Mock 1 Paper 2 Set 1 – IGCSE X ECONOMICS MS
Section A
Answer this question.
1. Coal mining Coal is used directly to heat homes throughout the world and produces more
than 40% of the world’s electricity. There are, however, a number of challenges facing the
coal industry. These include increasing concerns about the environmental effects of using
coal and the increased competition from other fuels. Mining and using coal to produce
electricity causes air pollution. Coal-fired power stations emit carbon dioxide, which has a
harmful effect on people’s health. Wildlife habitats are damaged when new mines are opened
and when coal waste is dumped on landfill sites. However, demand for coal has declined
recently. This resulted in the price of a tonne of coal falling from US$300 in 2010 to US$150
in 2015. Even China, the world’s largest consumer of coal, purchased less in 2015. Some
high-cost deep mines were closed in the USA. In the same year, Europe’s largest producer,
Poland, sold coal at a loss of US$37 a tonne. The fall in demand for coal arises partly from
competition from renewable energy. For instance, advances in technology are reducing the
costs of producing energy from wind power. Fig. 1 shows how the market for wind power
changed in 2015.
Some countries protect their energy industries from foreign competition, in some cases to
reduce a current account deficit. The governments of a number of coal-producing countries
also regulate their coal industries. The extent of government intervention is influenced by the
type of economic system operated.
(a) Identify, using information from the extract, two external costs that arise from using coal
to produce electricity. [2]
(b) Explain two reasons why a firm may continue to produce a good despite making a loss.
[4]
(c) Calculate, using information from the extract:
(i) the percentage fall in the price of coal between 2010 and 2015 [2]
(ii) the cost (in US$) of producing a tonne of coal in Poland in 2015. [2]
(d) Analyse how resources are allocated in a mixed economy. [5]
(e) Discuss whether governments should regulate the coal industries of their countries. [5]
(f) Explain, using information from the extract and Fig. 1, what happened to the market for
wind power in 2015. [4]
(g) Discuss whether a government should use trade protection to reduce a current account
deficit. [6]
Section B
Answer any three questions.
2. In the Netherlands in 2018, there were 1.3 bicycles per person and the world’s largest
underground bicycle parking area was built in the capital city. Land is scarce in city centres,
where most cycling takes place. Demand for bikes in the Netherlands is price-inelastic. Only
a few people in the Netherlands borrow money to buy bikes. The government encourages
cycling by spending on both bike parking areas and leisure cycle parks.
(a) Identify one difference between land and labour. [2]
(b) Explain two reasons why demand for a product may be price-inelastic. [4]
(c) Analyse why households in one country may borrow more than households in another
country. [6]
(d) Discuss whether or not a government should encourage more people to cycle. [8]
3. Sweden has a mixed economic system. In 2018, it was operating at a point inside its
production possibility curve (PPC). In 2018, the country’s schools employed nearly 2500
extra teachers. A few of these had previously been actors. A higher number had previously
been government officials involved with regulation of Swedish monopolies.
(a) Define a mixed economic system. [2]
(b) Explain the difference between a point inside a PPC and a point outside a PPC. [4]
(c) Analyse why an actor may decide to become a teacher. [6]
(d) Discuss whether all monopolies have low costs of production. [8]
4. Uruguay’s inflation rate reached 8.4% in July 2018. The central bank considered increasing
the interest rate to reduce the inflation rate. An increase in interest rates might influence total
demand in an economy and lead to an appreciation of its currency. This might influence
Uruguay’s exports, especially soybean exports. The total revenue of Uruguay’s soybean firms
might change if there is an appreciation of the Uruguayan peso.
(a) Define total revenue. [2]
(b) Explain two causes of inflation. [4]
(c) Analyse how an increase in the interest rate could reduce total demand in an economy. [6]
(d) Discuss whether or not an appreciation of a country’s domestic currency will have
negative effects on its economy.
[8]
5. Some economists criticise high government spending and trade unions for creating market
disequilibrium. However, trade unions may also play a key role in economic development.
There are over 60 trade unions in Singapore, in both labour-intensive and capital-intensive
industries.
(a) Define market disequilibrium. [2]
(b) Explain the difference between labour-intensive and capital-intensive industries. [4]
(c) Analyse how trade unions could increase economic development. [6]
(d) Discuss whether or not high government spending can help a government achieve its
macroeconomic aims. [8]
