Cambridge IGCSE Economics 0455 — 2018 Oct/Nov Paper 1 · Variant 2

Question 1

1 Which factor of production is not represented in the list shown? bananas         a factory         goats         a risk taking investor A capital B enterprise C labour D land

Accepted Answer

C

Question 2

2 What do economies aim to achieve in tackling the economic problem of scarcity? A equal balance between public and private sectors B equal reward for equal effort C increased competition in the use of resources D optimum allocation of finite resources

Accepted Answer

D

Question 3

3 The diagram shows a country’s production possibility curve (PPC). capital goods Y Z X O consumer goods Which statement is correct? A A movement from X to Y shows a decrease in efficiency in the economy. B A movement from X to Z shows a discovery of new resources in the economy. C A movement from Y to Z shows resources are being diverted from capital goods to consumer goods. D A movement from Z to Y shows an increase in efficiency in the economy.

Accepted Answer

C

Question 4

4 China, the world’s second largest economy, is becoming more like a market economy. Which policy would contribute directly to such a change? A abolishing state control completely B encouraging consumers to spend more and save less C reducing exports and encouraging more imports D transferring wealth from the state sector to the private sector

Accepted Answer

D

Question 5

5 The diagram shows the market for a firm making clothing with an initial equilibrium of X. What will be the new equilibrium if there is a successful advertising campaign by a rival firm and an increase in workers’ wages? S2 price S1 S3 B A C X D D3 D1 D2 O quantity

Accepted Answer

A

Question 6

6 Coal production in the UK has declined in recent years. One reason given for this is that the social cost of coal production is too high. What best describes the social cost of coal production? A all the benefits of coal production minus all the costs of coal production B the cost of the environmental damage caused by coal production C the cost to the government of subsidising the coal industry D the private costs of coal production plus the external costs of coal production

Accepted Answer

D

Question 7

7 The table shows the demand and supply for spices in a market in Africa. price quantity quantity per kg (US$) demanded (kg) supplied (kg) 10 50 10 20 40 20 30 30 30 40 20 40 When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED) for spices? A 0.25 B 0.5 C 1.0 D 2.0

Accepted Answer

B

Question 8

8 A central bank acts as a lender of last resort especially in times of financial crisis. What is the purpose of this function? A to cover credit card debts of consumers B to provide liquidity to the banking system C to remove failing banks from the financial system D to safeguard the profits of the banking system

Accepted Answer

B

Question 9

9 What will cause the level of savings in an economy to rise? A a fall in investment B a fall in real wages C a rise in income taxes D a rise in interest rates

Accepted Answer

D

Question 10

10 What could affect the size of the labour force in an economy? A the existence of a trade union B the government’s immigration policy C the quality of university graduates D the ratio of male to female employees

Accepted Answer

B

Question 11

11 Petrol (fuel) retailers in a country have noticed a sharp increase in sales in August when many people take their holidays. Why might this take place? A Consumers’ demand curve for petrol shifts to the left in August. B Consumers’ demand curve for petrol shifts to the right in August. C Oil refineries increase their output in August. D Travel companies increase their hotel prices in August.

Accepted Answer

B

Question 12

12 What is correct for firms in perfect competition? A They achieve economies of scale. B They are price takers. C They make use of non-price competition. D They produce differentiated products.

Accepted Answer

B

Question 13

13 A film production company purchases a group of cinemas. Of what is this an example? A backward vertical integration B conglomerate merger C forward vertical integration D horizontal integration

Accepted Answer

C

Question 14

14 The table shows a firm’s average revenue and average cost at different levels of output. When all output is sold, which level of output gives maximum profit? output average average (units) revenue (US$) cost (US$) A 5 10 30 B 10 20 20 C 15 25 15 D 20 30 18

Accepted Answer

D

Question 15

15 Which statement about total fixed cost is correct? A It falls as output increases. B It is calculated by adding total cost and total variable cost. C It is calculated by dividing total cost by output. D It must be paid even if output is zero.

Accepted Answer

D

Question 16

16 A government aims to reduce unemployment through a supply-side policy measure. Which measure would it use? A It would increase government spending. B It would increase tariffs on imported goods and services. C It would introduce retraining schemes. D It would reduce the rate of interest.

Accepted Answer

C

Question 17

17 When is a government said to balance its budget? A when all goods and services are taxed equally B when economic growth is the same in all regions of the economy C when its total income equals its total expenditure D when total exports equal total imports

Accepted Answer

C

Question 18

18 The table shows the amount of tax paid as income rises in four countries, A–D. Which country has a progressive tax? amount of tax (US$) paid on income of: 10 000 20 000 30 000 40 000 50 000 A 2 000 4 000 6 000 8 000 10 000 B 2 000 6 000 12 000 18 000 25 000 C 4 000 4 500 5 000 5 500 6 000 D 4 000 7 000 9 000 10 000 12 000

Accepted Answer

B

Question 19

19 In which case is success for the government in achieving the first aim likely to cause problems in achieving the second? first aim second aim A full employment price stability B high economic growth full employment C price stability stable balance of payments D stable balance of payments more even distribution of income

Accepted Answer

A

Question 20

20 Economic growth is usually measured by the annual change in A consumer spending. B gross domestic product. C the output of the manufacturing and construction industries. D the retail price index (RPI).

Accepted Answer

B

Question 21

21 Four groups who are affected by changing economic conditions are creditors, debtors, exporters and importers. Which pair is most likely to be disadvantaged by a high rate of inflation? A creditors and exporters B creditors and importers C debtors and exporters D debtors and importers

Accepted Answer

A

Question 22

22 The diagram shows the rate of unemployment and the periods of recession in a country between 1978 and 2012. 12 unemployment 10 rate % 8 key 6 recession years 4 2 0 1980 1990 2000 2010 What can be concluded from the diagram? A Each recession lasted for more than two years. B Recessions occurred at regular intervals. C The unemployment rate peaked in a recession period. D The unemployment rate rose during recession periods.

Accepted Answer

D

Question 23

23 A country experienced its usual August increase in the rate of unemployment. Unfortunately this was followed by the loss of jobs resulting from the regular downturn in global economic activity. Which types of unemployment occurred? first type of second type of unemployment unemployment (August) (global downturn) A cyclical structural B frictional seasonal C seasonal cyclical D structural frictional

Accepted Answer

C

Question 24

24 What will lead to an ageing population if other factors remain unchanged? A a fall in the birth rate B a rise in the death rate C an increase in the age of retirement D an increase in the state pension

Accepted Answer

A

Question 25

25 Which change is most likely to be expected when an economy is developing? A birth rates increase rapidly B poverty rates fall C unemployment levels rise D the primary sector overtakes the secondary sector

Accepted Answer

B

Question 26

26 Developing countries are sometimes given aid by charities and foreign governments. Which aid programme would be least likely to lead to long-term economic growth? A the building of an irrigation system B the construction of a new airport C the distribution of gifts of food D the training of technical staff

Accepted Answer

C

Question 27

27 It is estimated that in 2016 the Olympic Games in Rio, Brazil attracted over 600 000 foreign visitors. What is likely to have been the result of this number of visitors? A a depreciation of Brazil’s currency B a fall in Brazil’s rate of inflation C an increase in the Brazilian government’s budget deficit D a reduction in Brazil’s deficit on the current account of its balance of payments

Accepted Answer

D

Question 28

28 What is most likely to happen if South Korea builds a factory in Switzerland that becomes profitable? A South Korea’s imports of goods will decrease. B South Korea’s investment income will increase. C Switzerland’s trade balance in goods will worsen. D Switzerland’s trade balance in services will improve.

Accepted Answer

B

Question 29

29 A country has experienced a devaluation of its currency. What are the likely results of the devaluation? imports exports A price decreases value decreases B price decreases value increases C price increases quantity decreases D price increases quantity increases

Accepted Answer

D

Question 30

30 The table shows the tariffs imposed on imported tropical fruit in the European Union (EU) according to the degree of processing. EU tariffs (% rate) fresh tropical fruit 8.0 canned tropical fruit 11.3 bottled tropical fruit drinks 23.6 What might be the reason for this pattern of tariffs? A to encourage imports of processed products into the EU B to encourage tropical countries’ exports C to help manufacturing industries in the EU D to help tropical countries develop manufacturing industries

Accepted Answer

C

Cambridge IGCSE Economics 0455 — 2018 Oct/Nov Paper 1 · Variant 2

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · Which factor of production is not represented in the list shown?

Q2 · What do economies aim to achieve in tackling the economic problem of scarcity?

Q3 · The diagram shows a country’s production possibility curve (PPC)

Q4 · China, the world’s second largest economy, is becoming more like a market economy

Q5 · The diagram shows the market for a firm making clothing with an initial equilibrium of X

Q6 · Coal production in the UK has declined in recent years

Q7 · The table shows the demand and supply for spices in a market in Africa

Q8 · A central bank acts as a lender of last resort especially in times of financial crisis

Q9 · What will cause the level of savings in an economy to rise?

Q10 · What could affect the size of the labour force in an economy?

Q11 · Petrol (fuel) retailers in a country have noticed a sharp increase in sales in August…

Q12 · What is correct for firms in perfect competition?

Q13 · A film production company purchases a group of cinemas

Q14 · The table shows a firm’s average revenue and average cost at different levels of output

Q15 · Which statement about total fixed cost is correct?

Q16 · A government aims to reduce unemployment through a supply-side policy measure

Q17 · When is a government said to balance its budget?

Q18 · The table shows the amount of tax paid as income rises in four countries, A–D

Q19 · In which case is success for the government in achieving the first aim likely to cause…

Q20 · Economic growth is usually measured by the annual change in A consumer spending

Q21 · Four groups who are affected by changing economic conditions are creditors, debtors…

Q22 · The diagram shows the rate of unemployment and the periods of recession in a country…

Q23 · A country experienced its usual August increase in the rate of unemployment

Q24 · What will lead to an ageing population if other factors remain unchanged?

Q25 · Which change is most likely to be expected when an economy is developing?

Q26 · Developing countries are sometimes given aid by charities and foreign governments

Q27 · It is estimated that in 2016 the Olympic Games in Rio, Brazil attracted over 600 000…

Q28 · What is most likely to happen if South Korea builds a factory in Switzerland that becomes…

Q29 · A country has experienced a devaluation of its currency

Q30 · The table shows the tariffs imposed on imported tropical fruit in the European Union (EU)…

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