Cambridge University IGCSE Economics Paper (0455) 11 2013 : Solved!

1. What is a reason why firms making similar products sometimes locate near each other?

A. competition is decreased

B. there are external economies of scale

C. there are internal economies of scale

D. transport costs may be eliminated

Answer : C.there are internal economies of scale

2 The diagrams represent total cost curves (TC) of four firms in the short run.

Which firm has only fixed costs?

Answer : C [In the short run,fixed costs are mandetory and fixed at a scale.]

3. To achieve horizontal integration a record company producing compact discs (CDs) could merge

with another firm.

 What would this firm most likely be doing?

A. owning shops selling CDs

B.producing CDs

C.producing CD players

D.producing machinery used in the making of CDs

Answer : D. producing machinery used in the making of CDs

4.What is a difference between a monopoly and a perfectly competitive firm?

A.A monopoly always has economies of scale and a perfectly competitive firm has

diseconomies of scale.

B.A monopoly always operates in the public sector and a perfectly competitive firm always

operates in the private sector.

C.A monopoly is a price maker and a perfectly competitive firm is a price taker.

D.A monopoly seeks to maximise profits and a perfectly competitive firm seeks to maximise

output. 

Answer : C.A monopoly is a price maker and a perfectly competitive firm is a price taker.

5.An entrepreneur started a small business making candles. In the first month 1000 candles were

made. The costs (in $) were

 raw materials 1000

packaging 800

insurance 100

depreciation 100

rent 500

 What were the average variable costs for the month?

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

Answer : B. $1.80 (Since the last three are fixed costs)

6.Which aim of government policy is most likely to be achieved by an increase in interest rates?

A.economic growth

B.greater equality of income

C.full employment

 D.price stability

Answer : D.price stability

7. Why might a government encourage a monopoly?

A. It can have high average costs.

B. It can compete against foreign firms.

C. It can prevent innovation.

D. It can make excessive profits.

Answer : C.It can prevent innovation.

8.Which combination of government policies is most likely to be successful at reducing

unemployment?

A. budgeting for a surplus and lowering interest rates

B. budgeting for a deficit and raising interest rates

C. budgeting for a surplus and raising interest rates

D. budgeting for a deficit and lowering interest rates 

Answer : D. budgeting for a deficit and lowering interest rates 

9. A government wishes to raise the general standard of living in its country.

In the short run, which policy would be the most likely to achieve this aim?

A.preventing the merger of two companies into a monopoly

B.raising taxation to repay government debts

C.reducing the rate of income tax while maintaining the services it provides

D.spending more on roads in rural areas rather than in city centres

Answer : A.preventing the merger of two companies into a monopoly

10.Sam wrote a list of how he would prefer to spend his Saturday afternoon.

first choice go to a cricket match

second choice watch the annual town parade

third choice go to the cinema

fourth choice visit relatives

Unfortunately a thunderstorm caused the cricket match and the town parade to be cancelled.

Sam went to the cinema.

What was the opportunity cost of going to the cinema?

A.going to the cricket match

B.watching the town parade

C.visiting his relatives

D.losing his Saturday free time

Answer : C.visiting his relatives

11.How does a production possibility curve show that scarcity exists?

A. It shows that a rise in demand for one of the products increases its price.

B. It shows that as more resources are used to produce a product, its price rises.

C. It shows that at any point outside the production possibility curve an economy is wasting

resources.

D. It shows that there is a limit to the quantity of products that can be produced with existing

resources and technology. 

Answer : D. It shows that there is a limit to the quantity of products that can be produced with existing
resources and technology. 

12. In which case is it possible to set the level of reward before production takes place for the first

factor of production but not for the second?

A. capital land

B. enterprise labour

C. labour capital

D. land enterprise

Answer : C. labour capital

13. 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.

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

14. The diagrams show different conditions of demand and supply for a product.

In which diagram would market price remain unchanged if consumers’ incomes fell?

Answer : A

15. In 2011, a company selling milk in glass bottles replaced them with new plastic bottles. When

they were introduced, the equilibrium quantity on the market fell.

What could be a reason for this fall?

A. Consumers preferred the new bottle because it was lighter to carry.

B. Milk from the farms used to fill the bottle cost more.

C. The bottle was cheaper than the existing glass bottle to produce.

D. The new bottle was introduced with a successful advertising campaign. 

Answer : A. Consumers preferred the new bottle because it was lighter to carry.

16. Which change would make the supply of a product more price elastic?

A. an increase in the number of close substitutes for the product

B. an increase in the proportion of firms working at full capacity

C. a reduction in the time taken to make the product

D. a reduction in the time that the product can be stored

Answer : D. a reduction in the time that the product can be stored

17. Developers want to increase the size of a major retail shopping area in a city. It is thought that the

proposal would create hundreds of jobs, be profitable for the shops but cause major traffic

congestion.

 What economic concepts are involved in this statement?

A. external cost and private benefit

B. income distribution and inelastic demand

C. private investment and a decrease in supply

D. social benefit and perfect competition

Answer : A. external cost and private benefit

18. Which will encourage domestic producers to grow more maize?

A. granting subsidies to maize producers

B. increasing the sales tax on maize

C. removing guaranteed minimum prices for maize

D. removing quotas on imported maize

Answer : A. granting subsidies to maize producers

19. What will be the most likely effect of a fall in interest rates on saving and borrowing?

saving borrowing

A. decrease decrease

B. decrease increase

C. increase decrease

D. increase increase

Answer : B. decrease increase

20. When will a trade union find it easier to achieve higher wages for its members?

A. when consumers demand more of the product made

B. when the company has a decrease in profits

C. when the cost of raw materials increases

D. when unemployment increases 

Answer : A. when consumers demand more of the product made

21. 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.

Answer : C. Specialisation enables the worker to become more skilled.

22 The table shows the change in real incomes for a number of occupations between 1978 and

2008.

occupation change in real income

%

doctors 153

lawyers 114

accountants 60

bricklayers 37

bus and coach drivers 19

fork-lift truck drivers –5

What can be concluded from the table?

A. All occupations were better off in 2008 than in 1978.

B. Fork-lift truck drivers earned the lowest wages in 2008.

C. Doctors have earned more than lawyers since 1978.

D. Professionals received higher percentage increases in income than manual workers.

Answer : B. Fork-lift truck drivers earned the lowest wages in 2008.

23. Which function of money enables people to compare the worth of different products?

A. medium of exchange

B. standard for deferred payments

C. store of value

D. unit of account

Answer : D. unit of account

24. 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 

Answer : C. to protect a growing domestic industry

25. 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

Answer : C. dividends paid by a company in Jamaica to its American shareholders

26. 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.

Answer : A. Imported goods would become cheaper for local people.

27. In some developing countries a large percentage of the population is involved in subsistence

farming.

 What can be concluded from this?

A. Each family will be able to produce enough to live on.

B. Production is unlikely to be capital intensive.

C. Production will be efficient.

D. There will be a high level of trade.

Answer : B. Production is unlikely to be capital intensive.

28. A country has a falling birth rate and a rising death rate while an increasing number of its working

age adults (16-60 years) are seeking employment abroad.

How will this probably affect the numbers in the different age groups in the country?

 under 16 years 16-60 years over 60 years

A. fall fall fall

B. fall rise rise

C. rise fall rise

D. rise rise fall 

Answer : A. fall fall fall

29. 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

Answer : D. steadily increasing price levels

30. The table shows the change in the labour force in Bangladesh between 2006 and 2009.

group 2006 (millions) 2009 (millions)

• urban male labour force  8.9     3.1
• total urban labour force 11.7     12.8
• rural male labour force 28.5     30.5
• rural female labour force 9.3     10.4
• total rural labour force 37.8      40.9

Which statement is most likely to be consistent with these statistics?

A. Farming is the major employer in the economy.

B. Male workers are more mobile than female workers.

C. The absolute increase in the labour force is greater in urban areas than rural areas.

D. The supply of female workers has fallen. 

Answer : A. Farming is the major employer in the economy.

Original Link To Question Paper : http://www.cie.org.uk/images/196426-november-2013-question-paper-11.pdf