Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

ECONOMICS 0455/11
Paper 1 Multiple Choice October/November 2014
45 minutes
Additional Materials: Multiple Choice Answer Sheet
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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 and 2 blank pages.

IB14 11_0455_11/FP
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1 What is most likely to influence the price elasticity of demand for a food?

A a change in consumer tastes

B the number of close substitutes
C the rate of inflation
D whether the food can be stored easily

2 Economics textbooks often start by identifying the existence of the basic economic problem.

What is it that makes this problem ‘basic’?

A It affects all economies and individuals.

B It is the most urgent target of government economic policy.
C It only affects low-income developing economies.
D It relates to the production of raw materials in the primary sector.

3 Which statement about the factors of production is correct?

A Capital includes man-made machines that do not keep their original value.
B Enterprise is a natural factor of production that cannot be taught.
C Labour is an immobile factor that does not change its skill level.
D Land is only agricultural fields that cannot be improved by human effort.

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4 The diagram shows two production possibility curves for an economy.

manufactured
products

O Y X
agricultural products

What could have caused the change in the economy’s production possibility curve from XX
to YY?

A a decrease in the price level

B a large number of industrial disputes
C a major earthquake
D an increase in unemployment

5 The diagram shows the market for refined oil with equilibrium of X.

What will be the new equilibrium when a major oil refinery shuts down for repair work?

S2
D2
S1
D1
A
B S3
D3
X
price
C
D

O
quantity

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6 What is meant by the equilibrium quantity in the market for a product?

A the average quantity produced over the year

B the average quantity sold over the year
C the quantity at which profit occurs
D the quantity at which the demand and supply curves intersect

7 The following is a headline from the newspaper.

Car drivers to pay higher taxes

What will result from an increased tax on cars?

A increased employment in the car industry

B increased petrol (gas) sales
C reduced external costs of car use
D reduced number of bus journeys

8 A group of workers in a firm joins a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

9 When might rapid inflation together with low interest rates be a source of concern for a
consumer?

A when a consumer lives on a pension linked to the consumer price index

B when a consumer needs to use savings for regular expenditure
C when a consumer pays a fixed rent for their accommodation
D when a consumer wishes to buy a good on credit

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10 Asda, a supermarket chain, noticed a regular, sharp decrease in sales in the third week of the
month as people ran out of cash before their next wage payment. The supermarket offered their
biggest price reductions at that time.

Why might this policy increase total revenue?

A because consumers’ demand curve shifts to the left in the third week of the month
B because consumers’ demand curve shifts to the right in the third week of the month
C because the price elasticity of demand for Asda’s products decreases in the third week of the
month
D because the price elasticity of demand for Asda’s products increases in the third week of the
month

11 In which occupations do wages tend to be lowest?

A in those where the work is dangerous

B in those where there is an excess supply of labour
C in those where workers are paid on a monthly basis
D in those where workers need long training

12 The diagram shows the cost and revenue curves of a firm which starts to make a profit only after
producing 100 units of output.

2
costs and
revenue
$ 500

0 100
output

What are the correct labels for line 1 and line 2?

line 1 line 2

A average cost average revenue

B total cost total revenue
C total revenue total cost
D variable cost price

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13 A large tyre manufacturer expands by taking over a rubber plantation.

Of what is this an example?

A backward vertical integration

B diversifying integration
C forward vertical integration
D horizontal integration

14 What may exist in perfect competition but not in monopoly?

A barriers to entry
B economies of scale
C many sellers
D product differentiation

15 In 2011 the Egyptian Government increased the top rate of income tax.

What is likely to have been the main aim of this policy measure?

A a reallocation of resources from producing necessities to producing luxury products

B a redistribution of income from the rich to the poor
C a reduction in the deficit on the current account of the balance of payments
D a reduction in the level of cost-push inflation

16 What describes a regressive tax?

A It is paid by a higher proportion of high income earners.

B It is paid by a higher proportion of low income earners.
C It takes a higher proportion from high incomes.
D It takes a higher proportion from low incomes.

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17 The table shows output and total costs of production of a firm with three workers.

output total costs ($)

week 1 5 1500
week 2 6 1600
week 3 7 1700
week 4 8 1800

How did output per worker and average cost of the product change over the period?

output per worker average cost

A decrease no change
B increase decrease
C increase no change
D no change increase

18 A government aims to keep domestic prices stable in a fully employed economy.

Which policy should it use?

A increase expenditure on defence

B increase indirect taxes
C increase the rate of interest
D increase the wages of government workers

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19 The table shows the tax paid at different levels of income.

income amount of tax

($) ($)

6000 600
7000 700
8000 900
9000 1100

Which describes this tax?

A progressive at all levels of income

B proportional at all levels of income
C proportional at lower incomes, progressive at higher incomes
D proportional at lower incomes, regressive at higher incomes

20 World population increased from 5.26 billion in 1990 to just over 7.00 billion in 2012. It is
predicted to rise to 8.00 billion by 2025.

What is most likely to explain this?

A an increase in migration from developing to developed countries

B an increase in the birth rate in developing countries
C an increase in the death rate in developed countries
D an increase in the death rate in developing countries

21 The table shows the rate of unemployment and the annual rates of change of gross domestic
product (GDP) and consumer prices for four countries in 2012.

Which country was experiencing the worst economic recession?

unemployment consumer
GDP
rate prices
(% change)
(%) (% change)

A Greece 22.5 –7.1 +0.2

B Hungary 10.9 –0.8 +5.5
C Italy 10.8 –2.1 +3.2
D Spain 24.8 –1.6 +2.0

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22 The table shows the percentage change (%) in employment over a period for a country with three
economic sectors.

(%) change in
economic sector
employment

agriculture –6
manufacturing +2
services +4

What could be concluded from this information?

A Agricultural output fell.

B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

23 What must be a consequence of deflation in a country?

A a decrease in its exports

B a decrease in its saving
C an increase in its employment
D an increase in the real value of its money

24 The table shows statistics for four countries in southern Africa.

From the information given, which country has the lowest standard of living?

average annual population density real GDP

life
growth rate of per square per capita
expectancy
population (%) kilometre (US$)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

25 What will increase the level of economic development in a country?

A a higher infant mortality rate

B a higher inflation rate
C a higher interest rate
D a higher literacy rate

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

A a small amount of income spent on leisure and entertainment

B a small average family size
C a small number of old people
D a small number of professional people

27 Developing countries have, relatively, far more poor people than developed countries.

What is the reason for this?

A Developing countries have much higher fertility rates.

B It is not possible for migrants from developing countries to work in developed countries.
C The natural increase in population is lower in developing countries.
D There is an ageing population in all developing countries.

28 Which change will increase the demand for imports?

A Consumer credit becomes more expensive.

B Income tax rates increase.
C The exchange rate appreciates.
D The government increases tariffs.

29 In recent years, the US has experienced a deficit on its overall current account of the balance of
payments.

What could have led to an increase in the size of the deficit?

A increased competitiveness of goods made in the US

B increased earnings by US investors in foreign companies
C increased numbers of overseas visitors to the US
D increased spending on US military bases abroad

30 When the US$ exchange rate falls it will usually

A help to reduce a US trade deficit.

B increase the foreign price of US exports.
C reduce the price of US imports.
D reduce US inflation.

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Copyright Acknowledgements:

Q21 © Economist Intelligence Unit; The Economist; 11 August 2012.

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© UCLES 2014 0455/11/O/N/14