Economics 0455/11 May/June 2021: question paper and mark scheme

Question

Which statement about the factors of production is correct? A Capital is a financial resource and includes savings in banks. B Enterprise is limited in supply and includes office workers. C Labour is a human resource and includes pensioners and children. D Land is a natural resource and includes trees and fish.

Question

A builder spends one hour travelling to and from work. He works 40 hours per week for $200. He is given a choice to work 50 hours a week for an extra $75. What would be the opportunity cost to the builder of working the extra hours? A the ability to increase his purchasing power B the additional time travelling to and from work C the increased hourly earnings of $7.50 D the ten hours of leisure time

Question

A country’s infrastructure was damaged by a natural disaster. Before the disaster, the country was producing at point Y on the production possibility curve (PPC). Which point represents the country’s production immediately after the disaster? capital goods A C Y D B O consumer goods

Question

What is included in microeconomics? A the calculation of national income and expenditure B the effects of a change in exchange rates on the trade balance of an economy C the effects of an increase in the price of a good or service D the factors leading to demand-pull inflation

Question

What is an economist’s definition of a market? A a collection of informal retail outlets run by small firms B a place where traders gather regularly for short periods C a system that enables individuals and firms to buy and sell goods D the existence of consumer demand for a good

Question

What is an example of an external benefit from an individual cycling, rather than driving, to work? A higher cost of building cycle lanes B improved physical fitness to the individual from cycling C lower cost of cycling compared with driving to work D reduced congestion for other road users

Question

A tailor has four customers for her range of suits. The table shows the yearly demand for the suits she makes. demand for suits suit price customer R customer S customer T customer U ($) 800 4 1 2 2 900 4 0 1 2 1000 3 0 1 1 1100 2 0 0 1 Which price should be charged to maximise the tailor’s yearly revenue? A $800 B $900 C $1000 D $1100

Question

In response to an increase in price from $5 per kilo to $6 per kilo, a farmer increased supply from 400 kilos to 500 kilos per week. What is the price elasticity of supply? A 0.8 B 0.9 C 1.2 D 1.25

Question

It is expected that consumers will use less paper money. What is the most likely reason for this? A Inflation reduces the value of paper money. B More ways of making payments will be available. C Other forms of money are more durable. D Paper money will have less intrinsic value.

Question

In low-income countries, fewer girls than boys become skilled design engineers. What might explain this situation? A Girls are only interested in low-wage jobs. B Girls do not favour heavy manual work. C Girls have fewer opportunities to complete higher education. D It costs more for girls to be trained as design engineers.

Question

The diagram shows the demand for and supply of labour in an industry. The original equilibrium is X. A trade union then negotiates a wage rate of W. wage rate S ($) W X D O R S T quantity of labour What identifies the change in employment? A OR B OT C RS D RT

Question

A company mining cobalt, invests in machinery to replace some workers. Eventually diseconomies of scale occur. What could cause this situation? A As more cobalt is mined average costs increase. B Fewer workers are needed to produce the required output. C Output per hour increases as more machinery is used. D Overhead costs are spread as output increases.

Question

Why are many hairdressers able to operate as small businesses? A high level of competition B high scope for economies of scale C long period of training required D low start-up and running costs

Question

Dimitry owns a firm that produces and sells bottles of lemonade. He only sells one size of bottle. How would Dimitry calculate the total revenue of the firm? A multiply the quantity sold by the cost per bottle B multiply the quantity sold by the price per bottle C multiply the quantity sold by the profit per bottle D multiply the quantity sold by the tax per bottle

Question

Which market is likely to be the most competitive? barriers number to entry of sellers A high few B high many C low few D low many

Question

An economy has a high rate of inflation. In response to this, its government increases income tax. What is the most likely reason for this increase? A to discourage the consumption of harmful goods B to raise money for government spending C to redistribute income D to reduce total demand

Question

Interest rates are sometimes raised to control inflation. Why might this policy be effective? A Consumers may save more. B Government spending may increase. C Investment may be encouraged. D The exchange rate may fall.

Question

A government’s revenue grew 8% to $3.25 trillion. Its expenditure was reduced to $3.69 trillion. What can be concluded from this? government state of budget policy aim A deficit increase deficit B deficit reduce deficit C surplus increase surplus D surplus reduce surplus

Question

A country’s inflation rate, measured by the Consumer Prices Index (CPI), was 3% in year 1. Three years later it was 0.8%. What can be concluded from this information? A Prices are falling. B The rate of price increases is falling. C The real rate of interest is negative. D There is increased purchasing power for those on fixed incomes.

Question

What will deflation most likely lead to? A a fall in the real value of debts B an increase in the exchange rate C an increase in the rate of interest D an increase in the real purchasing power of money

Question

Economic growth can be defined as A a reduction in a country’s rate of inflation. B an increase in a country’s exports. C an increase in a country’s population. D an increase in a country’s productive capacity.

Question

The table compares the distribution of employment in selected industries in two years. employment in millions industry year 1 year 2 agriculture 4 3 mining 2 2 manufacturing 6 6 retailing 4 4 transport 4 5 total 20 20 How did the distribution of employment change between year 1 and year 2? primary sector secondary sector A fell rose B fell unchanged C rose fell D rose unchanged

Question

In a year, two changes occurred in a company. Company directors’ salaries increased by 15%. Office workers’ wages increased by 5%. The rate of inflation was 3.4%. What happened to real income? company directors’ office workers’ real income real income A fell fell B fell rose C rose fell D rose rose

Question

The diagrams show birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in two years, 1 and 2. There was no migration. X Y Z BR BR BR and and and BR DR DR DR DR BR DR DR BR 1 2 1 2 1 2 year year year Where was there a rise in population in year 1 and a fall in population in year 2? A X and Z B X only C Y and Z D Y only

Question

The richest 60% of the population of a high-income economy received an increase in income. The income of the rest of the population did not change. What happened to absolute and relative poverty? absolute poverty relative poverty A increased increased B increased remained constant C remained constant increased D remained constant remained constant

Question

Gross Domestic Product (GDP) is a better measure of comparative living standards when it is adjusted for the effects of A exports and inflation. B imports and exports. C population change and exports. D population change and inflation.

Question

What is a disadvantage of increasing international specialisation? A Consumers pay higher prices for goods and services reducing their welfare. B Domestic firms may be uncompetitive leading to structural unemployment. C Domestic firms may experience rising costs as they pay more for imports. D Resources may be used less efficiently as domestic firms face less competition.

Question

Which method of protection always reduces the supply of an imported good to zero? A embargo B quota C subsidy D tariff

Question

A US car dealer agrees an import price of US$25 000 for a Japanese car at the current rate of exchange. The US dollar then strengthens by 10% against the Japanese yen. What will be the new import price paid for the Japanese car? A US$20 000 B US$22 500 C US$25 000 D US$27 500

Question

A country has a deficit on its current account of its balance of payments. What could increase the size of its deficit? A increased exports of its services B increased international competitiveness of its goods C increased numbers of visitors from abroad D increased spending on its military bases abroad