Cambridge Assessment International Education

Cambridge International General Certificate of Secondary Education

IGCSE - II Div _____

Economics (0455/12)

Paper 1 Multiple Choice Questions

Additional materials : Multiple Choice Answer Sheet MODEL PAPER

Soft clean eraser September 2023
Soft pencil (type B or HB is recommended) 45 minutes
Marks - 30

Candidate
Name
Centre Candidate
Number Number

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write candidate name, number and centre 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.
1)
What necessarily happens when an external benefit exists?

a)
Social benefit is greater than private benefit.

b)
Social benefit is greater than social cost.
c)
Social cost is equal to private cost.
d)
Social cost is greater than private cost.

2)
A supply curve for a commodity is drawn to show how quantity supplied varies with

a)
Government taxes

b)
Income
c)
Taste
d)
The price of the commodity

3)
What is the variable cost of a firm producing bicycles?

a)
The component parts of the bicycle

b)
The interest on money borrowed
c)
The rent of the bicycle factory
d)
The salaries of the senior manager

4)
A developer built some large houses in a rural area which poorer people could not afford. The houses destroyed
an area of natural beauty. What type of market failure resulted from the development?

a)
Inequality of income

b)
Lack of information
c)
Negative externality
d)
Price discrimination

5)
The market for a normal good is in equilibrium at point x. Consumer’s income rise and the government gives
subsidy to the producers of the good. In which area of the diagram will the new equilibrium be?

6)
What could reduce the ability of a trade union to gain a pay rise for its members in a shoe factory?

a)
An increase in sales of shoe exports

b)
A rise in the demand for shoes.
c)
A rise in the productivity of shoe workers.
d)
More people willing in the shoe industry.

7)
Why do bank notes function as money?

a)
They are backed by gold.

b)
They are durable
c)
They are generally acceptable
d)
They have intrinsic value
8)
Which is an external economy of scale?
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 a)
Availability of training facilities in local colleges
b)
Greater production from employees
c)
Increase credit facilities from banks
d)
Lower costs through bulk buying.

9)
The graphs show the average total cost (ATC) curve of four firms and how they change as output increase.
Which firm has the highest fixed cost?

10)
A government agreed to provide $ 20 million to a developing country to help supply emergency aid. In which part
of the current account of the balance of payment recorded?

a)
Current transfer flows

b)
Income flows
c)
Trade in goods
d)
Trade in services

11)
In some Asian countries the cost of labour is lower than in developed countries. As a result they manufacture
and export clothes to Europe, where the demand for clothes is high. The quality of these clothes, however, is not
as good as some of the clothes produced in Europe. What is likely to happen in the Asian countries and to the
total expenditure on clothes in Europe?

12)
In the 2016 Olympics in Brazil, the opening ceremony will take place in the Maracana Stadium, which can seat
82 000 spectators. It is expected that all tickets for the ceremony will be sold quickly, leaving many people
dissatisfied. What can be concluded from this?

A Price elasticity of demand for tickets will be perfectly elastic.

B Some people will be able to resell their tickets at a higher price than they paid for them.
C The Olympic authority will make more tickets available for sale.
D This will be an example of market failure.

13)
What might be a direct benefit to the individual worker of a specialised job?

A Specialisation enables a better quality product to be produced.

B Specialisation enables the firm to introduce more machinery.
C Specialisation enables the worker to become more skilled.
D Specialisation makes better use of resources.

14)
Which function of money enables people to compare the worth of different products?
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 A medium of exchange
B standard for deferred payments
C store of value
D unit of account

15)
An entrepreneur started a small business making candles. In the first month 1000 candles were made. The costs
were

What were the average variable costs for the month?

A $1.00
B $1.80
C $1.90
D $2.00

16)
Which would best indicate the start of an economic recession?

A falling interest rates

B fluctuating levels of employment
C negative growth of GDP
D steadily increasing price levels

17)
A developing country's two major sources of income from international trade are fishing and tourism. If the
country's exchange rate depreciated, what is likely to happen?

A Imported goods would become cheaper for local people.

B The country would definitely become poorer.
C The price of fish sold as exports would become cheaper.
D Tourists to the country would be discouraged by higher prices.

18)
Which of the following could not be a reason for imposing tariffs on imported goods?

A to encourage self sufficiency

B to lower the general price level within the economy
C to protect a growing domestic industry
D to reduce a balance of trade deficit.

19)
Which of the following is an export of Jamaica?

A a loan to Jamaica by the International Monetary Fund

B Jamaican holidays taken by American tourists
C dividends paid by a company in Jamaica to its American shareholders
D sales of Japanese cars in Jamaica
20)
In 2011 the Egyptian Government increased the top rate of income tax. What is likely to have been the main aim

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 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

21)
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.

22)
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

23)
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

24)
There are a fixed number of seats at a concert. Most of the audience would continue to attend even if the seat
prices were increased. Which demand and supply diagram represents this situation? ANS ( c)

25)
The table gives the retail price of a paperback book as printed on its back cover.

What is needed to make a clear comparison of the price in the four countries?

A direct tax rates

B exchange rates
C inflation rates
D level of import tariffs

26) In developed economies there are changing patterns of employment. What explains why fewer work in
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 agriculture but food production has increased?

A increased incomes and more leisure

B mechanisation and the use of scientific methods
C movement to factory jobs in manufacturing
D shift to office work using computers

27)
In the first six months of 2011 a construction company, Morgan Sindall, saw its profits fall. Part of the reason was
the increased competition from foreign competitors. Which government policy is most likely to help such a
company?

A increasing benefits to the unemployed

B increasing tax-free allowances on new building projects
C putting a quota on imported raw materials used by the company
D raising interest rates

28)
The graph shows the impact of a tax on the supply of petrol (gas).

What can be concluded from this graph?

A The government will receive no tax revenue

B The impact of the tax will be shared between the consumer and the producer
C The impact of the tax will fall entirely upon the consumer
D The impact of the tax will fall entirely on the producer

29)
The table shows government estimates of the private and external benefits and costs of building a new dam.

What is the difference between the social benefits and social costs of building the dam?

A $25 million
B $50 million
C $175 million
D $225 million

30)
Which situation involving the building industry is most likely to be investigated by a government body set up to
control restrictive practices?

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A a builder purchasing a plot of land for development of housing
B groups of suppliers of building materials agreeing to fix prices
C several builders bidding for the same contracts
D several builders using different sources of supply

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Blank Page
IGCSE - I Candidate Name

Examination Title - Economics Candidate Number

Paper 1 Multiple Choice Questions

Mark Scheme Syllabus Paper

MODEL PAPER 0455 / 12 01

Multiple-choice Answer Sheet

1 A B C D 21 A B C D
Instructions
2 A B C D 22 A B C D
Use a soft pencil (B or HB). 3 A B C D 23 A B C D
4 A B C D 24 A B C D
Shade ONE letter only for each 5 A B C D 25 A B C D
question.
6 A B C D 26 A B C D
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For question 1, 8 A B C D 28 A B C D
if you think B is the right answer, A B C D
9 29 A B C D
fill in your answer sheet like this:
10 A B C D 30 A B C D
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14 A B C D
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15 A B C D
in line with the correct question
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