Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

ECONOMICS 0455/12

Paper 1 Multiple Choice MAY 25

30 minutes

Additional Materials: Multiple Choice Answer Sheet

Soft clean eraser

*1509399974*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, 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.

DO NOT WRITE IN ANY BARCODES.

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 11 printed pages and 1 blank page.

[Turn over
 2

1 Which statement about factors of production is correct?

A Capital is the money people keep in the bank.

B Enterprise is found more in service industries than in manufacturing industries.

C Labour includes only those who work using their hands.

D Land includes resources found in or under the sea.

2 China earns enough income to purchase large quantities of natural resources from developing

countries.

Which statement explains this situation?

A China does not experience the economic problem of scarcity.

B Supplies of natural resources in China are limited relative to demand.

C There are unlimited supplies of natural resources in developing countries.

D There is an excess stock of land in China.

3 The diagram shows the change in an economy’s production possibility curve from year 1 to

year 2.

goods

year 2
year 1

O services

What might explain the change from year 1 to year 2?

A Resources have moved from the production of services to the production of goods.

B The number of workers unemployed in manufacturing has fallen.

C The producers of services have introduced better technology.

D The workers in the production of goods have become less efficient.

 3

4 The table shows the demand and supply schedules for eggs.

price number of eggs number of eggs

$ demanded per week supplied per week

0.20 450 25

0.30 250 100

0.40 125 125

0.50 50 150

What will be the equilibrium price of eggs?

A $0.20 B $0.30 C $0.40 D $0.50

5 As incomes have risen in India, cinema attendance has increased.

How would this change be shown on a demand and supply diagram?

demand curve for supply curve of

cinema tickets cinema tickets

A movement along shifts to the left

B movement along shifts to the right

C shifts to the left movement along

D shifts to the right movement along

6 Although some economists believe that resources should be allocated through market forces,

markets often fail.

What might be an example of market failure?

A access to subsidised health care

B monopoly pricing of electricity supplies

C prohibiting cigarette smoking in public places

D regulation of interest rates charged by banks

[Turn over
 4

7 A group of shops sells all its products at the same price of $1. It is still able to make a profit,

although in other shops the products are sold at a higher price.

Which statement about this group of shops must be correct?

A Consumers recognise that the group’s products are better value.

B Costs will be lower than in the other shops.

C Revenue will be less than in the other shops.

D The group does not advertise nor use any form of marketing.

8 In 2011, the Bank of England released into circulation a new design for the £50 note to replace

the old design £50 note.

What might have been the reason for issuing these notes?

A to ease the use of the barter system

B to enable a means of exchange

C to lower the external value of the £ sterling

D to reduce inflationary pressures in the economy

9 A security company wishes to recruit an experienced person for a senior position to answer

customers’ emergency calls, some of which would be during the night. It is offering a good salary

and a small apartment next to the company premises.

Which person would be most likely to apply and be offered the position?

A a confident person currently employed in installing security systems for the company

B a person who has experience of answering customers’ queries in a travel company

C a recently qualified engineering graduate in security systems

D a reliable person who says that he needs to live with his young family of five children

10 Why do female workers in many countries have a lower income than male workers?

A Female workers are more experienced.

B Female workers are more likely to be employed part-time.

C Female workers are more likely to be in trade unions.

D Female workers have more qualifications.

 5

11 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.

B Colleges are established to train flight crew.

C Fuel suppliers charge less to airlines that buy in bulk.

D Larger airlines operate aircraft which can carry more passengers.

12 The financial director of a company adds up the cost for the firm of rent, insurance, new

machinery and the chief executive’s basic salary. The director then divides that total by the firm’s

output.

What has the director calculated?

A average fixed cost

B average revenue

C average total cost

D average variable cost

13 If a perfectly competitive market becomes a monopoly, what will be likely to increase and what

will be likely to decrease?

increase decrease

A barriers to entry economies of scale

B consumer choice prices

C long-run profits competition

D output market share

[Turn over
 6

14 The diagram shows the fixed costs, variable costs and total costs of a firm.

35
30
25

costs 20
($000) 15
10
5
0
100
output

What is the firm’s total variable cost at an output of 100 units?

A $250 B $5000 C $25 000 D $30 000

15 A government achieves a high rate of economic growth.

What may result from this that might cause a conflict with other government aims?

A it may increase government income

B it may increase incomes for the lower paid

C it may increase the supply of exports

D it may increase the volume of imports

16 What type of tax is a tax of 10% on the price of petrol?

A a direct tax

B a progressive tax

C an income tax

D an indirect tax
 2

17.A person bought a shop and stocked it with fresh fruit. He employed one member of his family to
help in the shop.

Which factors of production have been used?

A labour and capital only

B labour, capital and enterprise only
C land and labour only
D land, labour, capital and enterprise

18.The diagram shows a production possibility curve for a country. As a result of an increase in
demand for manufactured goods it moves from a situation of unemployment to full employment.

agriculture E

F G
H
O
manufactured goods

How would this be represented on this diagram?

A by a movement from E to G
B by a movement from F to E
C by a movement from F to G
D by a movement from G to H
 3

19.The diagram shows the choices for an individual between leisure and earnings. He currently
earns $25 a day.

24
hours of
leisure 18
per day
12

0
0 20 40 60 80 100
earnings ($)

What is the opportunity cost for the person if he accepts more work and earns $75 a day?

A $25
B $50
C 6 hours of leisure a day
D 12 hours of leisure a day

20 What is an example of market failure?

A a growth of competition
B a spread of pollution
C a surplus of production in the short term
D an existence of scarcity

21. What will be the impact on the market for oil of the closure of the world’s largest oil field for
maintenance work?

A a movement down the supply curve

B a movement up the demand curve
C a shift of the demand curve to the left
D a shift of the supply curve to the right

[Turn over
 4

22 The diagram shows a market for rice that is in equilibrium.

price T
S

X
V

W
D
O Y Z
quantity

Which area represents the total revenue for rice farmers?

A OTXY B OVXY C OVXZ D OWXY

23 A product has a price elasticity of demand that is greater than one.

What will happen to total revenue if the price of the product is reduced by 3%?

A It will fall by more than 3%.

B It will fall to zero.
C It will be unchanged.
D It will rise.

24 Why are some assembly workers poorly paid?

A because their work is exhausting

B because their work is repetitive
C because their work is unskilled
D because they work long hours
 5

25 The table shows the change in income for selected occupations between 1995 and 2015.

change in
occupation
income %
car assembly
workers 110

builders 110
teachers 60
nurses 30
shop assistants –5

What can be concluded from the table?

A Car assembly workers and builders earned the same in 2015.

B Everyone was better off in 2015 than 1995.
C Nurses earned less than teachers in 2015.
D Secondary sector workers received the highest percentage increase.

26 This table shows how three people spend their income.

person X person Y person Z

food and housing 60% 20% 30%

travel and leisure 20% 40% 30%
luxury goods 20% 40% 40%

Put the three people in the most likely order of income from the lowest to the highest income.

A X, Y, Z B X, Z, Y C Y, Z, X D Z, Y, X

27 What is usually a function of a trade union?

A It advertises the products that the members make.

B It conducts negotiations with employers for increased wages.
C It hires company employees.
D It negotiates with suppliers for reduced costs of materials.

[Turn over
 6

28 A firm’s aim is to become a monopoly supplier.

Which policy is it most likely to use to eliminate competition?

A adopt price reductions and advertising

B avoid diseconomies of scale
C maximise output and profit
D reduce financial barriers to entry

29 When is a firm most likely to reduce its demand for labour?

A when the demand for the final good increases

B when the firm’s profitability increases
C when the price of labour decreases
D when the productivity of labour decreases

30 The high volume of goods sold by large supermarkets enables them to reduce prices, but the
most important advantage that these businesses have is that they can sell non-food items as well
as food.

Which economic results does the statement suggest are available to large supermarkets?

A economies of scale and diversification

B external benefits and specialisation
C horizontal integration and optimum output
D increased sales and diminishing returns