60 earnings $ What is the opportunity cost to the individual of the extra earnings when moving from position X to position Y? A $10 B $40 C 3 hours of leisure per day D 6 hours of leisure per day

Accepted Answer

C

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 can be found in a market economy? A local government and charities B monopolies and commercial banks C nationalised industries and partnerships D stock exchange and public corporations

Accepted Answer

B

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 demand and supply curves for a product. Initially the market is in equilibrium at point X. What would be the new equilibrium point if the costs of production fell and a rumour circulated that the product could become unsafe in extreme weather conditions? D A X C price B O quantity

Accepted Answer

B

Question 8

8 What does the term ‘closed shop’ mean? A a bankrupt retail establishment B a trade union that is approved by the government C an agreement that all workers must be members of the same trade union D an agreement by trade unions to share members

Accepted Answer

C

Question 9

9 What function does a central bank fulfil? A It issues currency. B It offers overdraft facilities to individuals. C It operates deposit accounts. D It raises taxation.

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 30% 25% 50% entertainment and leisure 35% 35% 25% luxury goods 35% 40% 25% For these three people, what is the most likely order of income, from lowest income to highest income? A Y → X → Z B Y → Z → X C Z → X → Y D Z → Y → X

Accepted Answer

C

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 What is true when comparing a monopoly to a perfectly competitive firm? A Monopolies will have perfect knowledge of their market. B Monopoly costs are always lower owing to economies of scale. C Monopoly price is likely to be higher. D The products that monopolies produce have more limited demand.

Accepted Answer

C

Question 14

14 A manufacturing firm increases the scale of its production. Its average total cost curve in the long run (LRAC) is shown below. At which point on the LRAC curve is the firm experiencing diseconomies of scale? A LRAC cost D B C O output

Accepted Answer

D

Question 15

15 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 4 3 5 20 8 6 10 40 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

A

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 When a government aims to encourage economic growth it may adopt supply-side policies. Which policy is a supply-side policy? A increasing the money supply B lowering interest rates C reducing direct taxation D retraining unemployed workers

Accepted Answer

D

Question 18

18 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 direct taxes? A $135 m B $200 m C $300 m D $350 m

Accepted Answer

D

Question 19

19 Which policy combination will be the most effective if a government wishes to increase the level of employment? A decrease general taxation and increase the rate of interest B decrease general taxation and decrease the rate of interest C increase general taxation and decrease the rate of interest D increase general taxation and increase the rate of interest.

Accepted Answer

B

Question 20

20 What is most likely to lead to a rise in the rate of inflation? A a decrease in consumer spending B a decrease in unemployment benefits C an increase in import prices D an increase in income tax

Accepted Answer

C

Question 21

21 Which measures, in addition to Gross Domestic Product per capita, are included in the Human Development Index? A average earnings and inequalities of incomes B balance of trade and balance of payments C life expectancy at birth and expected years of schooling D size of population and age structure of population

Accepted Answer

C

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 Which type of government policy would be most suitable to control external costs of production? A employment policy B fiscal policy C monetary policy D trade policy

Accepted Answer

B

Question 24

24 The diagrams show birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in two years, 1 and 2. There was no migration. X Y Z BR BR, BR, BR, DR DR DR DR BR DR DR BR 1 2 1 2 1 2 year year year Where was there a rise in population in year 1 and a fall in population in year 2? A X and Z B X only C Y and Z D Y only

Accepted Answer

D

Question 25

25 Why might the emigration of workers help the economy of a developing country? A The dependency ratio is likely to improve. B The inflow of transfers of money is likely to increase. C The least healthy workers are likely to be the last ones to leave. D The more skilled workers are likely to be the ones to leave.

Accepted Answer

B

Question 26

26 What combination of changes in the birth rate and death rate is most likely to increase the dependency ratio in a country? birth rate death rate A falls falls B falls rises C rises falls D rises rises

Accepted Answer

C

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 value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1. What effect will this have on the price of Pakistani products sold in the US and the price of US products sold in Pakistan? price of Pakistani products price of US products sold in the US sold in Pakistan A increase increase B increase decrease C decrease increase D decrease decrease

Accepted Answer

B

Cambridge IGCSE Economics 0455 — 2016 May/June Paper 1 · Variant 3

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · Which statement about a production possibility curve is correct?

Q2 · Which firm is likely to find it most difficult to expand the use of its main factor of…

Q3 · The diagram shows the choices for an individual between leisure and earnings

Q4 · A government taxes the production of cars

Q5 · Which pair of economic institutions can be 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 demand and supply curves for a product

Q8 · What does the term ‘closed shop’ mean?

Q9 · What function does a central bank fulfil?

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 · What is true when comparing a monopoly to a perfectly competitive firm?

Q14 · A manufacturing firm increases the scale of its production

Q15 · The table shows the units of factors of production that a firm needs to employ for two…

Q16 · A government wishes to stimulate economic recovery

Q17 · When a government aims to encourage economic growth it may adopt supply-side policies

Q18 · The table shows a government’s receipts from taxation

Q19 · Which policy combination will be the most effective if a government wishes to increase…

Q20 · What is most likely to lead to a rise in the rate of inflation?

Q21 · Which measures, in addition to Gross Domestic Product per capita, are included in the…

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

Q23 · Which type of government policy would be most suitable to control external costs of…

Q24 · The diagrams show birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in…

Q25 · Why might the emigration of workers help the economy of a developing country?

Q26 · What combination of changes in the birth rate and death rate is most likely to increase…

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 value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1

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