UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

International General Certificate of Secondary Education

0455/01

ECONOMICS
Paper 1 Multiple Choice

For Examination from 2014

SPECIMEN PAPER
45 minutes
Additional Materials:

Multiple Choice Answer Sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless
this has been done for you.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This document consists of 10 printed pages.

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1

Nolwazi lived in a rural area in Botswana and made baskets to sell to the tourists. The local
government gave her a loan to buy a car to take the baskets to the city market.
Which factor of production increased?

capital

enterprise

labour

land

What, according to the definition of opportunity cost, is sacrificed when a decision is taken?
A

an identical alternative

any possible alternative

the least valuable alternative

the next best alternative

A friend said his French grandmother kept switching off the lights but left the tap running. His
Namibian relative left the lights on while shouting at him to turn off the water.
Which availability of resources and level of prices would make economic sense of these
consumer actions?
in France

in Namibia

adequate water supplies

expensive electricity

cheap electricity

adequate water supplies

expensive electricity

scarce water supplies

scarce water supplies

cheap electricity

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4

The table shows the value of output for some parts of an economy.
$ billion
fishing

25.0

mining

23.0

manufacturing

130.5

financial services

100.3

other services

170.0

Which conclusion may be drawn from these statistics?

The tertiary sector was the most valuable.

The value of the primary sector was $ 25.0 billion.

The value of the secondary sector was $ 153.5 billion.

The value of the secondary sector was worth less than the value of the primary sector.

A government decides that an economy should make more use of the market.
Which policy might help to achieve this?
A

a decrease in controls on imported goods

an increase in government ownership of land

an increase in subsidies to industry

the fixing of minimum wage levels for workers

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6

The diagram shows an initial equilibrium point (X) in a market and a new equilibrium point (Y).

Y
X
price

quantity

Which combination of changes in demand and supply could have caused the movement from X
to Y?

demand

supply

decrease

decrease

decrease

increase

increase

decrease

increase

increase

A large supermarket applied to build on land which was an area of natural beauty. The local
government allowed the building, even though the natural beauty of the area would be lost,
because many jobs would be created and much needed income would be brought to the local
community.
Which economic ideas cannot be found in the above statement?

external cost and private enterprise

free market and the conservation of resources

opportunity cost and improved standards of living

public sector and external benefit

For what would price elasticity of demand be used?

A

calculating current disposable income

calculating the rate of price inflation

estimating changes in a companys cost

identifying changes in consumer spending patterns

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9

What is an external benefit when a charge is made for vehicles entering a city centre?
A

increased government revenue

increased traffic

reduced air pollution

reduced business activity

10 In August 2007 the Central Bank of Swaziland increased its interest rate from 9.5% to 10%.
Which effect would this be likely to have on producers and consumers?
producers

consumers

borrow less

save more

borrow less

spend more

invest more

save more

invest more

spend more

11 Why might a family increase the proportion of its income it spends on food?
A

Some of the children start work.

The government increases the benefits it pays to families.

The number of children in the family increases.

The second parent becomes employed.

12 In 2007 the average annual pay of a scientist in the UK was 37 290. The average annual pay of
a laboratory technician was 26 157.
What could explain this difference in earnings?
A

Laboratory technicians have stronger bargaining power than scientists.

Laboratory technicians have to work more unsociable hours than scientists.

The period of training for scientists is longer than that for laboratory technicians.

The supply of scientists is high relative to demand for their services.

13 What distinguishes a multi-national company from other companies?

A

It has agents in other countries.

It produces in other countries.

It takes part in international trade.

It uses raw materials and components from more than one country.

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14 Cadbury Schweppes, the confectionery business, is reported to want to reduce the number of its
offices in an attempt to decrease its general and administrative costs.
Which type of cost does Cadbury Schweppes hope to decrease?
A

average variable cost

marginal cost

total fixed cost

total variable cost

15 Prices tend to be lower in a competitive industry than in a monopoly.

Why is this?
A

A monopoly has less influence on the market.

Competitive industry has more economies of scale.

New firms are free to enter the competitive industry.

Profits are lower in a monopoly.

16 India is experiencing rapid growth in air travel. The number and size of airlines is increasing every
year.
Which effect arising from this growth is an external economy of scale?
A

Banks are more prepared to lend to large airlines rather than small airlines.

Fuel suppliers charge less to airlines that buy in bulk.

Institutions are established to train flight crew.

Larger airlines operate aircraft which can carry more passengers.

17 The table shows the total cost of a firm. It can sell the units for $6 each.
quantity produced (units)

total cost $

12

15

20

27

How many units will the firm produce to maximise profits?

A

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18 Economic growth can be defined as
A

an increase in a countrys exports.

an increase in a countrys population.

an increase in the productive capacity of an economy.

a reduction in inflation.

19 A country has different rates of income tax depending on the level of income earned.
The highest rate of income tax is cut from 40% to 38%.
From this statement it can be deduced that taxation will become
A

less indirect.

less progressive.

less regressive.

more difficult to evade.

20 What will make an industry capital-intensive?

A

employing many unskilled workers

manufacturing expensive products

occupying cheap land

using expensive equipment and a small labour force

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21 The graph shows the labour force of a country from 20032015.
17
male

16
15
millions

14
female

13
12
11
0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

estimates

projections

What may be concluded from the graph?

A

Between 2003 and 2015, women will become a higher percentage of the labour force.

It is estimated that more girls than boys will be born between 2003 and 2005.

The labour force will remain relatively unchanged after 2006 at approximately 16 million.

The total population of the country in 2010-2011 will be approximately 28 million.

22 In 2008 inflation was close to 100 000% in Zimbabwe. In a bid to reduce this high rate, the
Zimbabwean Government imposed maximum prices on a range of products. This caused price
rises amongst those goods sold unofficially or illegally.
What could explain this?
A

The maximum prices increased demand whilst reducing supply.

The maximum prices reduced demand whilst increasing supply.

The maximum prices were set above the equilibrium price levels.

The maximum prices were set at the equilibrium price levels.

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23 The table shows a number of economic indicators for four countries in 2004.
Which country best fits the description of the fastest real economic growth with the strongest
international position?
country

GDP
(annual % change)

prices
(annual % change)

trade balance
($bn)

foreign reserves
($bn)

Chile

4.8

1.1

+6.2

15.9

Hungary

4.2

7.5

4.2

12.6

Peru

4.2

4.3

+1.5

10.4

Philippines

6.4

5.1

1.3

13.0

24 As a result of a decrease in the demand for coal, several coal mines were closed.
What type of unemployment would this cause?
A

cyclical

frictional

seasonal

structural

25 Which factor is most likely to reduce the average age of a population in a developed country?
A

a lower birth rate

a lower death rate

emigration

immigration

26 What is most likely to be found in a typical developing country?

A

a good education sector

a small average family size

a small percentage of very old people

high spending on entertainment

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27 The Chinese Government is concerned about two population problems overpopulation and a
gender imbalance, with males outnumbering females.
In 2007 it reduced the number of babies that foreigners are allowed to adopt; almost all of the
babies are girls.
What effect might this have on the size of Chinas population and gender imbalance in the short
run?
size of population

gender imbalance

increase

increase

increase

reduce

reduce

increase

reduce

reduce

28 What benefit is likely to result from the extension of specialisation within manufacturing?
A

For a consumer, there are more individually made goods available.

For a consumer, there could be a lower cost of living.

For an employee, job satisfaction will increase.

For an employee, the nature of work is more varied.

29 Which two items, as well as trade in goods and services, are included in the current account of
the balance of payments?
A

foreign reserves and international investment

government spending and international borrowing

incomes and current transfers

taxation and foreign aid

30 Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that
a reduction in tariffs would destroy the emerging drinks industry with large-scale imports of cheap
drinks.
Which argument for protectionism are they putting forward?
A

the declining industry argument

the infant industry argument

the strategic industry argument

the sunset industry argument

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