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UNIVERSITY OF CAMBRIDGE
INTERNATIONAL EXAMINATIONS
International General
Certificate of Secondary Education
Economics
Paper 1 Multiple Choice
May/June 2008 Time : 1 hour
1 What can happen in a
planned economy that does not happen in a market economy?
A The allocation of resources
can take account of the total effects on society.
B There can be full
employment of factors of production.
C There can be inflation.
D There can be international
trade.
2 Which of the following is a
factor of production?
A the payment of interest on
a bank loan
B the profit declared by a
company in its annual report
C the skill of the managers
of a business
D the taxes paid to the
government
3 In a mixed economy,
resources are used as a result of
A the decisions of consumers
only.
B the decisions of firms
only.
C the decisions of consumers
and firms.
D the decisions of consumers,
firms and government.
4 A farmer decides to use a
more fertile field. As a result he is able to produce the same
output as
before but with fewer workers
and less equipment.
This is a substitution in
which
A capital replaces labour and
land.
B labour replaces capital and
land.
C land replaces capital and
enterprise.
D land replaces capital and
labour.
3
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5 The table shows the various
combinations of food and clothing which a village can produce
using
all its resources.
food units clothing units
0 500
100 400
200 250
300 50
400 0
What is the opportunity cost
to the village of increasing the production of food from 200
to 300
units?
A 50 units of clothing
B 100 units of clothing
C 200 units of clothing
D 250 units of clothing
6 The diagrams show the
percentage (%) of output by type of business in four
countries, A, B, C, D.
Which country has the largest
percentage of output in the private sector?
A B C D
50 %
20 %
40 %
30 %
40 %
30 %
20 %
60 %
20 % 20 %
40 %
30 %
sole traders and partnerships
private and public companies
public corporations
4
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7 Which of the following
benefits does a stock exchange provide?
A a source of finance for
private limited companies
B a safeguard against the
risk of loss
C an opportunity to sell
shares quickly
D an opportunity to purchase
foreign currency
8 What is not a function of a
trade union?
A to act as a pressure group
to change labour laws
B to negotiate with employers
over conditions of work
C to promote the sales of
products made by its members
D to protect the living
standards of its members
9 A company is described as a
multinational if it
A employs workers of several
nationalities.
B exports goods to several
countries.
C has production units in
several countries.
D has shareholders from
several countries.
10 Due to good weather, there
is a surplus in the market for an agricultural product.
Which change would cause the
market to return to equilibrium?
A a decrease in demand
B a fall in price
C an increase in supply
D a rise in price
11 Which pair is an example
of products in complementary (joint) demand?
A bananas and oranges
B cars and petrol
C tea and coffee
D wheat and straw
5
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12 What combination of events
might cause a rise in the willingness and the ability of
consumers to
buy a product?
price of a substitute
product
tax rates
A decrease decrease
B decrease increase
C increase increase
D increase decrease
13 Which diagram best
represents the market for tickets for a world famous tennis
tournament?
C D
A B
S
D
S
D
S
D
S
D
O O
O O
price
quantity
price
quantity
price
quantity
price
quantity
14 What is a firm’s aim when
it advertises its product?
A to shift its demand curve
to the left
B to shift its supply curve
to the left
C to shift its demand curve
to the right
D to shift its supply curve
to the right
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15 What would an individual
be doing to be described as a worker in the secondary sector?
A working in a firm that
grows fruit trees and plants
B working in a firm that
produces machines for other firms
C working in a government
passport office
D working in the reception
area of a hospital
16 A supermarket wishes to
recruit a qualified manager for a senior position to control
the stocks of
goods. Some work will be
required at night as the supermarket is open 24 hours. A good
salary is
being offered.
Which applicant would be most
likely to be suitable for the position?
A a person currently employed
as a supervisor in another supermarket
B a person who has experience
of managing a small newsagents
C a person who has to travel
a long way and has demanding family commitments
D a person who has recently
graduated in Economics
17 What is the most likely
reason for a firm to offer higher wages to recruit more staff?
A falling incomes
B falling output
C falling prices
D falling unemployment
18 What is likely to be found
when comparing high income earners with low income earners?
A High income earners pay a
lower proportion of their income in direct tax.
B High income earners spend a
lower proportion of their income on food.
C High income earners spend a
lower proportion of their income on foreign travel.
D High income earners save a
lower proportion of their income.
19 What would encourage a
rise in spending but not a rise in saving?
A easier credit facilities
B more people working
C rising interest rates
D rising standards of living
7
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20 An Economics student made
the following statements about costs of production.
Average costs remain the same
at all levels of output.
Fixed costs can exist when
there is no output.
Total costs can include both
fixed and variable costs.
Total variable costs fall as
output increases.
How many of these statements
are correct?
A 1 B 2 C 3 D 4
21 Which statement explains
why cars are often repaired by small garages?
A bulk buying of spare parts
can take place
B car-repair jobs are varied
C entry to the car-repair
industry is restricted
D expensive machinery is
required
22 A Japanese company which
has spare capacity has agreed to refine 20 000 barrels of oil
a day
for a Chinese company.
What is likely to happen in
the Japanese firm to fixed cost, to variable cost and to total
cost?
fixed cost variable cost
total cost
A rise rise rise
B rise fall stay the same
C stay the same rise rise
D stay the same fall fall
23 The table shows a firm’s
total revenue and total cost.
output (units) total revenue
($) total cost ($)
10 20 14
20 25 17
30 30 21
40 35 27
What level of output gives
maximum profit?
A 10 units B 20 units C 30
units D 40 units
8
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24 As output increases, what
happens to the average fixed cost of production?
A It falls continuously.
B It falls and then rises.
C It remains constant.
D It rises and then falls.
25 ‘The pound sterling made a
dramatic recovery in the world's currency markets yesterday.’
To what does this statement
refer?
A exchange rate
B growth rate
C interest rate
D tax rate
26 To pay for local projects
the government imposes a charge of $500 on each adult with a
100 %
increase for those on higher
incomes.
Which diagram illustrates
this?
A
tax
$
income
$
0
tax
B
tax
$
income
$
0
tax
C
tax
$
income
$
0
tax
D
tax
$
income
$
0
tax
27 What might a government
increase if it wished to raise the growth rate of an economy?
A expenditure on road
building
B goods and services tax
(value added tax)
C the rate of income tax
D the rate of interest
28 What is meant by a
regressive indirect tax?
A a tax on income that falls
more heavily on the poor
B a tax on income that falls
more heavily on the rich
C a tax on spending that
falls more heavily on the poor
D a tax on spending that
falls more heavily on the rich
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29 What is likely to be an
advantage of economic growth?
A The country’s resources
will be depleted.
B The price level will
increase.
C The rate of employment will
fall.
D The standard of living will
increase.
30 A government decreased the
tax on all goods produced in a country.
What is the most likely
result of this?
A a decrease in imports
B a decrease in industrial
production
C a decrease in real incomes
D a deterioration in the
balance of trade in goods
31 In 2003, interest rates in
Southern Africa were reduced.
What might have happened as a
result?
A an increase in investment
B an increase in unemployment
C a reduction in economic
growth
D a reduction in government
spending
10
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32 The table gives
information on Gross Domestic Product (GDP) growth rates,
inflation and the
unemployment rates for a
number of countries in 2006.
country
GDP growth
%
inflation
%
unemployment
rate
%
Brazil 3.5 4.0 10.4
China 11.3 1.5 4.2
France 1.5 1.9 9.0
India 9.3 7.9 7.3
UK 2.6 2.5 3.0
What can be concluded from
the table about 2006?
A Any particular product
would cost most in India.
B Economic growth was highest
when unemployment was lowest.
C Low inflation always causes
low unemployment.
D On average, the Chinese
people were likely to have had an increase in real income.
33 Which of the following is
most likely to be used as a measure of living standards?
A the balance of trade
B the consumer price index
C the government’s budget
position
D the real GDP per head
34 In some developing
countries, such as Rwanda, a large percentage of the
population is involved
in subsistence farming.
What can be concluded from
this?
A In some developing
countries, the natural resources are used efficiently.
B Production in some
developing countries depends upon skilled labour.
C Production in some
developing countries is not likely to be capital intensive.
D Some developing countries
do not import food because each family is self-sufficient.
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35 What is characteristic of
a developed economy?
A a high infant mortality
rate
B a high literacy rate
C a low GDP per capita
D a low life expectancy
36 In 2001 a government
enquiry approved a major new air terminal for London, which
would create
many new jobs. However, it
would also cause extra noise and air pollution. Compensation
would
have to be paid to some
people whose houses would be demolished.
What is not involved in this
exploitation of resources?
A conflicts of interest
B free market economy
C income creation
D opportunity cost
37 Some countries protect
their economies through barriers to free trade.
What would be the result in
such countries of this protection?
A Competition will be
reduced.
B Consumer choice will
increase.
C Prices will fall.
D Unemployment will rise.
38 What is an advantage if a
region specialises in a narrow range of products?
A Other regions will become
over-dependent on the region.
B Scarce resources are used
more efficiently.
C The level of production in
the region will decrease.
D The region’s system of
transport is improved.
39 What is the main reason
why the government, rather than the private sector, builds and
runs
hospitals?
A Hospitals are expensive to
build.
B The government has enough
tax revenue to pay for hospitals.
C The government needs to be
sure that the doctors are well-trained.
D The whole country can
benefit from the provision of good health facilities.
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