UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2010
1 hour
Additional Materials: Multiple Choice Answer Sheet
*8347321536*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

IB10 06_2281_11/5RP
© UCLES 2010 [Turn over
 A A river from which a company draws water is called land.
B Raising finance for a company is called capital.
C Supervisors employed in a company are called enterprise.
D The owner of a company is called labour.

3 Which economic change would increase the problem of scarcity?

A a decrease in fish stocks

B a discovery of a new oil field
C an increase in labour productivity
D a reduction in waste

4 The government of a country with a rapidly increasing population decides to switch resources
from investment to increased subsidies to farmers.

What is the opportunity cost of this decision?

A the profit earned by farmers

B the rent of the land on which food is grown
C the reduction in investment
D the wages of the farm workers

5 ‘The tertiary sector of the economy is increasing in importance’.

This statement is most likely to mean that a high proportion of the labour force is

A employed in agriculture.
B employed in manufacturing.
C employed in the production of services.
D unemployed but looking for work.

© UCLES 2010 2281/11/M/J/10

 3

6 The diagram shows the market for fresh fish in the Caribbean with equilibrium point X. New, more
efficient boats with lower running costs are then used.

Which point represents the new equilibrium?

S3
S1

B S2
A
price X
C

D
D2
D1
O quantity

7 The diagram shows the demand for and the supply of bread.

price

P1
D
O
quantity

A maximum price P1 is fixed by the government.

What is likely to be the immediate result of this?

A a movement of the demand curve to the right

B a movement of the supply curve to the right
C a shortage of bread
D a surplus of bread

© UCLES 2010 2281/11/M/J/10 [Turn over

 4

8 The diagram shows a market for wheat that is in equilibrium.

T
S

X
price V

W
D
O Y Z
quantity

Which area represents the total revenue for wheat farmers?

A OTXY B OVXZ C OVXY D OWXY

9 The diagram shows the supply curve for a good.

price
($)
2

0 10 20 30
quantity (units)

What is the price elasticity of supply when the price rises from $2 to $4?

A 0.2 B 0.5 C 1 D 2

10 What could a government do to reduce external costs in the economy?

A Decrease direct tax for higher income earners.

B Decrease direct tax for lower income earners.
C Increase indirect tax on petrol / gasoline.
D Remove indirect tax on tobacco.

© UCLES 2010 2281/11/M/J/10

 5

11 The diagrams show possible demand curves for four commodities.

Which diagram shows a completely inelastic demand curve?

A B C D
D

price D price price price

D D
O quantity O quantity O quantity O quantity

12 What is a function of a commercial bank?

A acting as the lender of last resort

B deciding what is a legal tender
C determining monetary policy
D providing overdrafts

13 A person is most likely to save more when there is an increase in a country’s

A exchange rate.
B inflation rate.
C interest rates.
D money supply.

14 One of the functions of money is to act as a measure of value.

What does this mean?

A Money allows people to borrow and lend.

B Money allows people to save their surplus income.
C Money is used to buy goods and services.
D Money is used to compare the worth of different goods and services.

15 What is a function of a trade union?

A to negotiate workers’ contracts

B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm

© UCLES 2010 2281/11/M/J/10 [Turn over

 6

16 What is an example of occupational mobility of labour?

A A Japanese car manufacturer locates in England.

B A nurse returns to work after her children have grown up.
C A student takes an evening job in a restaurant.
D Farm workers retrain as call-centre workers.

17 Which activity is correctly linked to the organisation that provides it?

organisation activity

A central bank regulate the rate of inflation

B commercial bank manage the government’s financial accounts
C commercial bank safeguard the country’s foreign reserves
D stock exchange make loans to public companies

18 In August 2008, Infosys, an Indian information technology company, bought Axon, a UK

information technology company.

Which type of integration is this?

A conglomerate
B horizontal
C vertical backwards
D vertical forwards

19 What is correct about a monopoly?

A It may benefit from economies of scale.

B It must be privately not state owned.
C Its costs are always higher than those of a firm in perfect competition.
D It sells only one product.

© UCLES 2010 2281/11/M/J/10

 7

20 South African companies are planning to undertake major investment in Zimbabwe in order to
mine platinum.

If this investment occurs, what would happen in the short term to the supply of platinum, the price
of platinum and the profits of the companies?

supply curve price of platinum profits of the companies

A no change rise rise

B shift to left no change fall
C shift to right rise rise
D shift to right fall uncertain

21 Barilla, an Italian company, is the world’s largest pasta maker. It also produces bread.

In 2006 its bread production contributed $1.5 billion (bn) to its total revenue of $5.1 bn.
Overall profit was $0.6 bn.

What was the total cost to Barilla of producing pasta and bread in 2006?

A $2.1 bn B $3.0 bn C $3.6 bn D $4.5 bn

22 A firm which sells its product for $6 has the following total costs.

output (units) 0 10 20 30
total costs ($) 40 100 120 150

Which statement is correct?

A Average cost is lowest when 10 units are produced.

B The firm breaks even when 20 units are sold.
C The firm has no fixed costs.
D Total variable costs fall continuously over these outputs.

23 What is likely to be found when there are many small firms in an industry?

A There are few barriers to entry.

B There is high expenditure on research and development.
C There is little competition.
D Very large capital costs are needed to establish a firm.

© UCLES 2010 2281/11/M/J/10 [Turn over

 8

24 What is a direct tax?

A a tax on electricity
B a tax on imported goods
C a tax on services
D a tax on income and wealth

25 A government achieves a high rate of economic growth.

How may this conflict with other government aims?

A It may increase government income.

B It may increase incomes for the lower paid.
C It may increase the supply of exports.
D It may increase the volume of imports.

26 The directors of a firm have to discuss the following topics.

Which topic is least likely to be directly affected by the government’s influence on the firm?

A health and safety laws

B the interest it pays on borrowed money
C the minimum wage it must pay its workers
D the replacement of the director of finance

27 Between 2002 and 2007, approximately 18 million Latin American households moved out of
poverty.

Which change in the region is most likely to have caused this fall in poverty?

A an increase in economic growth

B an increase in inflation
C a reduction in employment
D a reduction in exports

28 One way in which a government may seek to increase geographical mobility of labour is by

A controlling firms locating in areas of low employment.

B giving grants to firms moving into areas of high unemployment.
C providing relocation expenses for workers.
D subsidising declining industries.

© UCLES 2010 2281/11/M/J/10

 9

29 What is not usually an aim of a government?

A economic growth
B full employment
C inequality of incomes
D price stability

30 The retail price index of a country rose during a year from 200 to 240.

What was the annual rate of inflation?

A 20 % B 40 % C 240 % D 440 %

31 What name is given to the type of unemployment that occurs while people search for new jobs?

A cyclical
B frictional
C residual
D structural

32 Why is the Human Development Index (HDI) a better indicator of comparative living standards
than Gross Domestic Product (GDP) per head?

A It includes international trade.

B It includes more measures of living standards.
C It is measured in money terms.
D It is more directly linked to economic growth.

33 What is likely to happen in an economy that experiences uncontrolled hyperinflation?

A Economic activity will cease.

B Inequality of income and wealth will cease.
C Internal trade will cease.
D Trust in money will cease.

© UCLES 2010 2281/11/M/J/10 [Turn over

 10

34 Gross Domestic Product (GDP) per capita is commonly used as an indicator of the comparative
level of development in different countries.

What does not lead to difficulties when using this as a comparison between countries?

A different climatic conditions

B different international exchange rates
C different population growth rates
D different rates of inflation

35 India has a more evenly distributed income than China but a greater proportion of its population
living on less than $1 a day.

What can be concluded from this statement?

A China has a smaller proportion of very rich people.

B India has a greater proportion of poor people.

C Most of the population of India live on $1 a day.
D The average income in China is higher than that in India.

36 What is likely to happen in a developing country as it becomes more developed?

A A lower percentage of people will go to university.

B Average life expectancy will rise.
C The rate of population growth will increase.
D The tertiary sector will decline in importance.

37 The table shows the percentages (%) of consumer spending on different items in four countries
which have similar geographical conditions and climate.

Which country is likely to have the highest standard of living?

consumer spending on each item (%)

food housing entertainment

A 20 30 25
B 30 25 15
C 40 20 10
D 40 25 10

© UCLES 2010 2281/11/M/J/10

 11

38 There was an increase in the value of the United States (US) dollar against the South African
Rand.

What is a result of this?

A an increase in the number of exports from the US to South Africa

B an increase in the number of imports to the US from South Africa
C fewer people from the US spend holidays in South Africa
D more people from South Africa spend holidays in the US

39 Which policy would best enable a government to encourage greater specialisation in the use of
its country’s resources?

A encouraging diversification in industry

B protecting small businesses
C reducing tariffs on imports into its country
D subsidising job creation in rural areas

40 Vietnamese companies buy insurance from companies in the United States (US).

How will this transaction be recorded in the Vietnamese balance of payments?

section credit / debit

A trade in goods credit

B trade in services credit
C trade in services debit
D current transfers debit

© UCLES 2010 2281/11/M/J/10

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 2281/11/M/J/10

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2010
1 hour
Additional Materials: Multiple Choice Answer Sheet
*5057326516*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB10 06_2281_12/RP
© UCLES 2010 [Turn over
 2

1 Which statement about the factors of production is correct?

A A river from which a company draws water is called land.

B Raising finance for a company is called capital.
C Supervisors employed in a company are called enterprise.
D The owner of a company is called labour.

2 Which terms summarise the nature of the economic problem?

A finite resources and limited wants

B finite resources and unlimited wants
C infinite resources and limited wants
D infinite resources and unlimited wants

3 ‘The tertiary sector of the economy is increasing in importance’.

This statement is most likely to mean that a high proportion of the labour force is

A employed in agriculture.
B employed in manufacturing.
C employed in the production of services.
D unemployed but looking for work.

4 The government of a country with a rapidly increasing population decides to switch resources
from investment to increased subsidies to farmers.

What is the opportunity cost of this decision?

A the profit earned by farmers

B the rent of the land on which food is grown
C the reduction in investment
D the wages of the farm workers

5 Which economic change would increase the problem of scarcity?

A a decrease in fish stocks

B a discovery of a new oil field
C an increase in labour productivity
D a reduction in waste

© UCLES 2010 2281/12/M/J/10

 3

6 What is a function of a commercial bank?

A acting as the lender of last resort

B deciding what is a legal tender
C determining monetary policy
D providing overdrafts

7 The diagram shows the market for fresh fish in the Caribbean with equilibrium point X. New, more
efficient boats with lower running costs are then used.

Which point represents the new equilibrium?

S3
S1

B S2
A
price X
C

D
D2
D1
O quantity

© UCLES 2010 2281/12/M/J/10 [Turn over

 4

8 The diagram shows the demand for and the supply of bread.

price

P1
D
O
quantity

A maximum price P1 is fixed by the government.

What is likely to be the immediate result of this?

A a movement of the demand curve to the right

B a movement of the supply curve to the right
C a shortage of bread
D a surplus of bread

9 The diagram shows a market for wheat that is in equilibrium.

T
S

X
price V

W
D
O Y Z
quantity

Which area represents the total revenue for wheat farmers?

A OTXY B OVXZ C OVXY D OWXY

© UCLES 2010 2281/12/M/J/10

 5

10 The diagram shows the supply curve for a good.

price
($)
2

0 10 20 30
quantity (units)

What is the price elasticity of supply when the price rises from $2 to $4?

A 0.2 B 0.5 C 1 D 2

11 What could a government do to reduce external costs in the economy?

A Decrease direct tax for higher income earners.

B Decrease direct tax for lower income earners.
C Increase indirect tax on petrol / gasoline.
D Remove indirect tax on tobacco.

12 The diagrams show possible demand curves for four commodities.

Which diagram shows a completely inelastic demand curve?

A B C D
D

price D price price price

D D
O quantity O quantity O quantity O quantity

© UCLES 2010 2281/12/M/J/10 [Turn over

 6

13 What is an example of occupational mobility of labour?

A A Japanese car manufacturer locates in England.

B A nurse returns to work after her children have grown up.
C A student takes an evening job in a restaurant.
D Farm workers retrain as call-centre workers.

14 A person is most likely to save more when there is an increase in a country’s

A exchange rate.
B inflation rate.
C interest rates.
D money supply.

15 One of the functions of money is to act as a measure of value.

What does this mean?

A Money allows people to borrow and lend.

B Money allows people to save their surplus income.
C Money is used to buy goods and services.
D Money is used to compare the worth of different goods and services.

16 What is a function of a trade union?

A to negotiate workers’ contracts

B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm

17 A firm which sells its product for $6 has the following total costs.

output (units) 0 10 20 30
total costs ($) 40 100 120 150

Which statement is correct?

A Average cost is lowest when 10 units are produced.

B The firm breaks even when 20 units are sold.
C The firm has no fixed costs.
D Total variable costs fall continuously over these outputs.

© UCLES 2010 2281/12/M/J/10

 7

18 Which activity is correctly linked to the organisation that provides it?

organisation activity

A central bank regulate the rate of inflation

B commercial bank manage the government’s financial accounts
C commercial bank safeguard the country’s foreign reserves
D stock exchange make loans to public companies

19 In August 2008, Infosys, an Indian information technology company, bought Axon, a UK

information technology company.

Which type of integration is this?

A conglomerate
B horizontal
C vertical backwards
D vertical forwards

20 Barilla, an Italian company, is the world’s largest pasta maker. It also produces bread.

In 2006 its bread production contributed $1.5 billion (bn) to its total revenue of $5.1 bn.
Overall profit was $0.6 bn.

What was the total cost to Barilla of producing pasta and bread in 2006?

A $2.1 bn B $3.0 bn C $3.6 bn D $4.5 bn

21 South African companies are planning to undertake major investment in Zimbabwe in order to
mine platinum.

If this investment occurs, what would happen in the short term to the supply of platinum, the price
of platinum and the profits of the companies?

supply curve price of platinum profits of the companies

A no change rise rise

B shift to left no change fall
C shift to right rise rise
D shift to right fall uncertain

© UCLES 2010 2281/12/M/J/10 [Turn over

 8

22 What is correct about a monopoly?

A It may benefit from economies of scale.

B It must be privately not state owned.
C Its costs are always higher than those of a firm in perfect competition.
D It sells only one product.

23 The directors of a firm have to discuss the following topics.

Which topic is least likely to be directly affected by the government’s influence on the firm?

A health and safety laws

B the interest it pays on borrowed money
C the minimum wage it must pay its workers
D the replacement of the director of finance

24 What is likely to be found when there are many small firms in an industry?

A There are few barriers to entry.

B There is high expenditure on research and development.
C There is little competition.
D Very large capital costs are needed to establish a firm.

25 What is a direct tax?

A a tax on electricity
B a tax on imported goods
C a tax on services
D a tax on income and wealth

26 A government achieves a high rate of economic growth.

How may this conflict with other government aims?

A It may increase government income.

B It may increase incomes for the lower paid.
C It may increase the supply of exports.
D It may increase the volume of imports.

© UCLES 2010 2281/12/M/J/10

 9

27 What name is given to the type of unemployment that occurs while people search for new jobs?

A cyclical
B frictional
C residual
D structural

28 Between 2002 and 2007, approximately 18 million Latin American households moved out of
poverty.

Which change in the region is most likely to have caused this fall in poverty?

A an increase in economic growth

B an increase in inflation
C a reduction in employment
D a reduction in exports

29 One way in which a government may seek to increase geographical mobility of labour is by

A controlling firms locating in areas of low employment.

B giving grants to firms moving into areas of high unemployment.
C providing relocation expenses for workers.
D subsidising declining industries.

30 What is not usually an aim of a government?

A economic growth
B full employment
C inequality of incomes
D price stability

31 The retail price index of a country rose during a year from 200 to 240.

What was the annual rate of inflation?

A 20 % B 40 % C 240 % D 440 %

© UCLES 2010 2281/12/M/J/10 [Turn over

 10

32 India has a more evenly distributed income than China but a greater proportion of its population
living on less than $1 a day.

What can be concluded from this statement?

A China has a smaller proportion of very rich people.

B India has a greater proportion of poor people.

C Most of the population of India live on $1 a day.
D The average income in China is higher than that in India.

33 Why is the Human Development Index (HDI) a better indicator of comparative living standards
than Gross Domestic Product (GDP) per head?

A It includes international trade.

B It includes more measures of living standards.
C It is measured in money terms.
D It is more directly linked to economic growth.

34 What is likely to happen in an economy that experiences uncontrolled hyperinflation?

A Economic activity will cease.

B Inequality of income and wealth will cease.
C Internal trade will cease.
D Trust in money will cease.

35 Gross Domestic Product (GDP) per capita is commonly used as an indicator of the comparative
level of development in different countries.

What does not lead to difficulties when using this as a comparison between countries?

A different climatic conditions

B different international exchange rates
C different population growth rates
D different rates of inflation

36 Which policy would best enable a government to encourage greater specialisation in the use of
its country’s resources?

A encouraging diversification in industry

B protecting small businesses
C reducing tariffs on imports into its country
D subsidising job creation in rural areas

© UCLES 2010 2281/12/M/J/10

 11

37 Vietnamese companies buy insurance from companies in the United States (US).

How will this transaction be recorded in the Vietnamese balance of payments?

section credit / debit

A trade in goods credit

B trade in services credit
C trade in services debit
D current transfers debit

38 What is likely to happen in a developing country as it becomes more developed?

A A lower percentage of people will go to university.

B Average life expectancy will rise.
C The rate of population growth will increase.
D The tertiary sector will decline in importance.

39 The table shows the percentages (%) of consumer spending on different items in four countries
which have similar geographical conditions and climate.

Which country is likely to have the highest standard of living?

consumer spending on each item (%)

food housing entertainment

A 20 30 25
B 30 25 15
C 40 20 10
D 40 25 10

40 There was an increase in the value of the United States (US) dollar against the South African
Rand.

What is a result of this?

A an increase in the number of exports from the US to South Africa

B an increase in the number of imports to the US from South Africa
C fewer people from the US spend holidays in South Africa
D more people from South Africa spend holidays in the US

© UCLES 2010 2281/12/M/J/10

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 2281/12/M/J/10

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2011
1 hour
Additional Materials: Multiple Choice Answer Sheet
*0653859993*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 12 printed pages.

IB11 06_2281_11/3RP
© UCLES 2011 [Turn over
 2

1 What is meant by the economic problem?

A how to achieve efficiency with the existence of fixed resources and limited wants
B how to allocate resources between public and private sectors
C how to balance unlimited wants against finite resources
D how to decide which methods to use to exploit all resources

2 Each of the factors of production earns an income.

What are the incomes for land and capital?

land capital

A rent interest
B rent profit
C wages interest
D wages profit

3 A firm decides to stop manufacturing ovens and to produce washing machines instead.

What is the opportunity cost to the firm?

A the additional washing machines produced

B the cost of producing ovens
C the cost of producing washing machines
D the loss of the production of ovens

© UCLES 2011 2281/11/M/J/11

 3

4 The table shows how employment in selected industries changed in a country between 2000 and
2010.

year 2000 year 2010

(thousands employed) (thousands employed)

extraction of minerals 1278 794

manufacturing 3102 2128
banking and finance 1336 1881
distribution and catering 3678 4323

Which statement about these industries during this period is correct?

A Employment in the primary industries decreased.

B Employment in the secondary industries increased.
C Employment in the tertiary industries decreased.
D Employment in the tertiary industries was less than the secondary industries.

5 What is an advantage of the market economic system?

A It aims for equality of income.

B It ensures the provision of defence and law and order.
C It gives an incentive to produce.
D It reduces pollution and congestion.

6 Which pair of economic institutions can be found in a market economy?

A commercial banks and public companies

B public corporations and partnerships
C public corporations and private companies
D stock exchange and local government schools

© UCLES 2011 2281/11/M/J/11 [Turn over

 4

7 Due to changes in the costs of production, an industry’s supply curve shifted at various times
from S1 to either S2 or S3.

S2
S1
S3
w
price x
y

D2
D1

O quantity

If a shift in supply was due to a seasonal increase in the cost of raw materials, what would have
been the effect on demand?

A The demand curve would move from D1 to D2.

B The quantity demanded would move from x to w.
C The quantity demanded would move from x to y.
D The quantity demanded would remain the same at x.

8 The table shows the changes in two influences on the demand for and supply of televisions.

If these two changes occurred at the same time, in which case is it impossible for the price of
televisions to rise?

consumers’ incomes costs of production

A fall fall
B fall rise
C rise fall
D rise rise

9 In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in
petrol tax will be mainly on

A the company that refines the oil.

B the motorist who buys the petrol.
C the petrol station that sells the petrol.
D the wholesale company that stores the petrol.

© UCLES 2011 2281/11/M/J/11

 5

10 What is an example of market failure?

A a growth of competition
B an existence of scarcity
C a spread of pollution
D a surplus of production in the short-term

11 Which action by the operators of an airport directly reduces external costs?

A the stopping of night flights

B the building of a new runway
C the payment of a productivity bonus
D the reduction of charges for landing aircraft

12 What may cause an individual to save a higher proportion of their income?

A a belief that the price of goods will rise in the future

B a fall in the rate of interest paid by the country’s banks
C a fear that income will fall in the future
D a rise in the individual’s wish to enjoy higher consumption immediately

13 A person wishes to buy shares in order to make a long-term profit, but wants as little risk of
short-term loss as possible.

Which type of share is most likely to meet these wishes?

A a share in a coffee growing company

B a share in a fashion house
C a share in a high-tech electronics company
D a share in a supermarket chain

14 Which statement about a country’s banks is correct?

A Commercial banks hold the financial accounts of the government.

B Commercial banks settle debts by clearing customers’ cheques.
C The central bank sets the government’s tax and spending policies.
D The central bank supplies foreign currency to members of the public.

© UCLES 2011 2281/11/M/J/11 [Turn over

 6

15 Why might factory workers have higher wage rates than agricultural workers?

A Factory workers are in greater supply.

B Factory workers face fewer risks of accidents.
C Factory workers have cleaner working conditions.
D Factory workers use more productive equipment.

16 What is the main purpose of a trade union?

A to achieve profit maximisation

B to encourage free trade
C to promote private ownership of industry
D to protect the interests of its members

17 A musician has a choice of playing for an orchestra in either England or Germany.

Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?

Incomes and cost of living in Germany compared with those in England

pre-tax (gross) income after-tax (net) income cost of living

A higher higher higher

B higher lower lower
C lower higher higher
D lower higher lower

18 What is an advantage of small-scale production?

A diseconomies of scale
B division of labour
C flexible production
D spreading of overheads

© UCLES 2011 2281/11/M/J/11

 7

19 A major computer company announced that its profits had fallen below the level predicted.

What might have caused this?

A increased advertising costs that greatly improved sales

B low prices that made the company’s product competitive
C new technology that reduced costs
D reduced sales and low prices

20 A firm raised the price of its product from $10 to $15 and as a result its sales fell from 200 units to
150 units.

What happened to its average revenue and total revenue?

average revenue total revenue

A decreased decreased
B decreased increased
C increased decreased
D increased increased

21 Which change must occur when a firm starts to experience diseconomies of scale?

A Average costs begin to rise.

B Employees are made redundant.
C Profits turn into losses.
D Variable costs become fixed.

22 If a firm increases its output in the short run, what will happen to its average fixed cost (AFC)?

A AFC will decrease continually.

B AFC will equal zero.
C AFC will increase then decrease.
D AFC will increase continually.

© UCLES 2011 2281/11/M/J/11 [Turn over

 8

23 Cathay Pacific, Hong Kong’s largest airline, flies to a number of countries.

Shares in the firm are owned by both individuals and other firms in a number of countries. The
shares are traded on the Hong Kong Stock Exchange.

Which type of business organisation is Cathay Pacific?

A a partnership
B a private limited company
C a public corporation
D a public limited company

24 Which statement is most likely to be correct?

A A direct tax benefits the government.

B An indirect tax benefits small shopkeepers.
C A progressive tax benefits successful entrepreneurs.
D A regressive tax benefits lower income earners.

25 The central bank of Mexico set its rate of interest to try to keep the rise in the price level to
only 3 %.

Which government aim was it directly trying to achieve?

A balance of payments equilibrium

B economic growth
C full employment
D low inflation

26 When is a direct tax described as progressive?

A when the government changes the basic rate of tax in each budget
B when the government taxes companies rather than individuals
C when the tax takes a larger proportion of earnings as earnings increase
D when the tax takes a smaller proportion of earnings as earnings increase

© UCLES 2011 2281/11/M/J/11

 9

27 In 2008, the government of Argentina imposed a tax on exports of wheat and soya beans.

What was the most likely aim of this tax?

A to increase agricultural output

B to increase exports
C to reduce a budget surplus
D to reduce the rise in domestic food prices

28 A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X
is the equilibrium position.

The effect is illustrated in the diagram below.

S3 S1
20 S2

X
price 15
($ per kilo)
10
D1
5

0
5 10 15 20 25 30
quantity supplied
(’000 kilos)

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

equilibrium price quantity supplied

($ per kilo) (’000 kilos)

A 10 20
B 13 25
C 15 20
D 20 10

© UCLES 2011 2281/11/M/J/11 [Turn over

 10

29 During 2009 some governments adopted policies to try to end the recession in their country and
increase economic growth.

Which combination of policies is most likely to achieve this?

A lower taxes and decrease government spending

B lower taxes and increase government spending
C raise taxes and decrease government spending
D raise taxes and increase government spending

30 The table shows the percentage change in employment over a period for a country with three
economic sectors.

percentage (%) change

economic sector
in employment

agriculture –6
manufacturing +2
services +4

Which statement must be correct?

A Agricultural output fell.

B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

31 Why may GDP not be a good measure to compare the standard of living of two countries?

A It does not include government expenditure.

B It does not take account of population size.
C It is based on a sample ‘basket of goods’.
D It only compares export prices with import prices.

32 Which type of unemployment is generally regarded by economists as the least serious for the
economy?

A cyclical
B frictional
C regional
D structural

© UCLES 2011 2281/11/M/J/11

 11

33 Which people are most likely to gain at a time of inflation?

A companies who sell abroad

B foreign tourists visiting the country
C those living on their savings
D those who are repaying borrowed money

34 What is likely to happen as a developing country becomes more developed?

A A higher percentage of children will attend school.

B Infant mortality will rise.
C Life expectancy will fall.
D The agricultural sector will increase in importance.

35 Many developed countries are faced with an ageing population.

What is the likely result of this?

A a reduced dependency ratio

B increased mobility of labour
C increased spending on medical care
D reduced tax levels

36 The table shows statistics for four countries in southern Africa.

From the information given, which country has the lowest standard of living?

average annual population density real GDP

life
growth rate of per square per capita
expectancy
population (%) kilometre (US$)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

37 Net migration is the difference in a particular year between

A the birth rate and the death rate.

B the number of people entering and leaving a country looking for temporary work.
C the number of people entering and leaving a country on a permanent basis.
D the number of tourists coming to and going from a country.

© UCLES 2011 2281/11/M/J/11 [Turn over

 12

38 Which item would appear as a credit item in Pakistan’s current account of the balance of
payments?

A the purchase by a Pakistani firm of oil from Nigeria

B the sale by a Pakistani firm of cotton jackets to a UK firm
C the setting up by the Chinese of a clothing factory in Pakistan
D the spending by Pakistani tourists in Abu Dhabi

39 The diagrams show the composition of exports and imports of a country.

Exports Imports

goods services goods services

50 % 50 % 60 % 40 %

total exports $120 million total imports $100 million

What is true for this country?

A There was a deficit in the balance of trade in goods.

B There was a deficit in the balance of trade in services.
C There was a surplus in the balance of trade in goods.
D There was a surplus in the balance of trade in services.

40 A government may use customs barriers to restrict free trade.

What is an economic reason for doing this?

A to discourage the production of strategic goods

B to improve the balance of trade
C to increase a balance of payments deficit
D to make imports cheaper

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011 2281/11/M/J/11

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2011
1 hour
Additional Materials: Multiple Choice Answer Sheet
*3456645326*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 12 printed pages.

IB11 06_2281_12/FP
© UCLES 2011 [Turn over
 2

1 Each of the factors of production earns an income.

What are the incomes for land and capital?

land capital

A rent interest
B rent profit
C wages interest
D wages profit

2 A firm decides to stop manufacturing ovens and to produce washing machines instead.

What is the opportunity cost to the firm?

A the additional washing machines produced

B the cost of producing ovens
C the cost of producing washing machines
D the loss of the production of ovens

3 The table shows how employment in selected industries changed in a country between 2000 and
2010.

year 2000 year 2010

(thousands employed) (thousands employed)

extraction of minerals 1278 794

manufacturing 3102 2128
banking and finance 1336 1881
distribution and catering 3678 4323

Which statement about these industries during this period is correct?

A Employment in the primary industries decreased.

B Employment in the secondary industries increased.
C Employment in the tertiary industries decreased.
D Employment in the tertiary industries was less than the secondary industries.

© UCLES 2011 2281/12/M/J/11

 3

4 What is an advantage of the market economic system?

A It aims for equality of income.

B It ensures the provision of defence and law and order.
C It gives an incentive to produce.
D It reduces pollution and congestion.

5 What is meant by the economic problem?

A how to achieve efficiency with the existence of fixed resources and limited wants
B how to allocate resources between public and private sectors
C how to balance unlimited wants against finite resources
D how to decide which methods to use to exploit all resources

6 The table shows the changes in two influences on the demand for and supply of televisions.

If these two changes occurred at the same time, in which case is it impossible for the price of
televisions to rise?

consumers’ incomes costs of production

A fall fall
B fall rise
C rise fall
D rise rise

7 In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in
petrol tax will be mainly on

A the company that refines the oil.

B the motorist who buys the petrol.
C the petrol station that sells the petrol.
D the wholesale company that stores the petrol.

8 What is an example of market failure?

A a growth of competition
B an existence of scarcity
C a spread of pollution
D a surplus of production in the short-term

© UCLES 2011 2281/12/M/J/11 [Turn over

 4

9 Which action by the operators of an airport directly reduces external costs?

A the stopping of night flights

B the building of a new runway
C the payment of a productivity bonus
D the reduction of charges for landing aircraft

10 Due to changes in the costs of production, an industry’s supply curve shifted at various times
from S1 to either S2 or S3.

S2
S1
S3
w
price x
y

D2
D1

O quantity

If a shift in supply was due to a seasonal increase in the cost of raw materials, what would have
been the effect on demand?

A The demand curve would move from D1 to D2.

B The quantity demanded would move from x to w.
C The quantity demanded would move from x to y.
D The quantity demanded would remain the same at x.

11 Which pair of economic institutions can be found in a market economy?

A commercial banks and public companies

B public corporations and partnerships
C public corporations and private companies
D stock exchange and local government schools

© UCLES 2011 2281/12/M/J/11

 5

12 A person wishes to buy shares in order to make a long-term profit, but wants as little risk of
short-term loss as possible.

Which type of share is most likely to meet these wishes?

A a share in a coffee growing company

B a share in a fashion house
C a share in a high-tech electronics company
D a share in a supermarket chain

13 Which statement about a country’s banks is correct?

A Commercial banks hold the financial accounts of the government.

B Commercial banks settle debts by clearing customers’ cheques.
C The central bank sets the government’s tax and spending policies.
D The central bank supplies foreign currency to members of the public.

14 Why might factory workers have higher wage rates than agricultural workers?

A Factory workers are in greater supply.

B Factory workers face fewer risks of accidents.
C Factory workers have cleaner working conditions.
D Factory workers use more productive equipment.

15 What is the main purpose of a trade union?

A to achieve profit maximisation

B to encourage free trade
C to promote private ownership of industry
D to protect the interests of its members

© UCLES 2011 2281/12/M/J/11 [Turn over

 6

16 A musician has a choice of playing for an orchestra in either England or Germany.

Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?

Incomes and cost of living in Germany compared with those in England

pre-tax (gross) income after-tax (net) income cost of living

A higher higher higher

B higher lower lower
C lower higher higher
D lower higher lower

17 What may cause an individual to save a higher proportion of their income?

A a belief that the price of goods will rise in the future

B a fall in the rate of interest paid by the country’s banks
C a fear that income will fall in the future
D a rise in the individual’s wish to enjoy higher consumption immediately

18 A firm raised the price of its product from $10 to $15 and as a result its sales fell from 200 units to
150 units.

What happened to its average revenue and total revenue?

average revenue total revenue

A decreased decreased
B decreased increased
C increased decreased
D increased increased

19 Which change must occur when a firm starts to experience diseconomies of scale?

A Average costs begin to rise.

B Employees are made redundant.
C Profits turn into losses.
D Variable costs become fixed.

© UCLES 2011 2281/12/M/J/11

 7

20 If a firm increases its output in the short run, what will happen to its average fixed cost (AFC)?

A AFC will decrease continually.

B AFC will equal zero.
C AFC will increase then decrease.
D AFC will increase continually.

21 Cathay Pacific, Hong Kong’s largest airline, flies to a number of countries.

Shares in the firm are owned by both individuals and other firms in a number of countries. The
shares are traded on the Hong Kong Stock Exchange.

Which type of business organisation is Cathay Pacific?

A a partnership
B a private limited company
C a public corporation
D a public limited company

22 A major computer company announced that its profits had fallen below the level predicted.

What might have caused this?

A increased advertising costs that greatly improved sales

B low prices that made the company’s product competitive
C new technology that reduced costs
D reduced sales and low prices

23 What is an advantage of small-scale production?

A diseconomies of scale
B division of labour
C flexible production
D spreading of overheads

24 When is a direct tax described as progressive?

A when the government changes the basic rate of tax in each budget
B when the government taxes companies rather than individuals
C when the tax takes a larger proportion of earnings as earnings increase
D when the tax takes a smaller proportion of earnings as earnings increase

© UCLES 2011 2281/12/M/J/11 [Turn over

 8

25 In 2008, the government of Argentina imposed a tax on exports of wheat and soya beans.

What was the most likely aim of this tax?

A to increase agricultural output

B to increase exports
C to reduce a budget surplus
D to reduce the rise in domestic food prices

26 A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X
is the equilibrium position.

The effect is illustrated in the diagram below.

S3 S1
20 S2

X
price 15
($ per kilo)
10
D1
5

0
5 10 15 20 25 30
quantity supplied
(’000 kilos)

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

equilibrium price quantity supplied

($ per kilo) (’000 kilos)

A 10 20
B 13 25
C 15 20
D 20 10

© UCLES 2011 2281/12/M/J/11

 9

27 During 2009 some governments adopted policies to try to end the recession in their country and
increase economic growth.

Which combination of policies is most likely to achieve this?

A lower taxes and decrease government spending

B lower taxes and increase government spending
C raise taxes and decrease government spending
D raise taxes and increase government spending

28 The central bank of Mexico set its rate of interest to try to keep the rise in the price level to
only 3 %.

Which government aim was it directly trying to achieve?

A balance of payments equilibrium

B economic growth
C full employment
D low inflation

29 Which statement is most likely to be correct?

A A direct tax benefits the government.

B An indirect tax benefits small shopkeepers.
C A progressive tax benefits successful entrepreneurs.
D A regressive tax benefits lower income earners.

30 Which type of unemployment is generally regarded by economists as the least serious for the
economy?

A cyclical
B frictional
C regional
D structural

© UCLES 2011 2281/12/M/J/11 [Turn over

 10

31 Which people are most likely to gain at a time of inflation?

A companies who sell abroad

B foreign tourists visiting the country
C those living on their savings
D those who are repaying borrowed money

32 Why may GDP not be a good measure to compare the standard of living of two countries?

A It does not include government expenditure.

B It does not take account of population size.
C It is based on a sample ‘basket of goods’.
D It only compares export prices with import prices.

33 The table shows the percentage change in employment over a period for a country with three
economic sectors.

percentage (%) change

economic sector
in employment

agriculture –6
manufacturing +2
services +4

Which statement must be correct?

A Agricultural output fell.

B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

34 Many developed countries are faced with an ageing population.

What is the likely result of this?

A a reduced dependency ratio

B increased mobility of labour
C increased spending on medical care
D reduced tax levels

© UCLES 2011 2281/12/M/J/11

 11

35 The table shows statistics for four countries in southern Africa.

From the information given, which country has the lowest standard of living?

average annual population density real GDP

life
growth rate of per square per capita
expectancy
population (%) kilometre (US$)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

36 Net migration is the difference in a particular year between

A the birth rate and the death rate.

B the number of people entering and leaving a country looking for temporary work.
C the number of people entering and leaving a country on a permanent basis.
D the number of tourists coming to and going from a country.

37 What is likely to happen as a developing country becomes more developed?

A A higher percentage of children will attend school.

B Infant mortality will rise.
C Life expectancy will fall.
D The agricultural sector will increase in importance.

38 A government may use customs barriers to restrict free trade.

What is an economic reason for doing this?

A to discourage the production of strategic goods

B to improve the balance of trade
C to increase a balance of payments deficit
D to make imports cheaper

© UCLES 2011 2281/12/M/J/11 [Turn over

 12

39 Which item would appear as a credit item in Pakistan’s current account of the balance of
payments?

A the purchase by a Pakistani firm of oil from Nigeria

B the sale by a Pakistani firm of cotton jackets to a UK firm
C the setting up by the Chinese of a clothing factory in Pakistan
D the spending by Pakistani tourists in Abu Dhabi

40 The diagrams show the composition of exports and imports of a country.

Exports Imports

goods services goods services

50 % 50 % 60 % 40 %

total exports $120 million total imports $100 million

What is true for this country?

A There was a deficit in the balance of trade in goods.

B There was a deficit in the balance of trade in services.
C There was a surplus in the balance of trade in goods.
D There was a surplus in the balance of trade in services.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011 2281/12/M/J/11

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2012
1 hour
Additional Materials: Multiple Choice Answer Sheet
*0412527342*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 13 printed pages and 3 blank pages.

IB12 06_2281_11/2RP
© UCLES 2012 [Turn over
 2

1 Which combination of resources and wants causes the economic problem?

resources wants

A limited limited
B limited unlimited
C unlimited limited
D unlimited unlimited

2 What does an economist mean by capital?

A man-made goods that do not directly satisfy human wants

B money used to set up new businesses and expand existing businesses
C natural resources that will not be replaced
D the ability to earn profits by combining resources to produce goods

3 A student leaves school and decides to spend the next two years at a college to improve her
qualifications.

What is the opportunity cost to the student of taking this decision?

A the cost of the course fees at the college

B the increase in job opportunities she will have as a result of her extra qualifications
C the lost production due to her not being in work
D the money she would have earned if she had been in work for the two years

4 What is found in a mixed economy but not a free market economy?

A banks
B division of labour
C price controls
D profit motive

© UCLES 2012 2281/11/M/J/12

 3

5 A large shop selling clothes opened in a town. Its prices were much cheaper than other shops
selling similar items. As a result many more customers came to the area. They also visited
restaurants near the shop. The restaurants reported a 10 % increase in sales.

What economic concept does the above statement best illustrate?

A external benefit
B inelastic demand
C market failure
D perfect competition

6 What is not held constant in constructing a demand schedule?

A the incomes of consumers

B the prices of complementary goods
C the price of the good itself
D the tastes of consumers

7 The diagram shows the demand and supply curves for digital cameras. The original equilibrium
point is X.

What will be the new equilibrium point if these cameras become more fashionable and the rate of
sales tax rises?

supply

price A X C

D
demand
O quantity

8 A shop sells chocolate birthday cakes. When the price was $15 it sold 40 cakes. It reduced the
price to $10 and sold 60 cakes.

What can be concluded from this?

A The firm will make less profit because the price has fallen.
B The firm will make more profit because sales have increased.
C The price elasticity is inelastic because demand only increased by 50 %.
D There is unit price elasticity because the firm’s revenue remained the same after the price
change.

© UCLES 2012 2281/11/M/J/12 [Turn over

 4

9 In 2010, a major oil leak from an oil rig affected many people living around the Gulf of Mexico.

What type of market failure did they experience?

A monopoly exploitation
B negative externality
C price discrimination
D rising tax burden

10 What changes would move the equilibrium in the diagram from point X to a new point within
area Z?

S
Z

X
price

D
O quantity

A a decrease in demand with a decrease in supply

B a decrease in demand with an increase in supply
C an increase in demand with a decrease in supply
D an increase in demand with an increase in supply

11 What is likely to cause wages in an occupation to be high?

A a low level of responsibility

B high unemployment
C pleasant working conditions
D the need for special skills

© UCLES 2012 2281/11/M/J/12

 5

12 A trade union negotiates a basic weekly wage for its members with all employers in an industry.
In addition to the basic wage, one company also operates a production bonus at factory level.

What is the aim of this company?

A to give equal wages to all workers

B to increase the efficiency of the workers

C to introduce a minimum wage
D to reduce its total wage bill

13 What might cause a rise in the proportion of income that a person saves?

A a fall in interest rates

B a fall in population
C a fall in real incomes
D a fall in the income tax rate

14 For anything to be used as money, it must be

A a fixed value.
B in fixed supply.
C legal tender.
D readily acceptable.

15 Which is a major function of a commercial bank?

A acting as the lender of last resort

B collecting direct and indirect taxes
C issuing bank notes and coins
D lending money to its customers

© UCLES 2012 2281/11/M/J/12 [Turn over

 6

16 The table shows information for two workers.

doctor window cleaner

annual income ($) 50 000 20 000

total deductions ($) 10 000 8 000

Both workers save 10 % of their disposable income.

How much is this in each case?

doctor window cleaner

A $12 000 $40 000

B $1 200 $4 000
C $40 000 $12 000
D $4 000 $1 200

17 Which is a diseconomy of scale?

A Bulk buying reduces costs.

B Communications deteriorate.
C Employees are more motivated.
D Technological improvements take place.

18 The financial director of a company adds up the cost for the firm of rent, insurance, new
machinery and the chief executive’s basic salary. The director then divides that total by the firm’s
output.

What has the director calculated?

A average fixed cost

B average revenue
C average total cost
D average variable cost

19 A manufacturing firm wishing to have better control of its raw materials would seek to grow

A horizontally.
B laterally.
C vertically backwards.
D vertically forwards.

© UCLES 2012 2281/11/M/J/12

 7

20 Amit and Pardeep set up in business together. Each has half of the shares in the business and
limited liability.

What type of business organisation is this?

A a co-operative
B a partnership
C a private company
D a public company

21 The table shows a firm’s average revenue and average cost.

What level of output, A, B, C or D, gives maximum profit?

output (units) average revenue ($) average cost ($)

A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18

22 If a perfectly competitive market becomes a monopoly, what will be likely to increase and what
will be likely to decrease?

increase decrease

A barriers to entry economies of scale

B long-run profits competition
C output market share
D consumer choice prices

23 What would be most likely to reduce the rate of inflation?

A an increase in direct taxes

B an increase in government expenditure
C an increase in indirect taxes
D an increase in the budget deficit

© UCLES 2012 2281/11/M/J/12 [Turn over

 8

24 A government decides to sell to a private firm its monopoly supply of gas to households.

How could the government protect the interests of households after selling a large company to
the private sector?

A by excluding all competition from foreign companies

B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas

25 Why are schools sometimes built and run with government money?

A The private sector could not afford the cost of investment to build schools.
B The private sector would have lower standards than government schools.
C The provision of schools by the government ensures the widest choice for students.
D There are external benefits from the provision of education.

26 Changes in demand mean that the government of Bangladesh hopes to switch some production
from clothes made by low-paid, unskilled workers to medicines produced by highly-trained
technicians.

Which policies would enable Bangladesh to achieve this switch in employment and production?

A close clothes factories and decrease imports

B encourage immigration of foreign labour and introduce tariffs on clothing
C invest in education and purchase new machines
D substitute labour for machines and encourage emigration of workers from Bangladesh

© UCLES 2012 2281/11/M/J/12

 9

27 A country has a tax system which places no tax on incomes below $5000, is proportional on
incomes between $5000 and $10 000 and is progressive on incomes above $10 000.

Which graph illustrates this tax system?

A B

% of income % of income
paid in tax paid in tax

0 5 10 15 0 5 10 15
income $000s income $000s

C D

% of income % of income
paid in tax paid in tax

0 5 10 15 0 5 10 15
income $000s income $000s

28 The following are a government’s receipts from taxation.

$m

tax on company profits 90

income tax 500
import duties 25
sales tax (VAT) 200

What is the total amount of revenue raised by direct taxes?

A $315m B $525m C $590m D $700m

© UCLES 2012 2281/11/M/J/12 [Turn over

 10

29 An increase in which of the following is least likely to cause inflation?

A consumer spending
B government spending
C income tax
D wages

30 Why might an increase in employment reduce a country’s productivity?

A The cost of employing workers may increase.

B The new workers employed may be less skilled.
C The new workers employed may work with more advanced technology.
D The price of goods produced may fall.

31 Between 2009 and 2010, an economy grew by 2.1 %.

What is most likely to have increased during this period?

A population
B production
C unemployment
D wages

32 A country experienced its usual yearly increase in the rate of unemployment. Unfortunately this
was followed by the loss of jobs resulting from the regular downturn in global economic activity.

Which types of unemployment occurred?

first type of second type of

unemployment unemployment

A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional

© UCLES 2012 2281/11/M/J/12

 11

33 A government has a target of keeping inflation between 2 % and 3 %.

The diagram shows the rate of inflation over a four year period.

5
4
3 inflation
rate of
inflation 2 target
%
1
0
1 2 3 4
–1
year

What can be deduced from the diagram?

A The government target was missed in two years.

B The price level fell in two years.
C The price level was at its highest in the first year.
D The real value of money fell in three years.

34 After more than 70 years of production, a German car manufacturer, Volkswagen, has decided to
locate the production of its biggest selling car in developing countries, rather than Germany.

What is the main advantage of this policy?

A to access new management techniques

B to make use of better infrastructure
C to sell the car only to customers in developing countries
D to train and employ labour at a lower cost

35 What is usually a characteristic of a developed country?

A a dependency on primary product exports

B high rates of economic growth
C low levels of productivity
D low rates of population growth

© UCLES 2012 2281/11/M/J/12 [Turn over

 12

36 What is most likely to be found in both developed and developing economies?

A Adult literacy rates are more than 90 %.

B A high proportion of wealth is owned by a few people.
C Earnings from agriculture and mining contribute most to GDP.
D Those who live in rural areas have access to proper sanitation.

37 The charts show the population structure of a country in 1950 and 2010.

age age
male female male female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4

3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions
1950 2010

What decreased between 1950 and 2010?

A average age
B number of people below 15
C number of people over 60
D total population

© UCLES 2012 2281/11/M/J/12

 13

38 What is an advantage to a country of free trade?

A greater international diversification of production

B greater range of domestically produced goods
C greater reliance on other countries
D greater specialisation in the use of resources

39 The diagram shows the value of exports and imports of goods of a country in five years.

30

25
key
20
exports
$m 15
imports
10

0
1 2 3 4 5
year

Between which two years did the country have an increase in the value of imports and an
improvement in its trade balance?

A 1 and 2 B 2 and 3 C 3 and 4 D 4 and 5

40 Which factor would cause a country’s exchange rate to fall?

A demand for imports increase

B domestic interest rates rise
C domestic savings increase
D more tourists visit the country

© UCLES 2012 2281/11/M/J/12

 14

BLANK PAGE

© UCLES 2012 2281/11/M/J/12

 15

BLANK PAGE

© UCLES 2012 2281/11/M/J/12

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2012 2281/11/M/J/12

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2012
1 hour
Additional Materials: Multiple Choice Answer Sheet
*3954581408*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 12 printed pages.

IB12 06_2281_12/3RP
© UCLES 2012 [Turn over
 2

1 Economics is primarily concerned with

A allocating scarce resources for unlimited wants.

B controlling unemployment and inflation.
C determining the level of government expenditure.
D studying how new wants and economic resources can be produced.

2 Which statement about the factors of production is correct?

A Capital includes factories and machinery but not roads and ports.
B Enterprise is more often found in the public sector rather than the private sector.
C Labour is the factor that takes risks and can become unemployed.
D Land is the natural factor that can be improved by human action.

3 A student leaves school and decides to spend the next two years at a college to improve her
qualifications.

What is the opportunity cost to the student of taking this decision?

A the cost of the course fees at the college

B the increase in job opportunities she will have as a result of her extra qualifications
C the lost production due to her not being in work
D the money she would have earned if she had been in work for the two years

4 What is true of a mixed economy but is not true of a free market economy?

A There is a mixture of agricultural, manufacturing and service industries.

B There is a mixture of central authorities, firms and consumers.
C There is a mixture of external benefits and private costs.
D There is a mixture of large and small companies.

5 Journeys in city centres may be made by bus or by car.

What is an external cost of this?

A bus fares
B car fumes and noise
C licence fees for cars
D purchase of buses

© UCLES 2012 2281/12/M/J/12

 3

6 What is not held constant in constructing a demand schedule?

A the incomes of consumers

B the prices of complementary goods
C the price of the good itself
D the tastes of consumers

7 The diagram shows the demand and supply curves for digital cameras. The original equilibrium
point is X.

What will be the new equilibrium point if these cameras become more fashionable and the rate of
sales tax rises?

supply

price A X C

D
demand
O quantity

8 The table shows the demand for chocolates at two different prices.

price quantity
$ demanded

0.50 400
0.45 480

What is the price elasticity of demand when the price falls from $0.50 to $0.45?

A less than 0.5

B between 0.5 and 1
C between 1 and 1.5
D greater than 1.5

9 What is an example of market failure?

A a monopoly making abnormal profit

B prices charged to cover social cost
C the closure of small, independent shops in a rural area
D the inability of a car producer to achieve economies of scale

© UCLES 2012 2281/12/M/J/12 [Turn over

 4

10 What changes would move the equilibrium in the diagram from point X to a new point within
area Z?

S
Z

X
price

D
O quantity

A a decrease in demand with a decrease in supply

B a decrease in demand with an increase in supply
C an increase in demand with a decrease in supply
D an increase in demand with an increase in supply

11 Cleaning the streets can be an unpleasant job and yet in many countries it is badly paid.

What is likely to be the reason for this?

A There is a high degree of trade union membership among these workers.

B There is a high supply of labour because the work is unskilled.
C There is a high demand for staff in busy urban areas.
D There is a long working year because there are few holidays.

12 What might be an advantage to a trade union when arguing for an increase in its members’ pay?

A an increase in imports of a similar product

B the development of a new and profitable brand of the company’s product
C the development of new machines requiring fewer workers
D the establishment of a local college providing training

© UCLES 2012 2281/12/M/J/12

 5

13 In 2008–2009 the central bank of a developed country reduced interest rates from 5 % to 0.5 %
per year to stimulate the economy.

How would this policy have affected the amount saved and the cost of borrowing by individuals?

amount saved cost of borrowing

A decrease decrease
B decrease increase
C increase decrease
D increase increase

14 For anything to be used as money, it must be

A a fixed value.
B in fixed supply.
C legal tender.
D readily acceptable.

15 Which is a major function of a commercial bank?

A acting as the lender of last resort

B collecting direct and indirect taxes
C issuing bank notes and coins
D lending money to its customers

16 The table shows information for two workers.

doctor window cleaner

annual income ($) 50 000 20 000

total deductions ($) 10 000 8 000

Both workers save 10 % of their disposable income.

How much is this in each case?

doctor window cleaner

A $12 000 $40 000

B $1 200 $4 000
C $40 000 $12 000
D $4 000 $1 200

© UCLES 2012 2281/12/M/J/12 [Turn over

 6

17 Which is a diseconomy of scale?

A Bulk buying reduces costs.

B Communications deteriorate.
C Employees are more motivated.
D Technological improvements take place.

18 When would a firm achieve maximum profits?

A when average revenue equals average cost

B when average revenue minus variable cost is greatest
C when fixed costs are equal to variable costs
D when total revenue minus total cost is greatest

19 Domino’s, the largest US pizza chain, decided also to sell sandwiches in an attempt to increase
its revenue.

Which term describes this change?

A amalgamation
B diversification
C externalities
D vertical integration

20 Which of these statements made by an Economics student about different types of business
organisation is true?

A Partnerships face problems in raising large sums of finance.

B Private companies cannot have limited liability.
C Public companies operate in the public sector of the economy.
D Public corporations operate in the private sector of the economy.

21 The table shows the total costs of a firm. It can sell the units for $4 each.

quantity produced and sold (units) 5 6 7 8

total cost $ 17 18 21 23

How many units will the firm produce to maximise profits?

A 5 B 6 C 7 D 8

© UCLES 2012 2281/12/M/J/12

 7

22 A monopoly takes over an industry from competitive firms.

What is not likely to be true about the monopoly compared with a competitive firm?

A A monopoly will earn a higher rate of profit.

B A monopoly will gain a greater share of the market.
C A monopoly will offer a wider choice to the consumer.
D A monopoly will operate on a larger scale of production.

23 What would be most likely to reduce the rate of inflation?

A an increase in direct taxes

B an increase in government expenditure
C an increase in indirect taxes
D an increase in the budget deficit

24 Which statement about the meaning of government economic aims is correct?

A Economic growth means that a country’s real output must rise over time.
B Full employment means that no-one must be unemployed.
C Price stability means that the price of all goods and services must remain unchanged.
D Redistribution of income means that everyone must have equal incomes.

25 Which combination of government policies would most likely increase the rate of growth of
domestic production in an economy?

A an increase in expenditure on infrastructure and an increase in income tax

B an increase in interest rates and an increase in quotas on imported goods
C an increase in subsidies to domestic industry and an increase in tariffs
D an increase in value added tax (goods and services tax) and an increase in education
expenditure

26 Changes in demand mean that the government of Bangladesh hopes to switch some production
from clothes made by low-paid, unskilled workers to medicines produced by highly-trained
technicians.

Which policies would enable Bangladesh to achieve this switch in employment and production?

A close clothes factories and decrease imports

B encourage immigration of foreign labour and introduce tariffs on clothing
C invest in education and purchase new machines
D substitute labour for machines and encourage emigration of workers from Bangladesh

© UCLES 2012 2281/12/M/J/12 [Turn over

 8

27 A country has a tax system which places no tax on incomes below $5000, is proportional on
incomes between $5000 and $10 000 and is progressive on incomes above $10 000.

Which graph illustrates this tax system?

A B

% of income % of income
paid in tax paid in tax

0 5 10 15 0 5 10 15
income $000s income $000s

C D

% of income % of income
paid in tax paid in tax

0 5 10 15 0 5 10 15
income $000s income $000s

28 The following are a government’s receipts from taxation.

$m

tax on company profits 100

income tax 600
import duties 30
sales tax (VAT) 250

What is the total amount of revenue raised by direct taxes?

A $280m B $700m C $730m D $950m

© UCLES 2012 2281/12/M/J/12

 9

29 Why is it difficult for a government to measure economic growth in an economy based on

subsistence farming?

A Farmers’ families consume most of their own produce.

B Farmers have low rates of saving.
C The size of harvest is dependent on the weather.
D The surplus produce is sold to the government.

30 A country experiences a significant fall in unemployment.

What is a possible advantage and a possible disadvantage of such a fall?

possible advantage possible disadvantage

A fall in government spending on fall in labour disputes

unemployment benefits
B fall in tax revenue fall in poverty
C rise in living standards rise in inflation rate
D rise in output rise in labour mobility

31 The inhabitants of an economy experience an increase in their cost of living, their living standards
and their leisure time.

Which combination of events could explain these changes?

average
price level real GDP
working week

A decrease decrease increase

B decrease increase decrease
C increase decrease increase
D increase increase decrease

32 What must have happened in a country when it experienced an annual rate of inflation of 100 %?

A The money supply doubled.

B The price level halved.
C The purchasing power of money halved.
D The real value of money doubled.

© UCLES 2012 2281/12/M/J/12 [Turn over

 10

33 The diagram shows a country’s inflation rate in four successive years.

+15

+10

+5
inflation rate
% 0

–5

1 2 3 4
year

In which year was the country’s general price level lowest and highest?

lowest general price highest general price

level year level year

A 1 3
B 3 2
C 3 4
D 4 2

34 What level of unemployment and what distribution of income are often found in developing
economies?

level of unemployment distribution of income

A high evenly distributed

B high unequal
C low evenly distributed
D low unequal

35 Why is the size of the average family higher in developing countries than in developed countries?

A In developing countries babies are more likely to survive at birth.

B In developing countries parents start families at a later age.
C In developing countries there is often a shortage of family planning advice.
D In developing countries the government provides a higher level of child support.

© UCLES 2012 2281/12/M/J/12

 11

36 Which combination of factors might cause a country to be classified as developing rather than
developed?

A a government budget deficit and a low death rate

B a high birth rate and a low death rate
C a large population and a current account deficit
D a poor education system and a low standard of living

37 The charts show the population structure of a country in 1950 and 2010.

age age
male female male female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4

3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions
1950 2010

What decreased between 1950 and 2010?

A average age
B number of people below 15
C number of people over 60
D total population

© UCLES 2012 2281/12/M/J/12 [Turn over

 12

38 What is likely to cause a rise in a country’s foreign exchange rate?

A a fall in its exports of goods and services

B a fall in its imports of goods and services
C a fall in its inflow of income
D a rise in its outflow of transfers

39 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production

B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

40 The table shows the exchange rate of the pound (£) in US dollars ($) and the UK Balance of
Payments on current account from 1998 to 2001.

UK current
number of US
year account
$ for each £
£m
1998 1.65 –4 814
1999 1.61 –19 729
2000 1.51 –19 208
2001 1.44 –20 453

Which of the following correctly describes these trends between 1998 and 2001?

value of £
current account
in terms of US $

A appreciating improving
B appreciating worsening
C depreciating improving
D depreciating worsening

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2012 2281/12/M/J/12

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2013
1 hour
Additional Materials: Multiple Choice Answer Sheet
*0611352254*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB13 06_2281_11/3RP
© UCLES 2013 [Turn over
 2

1 A tractor factory runs out of important components and has to stop production.

How does this illustrate the economic problem?

A The factory lacks a competitive advantage.

B The factory lacks economies of scale.
C There are limited wants.
D There is evidence of scarce resources.

2 The diagram shows a production possibility curve for digital televisions and CD players.

digital televisions Y
Z

X W

O
CD players

Which movement shows an increase in the use of existing resources to increase production for
both digital televisions and CD players?

A X to W B X to Z C Z to W D Z to Y

3 Which group linked to a firm always bears the risk of the decision to produce?

A creditors
B managers
C owners
D workers

4 In a pure market economy, which secondary factor determines the distribution of goods and
services?

A fairness to the consumer

B needs of the consumer
C price of the product
D quality of the product

© UCLES 2013 2281/11/M/J/13

 3

5 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?

A B C D

S D DS

price D price S price price S

D

O quantity O quantity O quantity O quantity

6 Maize and fuel are used in the production of Mexican tortillas. In 2010 Mexico produced a record
maize crop but in 2011 rises in the price of fuel increased costs for tortilla makers.

What is likely to have happened to the price of tortillas in 2010 and 2011?

price in 2010 price in 2011

A decreased decreased
B decreased increased
C increased decreased
D increased increased

7 When the price of shirts rises from $8 to $10, the demand for shirts falls from 1000 to 500.

What is the price elasticity of demand for shirts?

A greater than 1
B unitary
C less than 1
D zero

8 What is a likely reason why many countries’ governments subsidise scientific research?

A Private sector firms may overestimate the external benefits and ignore the private benefits of
scientific research.
B Private sector firms may overestimate the external costs and ignore the private costs of
scientific research.
C Private sector firms may underestimate the private benefits and ignore the external benefits
of scientific research.
D Private sector firms may underestimate the private costs and ignore the external costs of
scientific research.

© UCLES 2013 2281/11/M/J/13 [Turn over

 4

9 When the price of a good doubles the demand falls by less than half, and the revenue received
by the seller increases.

What does this suggest about the good?

A it has substitutes
B it is a necessity
C it is in fixed supply
D it is perfectly elastic in demand

10 When is the market system not used to allocate resources?

A When a local firm persuades people to buy its products through advertising.
B When a local government fixes the price of rented accommodation.
C When a local shop has a monopoly in the area.
D When a local solicitor charges a different price for the same service to different people.

11 The use of a mobile (cell) phone to make payments is an example of which function of money?

A a medium of exchange
B a standard of deferred payment
C a store of wealth
D a unit of account

12 What is most likely to cause a person to save a larger proportion of their weekly income rather
than spend a larger proportion of their weekly income?

A a decrease in the tax on goods and services

B a decrease in weekly income
C an increase in interest rates
D an increase in the range of products available

13 Which of the following is most likely to limit wage increases in an industry?

A an increased demand for the industry’s product

B a rise in the industry’s profits
C a rise in wages for workers in similar jobs
D the replacement of workers with robots

© UCLES 2013 2281/11/M/J/13

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14 What is a function of a trade union?

A to negotiate workers’ contracts

B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm

15 Although car production is based on specialisation, fewer workers are employed than 20 years
ago.

What might be the reason for this change?

A Speed of car production is slower.

B Various tasks are performed by machines.
C Wages of workers have declined.
D Work is repetitive and boring.

16 Differences in earnings between higher paid and lower paid jobs have widened in developed
countries.

What is the most likely reason for this?

A Immigration of unskilled workers has reduced.

B The demand for highly skilled workers has increased.
C Unemployment rates have remained low.
D Women are paid the same rates as men.

17 Which characteristic relates to perfect competition and which to monopoly?

perfect competition monopoly

A abnormal profit normal profit

B barriers to entry freedom of entry
C few firms many firms
D price taker price maker

18 Which of the following is an internal diseconomy of scale?

A a lack of communication in a firm

B a reduction of cost by buying in bulk
C a shortage of skilled labour in an area
D traffic congestion in a particular area

© UCLES 2013 2281/11/M/J/13 [Turn over

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19 Cocoa and sugar are used in a factory to produce chocolate.

What is a fixed cost in the production of chocolate?

A cocoa
B electricity
C rent
D sugar

20 In August 2008, Infosys, an Indian information technology company, bought Axon, a UK

information technology company.

Which type of integration is this?

A conglomerate
B horizontal
C vertical backwards
D vertical forwards

21 The multinational Indian Tata Group, which has companies in chemicals, consumer goods,
engineering and communications, has been buying foreign companies.

What does this action most likely suggest about the company?

A It intends to achieve a domestic monopoly position.

B It intends to increase its level of specialisation.
C It intends to reduce fixed costs.
D It intends to spread risks by diversification.

22 The table shows the costs of a firm.

units of output variable costs ($) total costs ($)

10 20 80
20 50 110
30 80 140
40 110 170

What is the value of the firm’s fixed costs?

A $20 B $30 C $60 D $80

© UCLES 2013 2281/11/M/J/13

 7

23 A government wishes to use a fiscal policy measure.

What could it do?

A increase the money in circulation

B put a quota on imports
C raise direct taxes
D raise interest rates

24 What is the most likely result of an increase in interest rates?

A a rise in investment
B a rise in borrowing
C a fall in consumer spending
D a fall in productivity

25 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

26 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

© UCLES 2013 2281/11/M/J/13 [Turn over

 8

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

D S2

price S1

O quantity

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

28 A government wants to reduce basic food prices without making the current account of the
balance of payments worse.

What should it do?

A ban food exports

B put duties on food imports
C ration basic foods
D subsidise local food producers

29 Why is the Human Development Index (HDI) a better indicator of comparative living standards
than Gross Domestic Product (GDP) per head?

A It includes international trade.

B It includes more measures of living standards.
C It is measured in money terms.
D It is more directly linked to economic growth.

© UCLES 2013 2281/11/M/J/13

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30 In developed economies there are changing patterns of employment.

What explains why fewer work in 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

31 The table gives information about some economic indicators in a number of countries.

inflation interest rates unemployment

% % %

country W 1.4 3.4 10.2

country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.

B Countries with higher interest rates have lower inflation.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the highest inflation.

32 A price index is used to compare retail prices from one year to another.

In 2001 the retail price of a litre of oil was $0.50.

Using 2001 as a base year (index 100), for which year was the oil price index 140?

price of oil
year
per litre ($)

A 2003 0.60
B 2005 0.70
C 2007 0.80
D 2009 0.90

© UCLES 2013 2281/11/M/J/13 [Turn over

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33 What is most likely to cause a reduction in the rate of inflation?

A an increase in consumer demand

B an increase in productivity
C an increase in the supply of money
D an increase in wage demands

34 In some developing countries the agricultural sector employs the majority of the working
population. However, the countries cannot produce enough food themselves and still need food
imports.

What would be the most likely cause of an improvement in the standard of living of those
countries?

A a change in production techniques which replaces labour with machines

B a decrease in world food prices
C a fall in the country’s foreign exchange rate
D a period of low rainfall

35 The table shows the percentage share of GDP held by the richest 20% and poorest 20% of the
population in each country.

Which country had the greatest extremes of income and poverty?

country richest 20% poorest 20%

A Ghana 41.7% 8.4%

B Nigeria 55.7% 4.4%
C Senegal 48.2% 6.4%
D South Africa 64.8% 2.9%

36 On 17 October 2006, the US population reached 300 million and was predicted to increase to
400 million by 2043.

Which change would mean that the US population moves in the opposite direction to that
predicted?

A a change from net immigration to net emigration

B the birth rate falling more slowly than the death rate
C the death rate falling below the net immigration rate
D the infant mortality rate decreasing more rapidly than the increase in life expectancy

© UCLES 2013 2281/11/M/J/13

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37 What is most likely to be an indicator that a country is a developed economy rather than a
developing economy?

A a dominant service sector

B a high birth rate
C a lack of capital-intensive production
D a low level of adult literacy

38 A country experienced a deficit on its trade in goods, income and current transfers. Overall, it had
a surplus on the current account of its balance of payments.

What must this mean?

A It had a floating exchange rate.

B It had a surplus on its trade in services.
C It had a surplus on the government’s budget.
D It was a developing country.

39 What is thought to be a benefit of global free trade?

A It increases the opportunity for domestic producers to specialise.

B It increases the protection for domestic producers.
C It reduces a country’s reliance on other countries.
D It reduces the transport costs involved in trading.

40 The table gives the retail price of a product in four countries in 2012.

New Zealand $20.00 (New Zealand dollars)

Pakistan 1500 Rupees
South Africa 125 Rand
United Kingdom £10.00

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

A direct tax rates

B exchange rates
C import tariff rates
D transport costs

© UCLES 2013 2281/11/M/J/13

 12

BLANK PAGE

Copyright Acknowledgements:

Question 26 © Business Section; The Daily Telegraph; Telegraph Media Group Ltd; 9 August 2011.
Question 35 © World Bank Social Indicatiors; The World Bank; 2002.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2013 2281/11/M/J/13

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2013
1 hour
Additional Materials: Multiple Choice Answer Sheet
*5589429563*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB13 06_2281_12/3RP
© UCLES 2013 [Turn over
 2

1 Why will the economic problem never be solved?

A People will always want more products than can be produced.

B People will never agree on what is the best economic system.
C There will always be an uneven distribution of income.
D There will always be some people unemployed.

2 A country is producing at point X on its production possibility curve which shows how it can
allocate its production between capital goods and consumer goods.

A period of recession then causes some of its factories to close.

Which point could represent the country’s new position?

A B

X
capital
goods C D

O consumer goods

3 Reena makes a living by selling paintings of the town in which she lives. She sells them in an
open-air market once a week.

In order to be able to sell more pictures in a week she decides to buy a studio, pay someone to
help in the studio and try to increase demand by advertising in the local paper.

Which factors of production were changed?

A capital and enterprise

B enterprise and labour
C labour and capital
D labour only

© UCLES 2013 2281/12/M/J/13

 3

4 A country needs extra nurses. How could this be encouraged in a mixed economy but not in a
market economy?

A Extra part-time nursing courses could be arranged by private colleges.

B Nurses could be given a higher statutory minimum wage.
C Nursing students could be asked to pay increased fees.
D Nursing training colleges could have their subsidies reduced.

5 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?

A B C D

S D DS

price D price S price price S

D

O quantity O quantity O quantity O quantity

6 Many countries buy oil from Saudi Arabia.

Which change is most likely to lead to a fall in the price of a barrel of oil?

A an increase in demand of 10% with no change in supply

B an increase in demand of 10% with an increase in supply of 10%
C no change in demand with a 10% decrease in supply
D no change in demand with a 10% increase in supply

7 A recent study has found that the price elasticity of demand for cigarettes in the USA is –0.7.

What can be concluded from this information?

A A fall in the price of cigarettes would lead to a fall in the revenue of cigarette producers.
B A rise in the price of cigarettes would lead to a fall in consumer expenditure on cigarettes.
C A 7% increase in the price of cigarettes would reduce the quantity demanded by 10%.
D A 10% increase in the cost of producing cigarettes would lead to a 7% fall in the quantity
demanded.

© UCLES 2013 2281/12/M/J/13 [Turn over

 4

8 A government makes public transport free to try to reduce car use in a city.

What might explain why people continue to use their own cars?

A Cars are less crowded than public transport.

B Car use does not cause external costs.
C Public transport has a better safety record than cars.
D Public transport networks require high capital costs.

9 When the price of a good doubles the demand falls by less than half, and the revenue received
by the seller increases.

What does this suggest about the good?

A it has substitutes
B it is a necessity
C it is in fixed supply
D it is perfectly elastic in demand

10 What is an example of market failure?

A a balance of trade deficit

B monopoly profits
C rapidly rising price levels
D the production of non-essential goods

11 A function of money is to act as a measure of value.

What does this mean?

A It is used to compare the worth of different goods.

B It is used to enable monthly payments for expensive goods.
C It is used to pay the price of a good.
D It is used for future savings.

12 Why may a rise in the rate of interest cause some people to save less?

A They may be saving for a fixed 10 year term.

B They may be saving out of habit.
C They may be saving to leave as much money as possible to their children.
D They may be saving to raise a particular sum of money.

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 5

13 Which of the following is most likely to limit wage increases in an industry?

A an increased demand for the industry’s product

B a rise in the industry’s profits
C a rise in wages for workers in similar jobs
D the replacement of workers with robots

14 What is a function of a trade union?

A to negotiate workers’ contracts

B to promote workers to more responsible jobs
C to recruit workers for the firm
D to supervise the workers in the firm

15 Each worker in a firm specialises in performing one task. The firm then decides that each worker
should carry out a variety of tasks.

Which benefit will the firm be expecting to gain from the change?

A a decrease in the equipment workers need to be given

B a decrease in the time it takes to train workers
C an increase in the ability to cover for absent staff
D an increase in the skill gained from repetition

16 The diagram shows how the weekly earnings of four workers changed between ages 16 and 64.

Which line is most likely to represent the change in the weekly earnings of an unskilled, manual
labourer?

average
weekly
earnings
B

C
D
16 32 48 64
age

© UCLES 2013 2281/12/M/J/13 [Turn over

 6

17 Why is a firm in perfect competition a price taker?

A Demand for its product is perfectly inelastic.

B Demand for its product is unaffected by changes in market conditions.
C It is one of a small number of firms in the industry.
D Its output is too small to have any effect on a proportion of the total market.

18 What will happen to a firm that expands to take advantage of economies of scale?

A Average costs of production will decrease.

B Average costs of production will increase.
C Profits will decrease.
D The price of the firm’s products will increase.

19 Cocoa and sugar are used in a factory to produce chocolate.

What is a fixed cost in the production of chocolate?

A cocoa
B electricity
C rent
D sugar

20 In August 2008, Infosys, an Indian information technology company, bought Axon, a UK

information technology company.

Which type of integration is this?

A conglomerate
B horizontal
C vertical backwards
D vertical forwards

21 In a city, both large and small shops sell clothes.

Why do large and small shops exist together?

A Large clothing shops create barriers to entry.

B Small shops always sell clothes at lower prices.
C The market for clothing operates under perfect competition.
D There is demand from consumers for a range of fashions.

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 7

22 An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of
operation he spends $70 000 on materials, employs ten production workers paid by the amount
produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.

What are his total variable costs?

A $100 000 B $150 000 C $220 000 D $370 000

23 Goods and Services Tax (GST) is charged on purchases at 15% in New Zealand and 10% in
Australia.

This tax is considered to be

A direct.
B progressive.
C proportional.
D regressive.

24 What is the most likely result of an increase in interest rates?

A a rise in investment
B a rise in borrowing
C a fall in consumer spending
D a fall in productivity

25 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

26 A government reduces the interest rate to encourage economic growth.

Which other aim of government policy might now become more difficult to achieve?

A reducing a balance of trade in goods surplus

B reducing a government budget deficit
C reducing the level of unemployment
D reducing the rate of inflation

© UCLES 2013 2281/12/M/J/13 [Turn over

 8

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

D S2

price S1

O quantity

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

28 A government wants to reduce basic food prices without making the current account of the
balance of payments worse.

What should it do?

A ban food exports

B put duties on food imports
C ration basic foods
D subsidise local food producers

29 In an economic recession, which policy might be adopted to reduce unemployment?

A an increase in foreign exchange rates

B an increase in interest rates
C a reduction in import duty
D a reduction in tax rates

30 In 2010 there was an increase in net emigration from Ireland.

What is most likely to have caused this increase?

A a decrease in job security abroad

B a decrease in wage rates abroad
C an increase in Ireland’s real GDP
D an increase in unemployment in Ireland

© UCLES 2013 2281/12/M/J/13

 9

31 In the United States (US) Consumer Price Index (CPI), food has a weighting of 13.7%. In the
Indian CPI, food’s weighting is 46.2%.

What can be concluded from this?

A Consumers in India spend more on food than US consumers.

B Food is a bigger proportion of consumer spending in India than in the US.
C The farming sector’s output of food is higher in India than in the US.
D The price of food is rising more rapidly in India than in the US.

32 In July 2011 the monthly rate of inflation decreased to 2%. At that time it was expected that it
would be 1% in August but would not continue to decline in September.

If this occurred, what happened to prices in July, August and September?

July August September

A fell fell uncertain

B fell rose rose
C rose fell uncertain
D rose rose rose

33 Which is most likely to lead to a fall in the rate of inflation?

A a decrease in import prices

B a decrease in income tax
C an increase in consumer spending
D an increase in unemployment benefits

34 In Botswana, better health care has meant that birth rates have been falling faster than death
rates. Also the number of children born, on average, to each woman has declined. In 1981,
women had 6.4 children on average; by 2006, the average was 3.2

What may be concluded from this information?

A Government spending on education will need to increase.

B Medical improvements have resulted in falling child mortality rates.
C There will be a decline in income for each person working.

D There will, in future, be an increase in the proportion of working population compared with
non-working population.

© UCLES 2013 2281/12/M/J/13 [Turn over

 10

35 The table shows data for four countries in 2006.

percentage of
life expectancy computers per labour force crude birth
(years) 100 population employed in rate
agriculture

Bangladesh 64.1 1.2 66 24.8

Egypt 71.3 3.7 27 24.2
India 64.8 1.5 60 23.0
Pakistan 65.6 1.6 42 27.2

On the basis of the information given, what is the likely ranking order of the four countries in
terms of development, starting from the most developed to the least developed?

A Bangladesh → India → Pakistan → Egypt

B Egypt → Pakistan → India → Bangladesh

C India → Egypt → Bangladesh → Pakistan

D Pakistan → Bangladesh → Egypt → India

36 Which combination of changes is most likely to result in a rise in the average living standard in a
country?

Gross Domestic general price

population
Product level

A falls falls rises

B falls rises falls
C rises falls falls
D rises rises rises

37 In the short-run, which investment is likely to be the most successful in improving living
standards?

A investment in capital intensive production

B investment in education
C investment in labour intensive production
D investment in research and development

© UCLES 2013 2281/12/M/J/13

 11

38 A country says that it wishes to increase its trade protection policies.

What might that involve?

A conservation of resources and taxes on external costs

B eliminating waste in the use of resources and the encouragement of multinational companies
C increased self sufficiency and barriers to trade
D price controls and increased regulations on domestic monopoly industries

39 The recent world recession has resulted in fewer tourists from other countries visiting the United
States (US).

How would this be recorded in the current account of the US balance of payments?

A a decrease in services exported

B a decrease in services imported
C an increase in services exported
D an increase in services imported

40 The table gives the retail price of a product in four countries in 2012.

New Zealand $20.00 (New Zealand dollars)

Pakistan 1500 Rupees
South Africa 125 Rand
United Kingdom £10.00

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

A direct tax rates

B exchange rates
C import tariff rates
D transport costs

© UCLES 2013 2281/12/M/J/13

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2013 2281/12/M/J/13

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2014
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*6337308057*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB14 06_2281_11/FP
© UCLES 2014 [Turn over
 2

1 A power station was built to provide electricity to rural villages in Namibia.

What was its opportunity cost?

A the cost of producing the electricity

B the school which could have been built instead
C the time given up by the architect to design the power station
D the wages of the workers who built the power station

2 Using all available resources, an economy produces different combinations of two types of
goods, clothes and food, shown by the production possibility curve (PPC) below.

100 units

clothes

O 50 units
food

What does the PPC indicate?

A It is more efficient to produce more of clothes than food.

B It is only possible to increase the output of clothes by reducing the output of food.
C The best situation is to produce equal units of clothes and food.
D The cost of producing a unit of clothes is always higher than that of food.

3 What is most likely to reduce the supply of factors of production in an economy?

A increasing the age of retirement

B introducing new methods of irrigation
C lowering the cost of borrowing from banks
D raising the rate of tax on profits

© UCLES 2014 2281/11/M/J/14

 3

4 The government of a developed country subsidises local private businesses, and encourages
large foreign companies to locate in the country.

Which type of economic system is this?

A free market
B mixed
C planned
D subsistence

5 What would cause a movement down the demand curve for cars?

A a fall in the price of cars

B a fall in the price of petrol
C a rise in the price of car insurance
D a rise in the price of public transport

6 An area attracts tourists to see rare animals but the tourists have few hotels in which to stay. The
local government has given permission for a developer to build a hotel. Conservationists say that
the area will be ruined as the animals will move away and the nature of the area will be changed.

What is likely to happen as a result of this decision to the private benefit of the tourists and the
external cost?

private benefit external cost

A increase increase
B decrease decrease
C uncertain increase
D uncertain decrease

7 Russia is the world’s third largest exporter of grain but much of the country’s farmland was
damaged by fire in 2010.

How would this be represented on demand and supply diagrams for the Russian grain market
and for a country importing Russian grain?

market for Russian grain

Russian grain market
in the importing country

A demand curve shifts to the left demand curve shifts to the right
B demand curve shifts to the right supply curve shifts to the right
C supply curve shifts to the left supply curve shifts to the left
D supply curve shifts to the right demand curve shifts to the left

© UCLES 2014 2281/11/M/J/14 [Turn over

 4

8 What may cause an individual to save a higher proportion of their income?

A a belief that the price of goods will rise in the future

B a fall in the rate of interest paid by the country’s banks
C a fear that income will fall in the future
D a rise in the individual’s wish to enjoy higher consumption immediately

9 Why are unskilled workers paid less than skilled workers?

A There is a higher demand for unskilled labour than skilled labour.

B There is a larger supply of unskilled labour than skilled labour.
C Unskilled labour belong to trade unions.
D Unskilled labour is more productive than skilled labour.

10 Between 2009 and 2010 the number of potential jobs for qualified law students fell by 16%.
During the same period the total number of applicants for places on law courses increased.

What is the most likely explanation for this?

A an economic recession and an increase in general unemployment

B an increase in crime rates and the possibility of high salaries in the legal profession
C an increase in the retirement age for existing lawyers and an increase in law course fees
D the merger of law firms and the closure of law courses

11 A trade union is negotiating a wage rise for its members.

What will increase the chance of the wage rise being granted?

A The company’s product has many substitutes.

B The economy is entering a period of recession.
C The government has made strike action illegal.
D Wages are a small part of the company’s costs.

12 Which type of economy of scale results from a firm producing a diverse range of products?

A buying
B financial
C risk bearing
D technical

© UCLES 2014 2281/11/M/J/14

 5

13 A market changes from perfect competition to monopoly.

What is likely to happen in this market?

barriers to economies the size of

entry of scale the firm

A decrease decrease increase

B decrease increase decrease
C increase decrease decrease
D increase increase increase

14 The diagram shows the fixed costs, variable costs and total costs of a firm.

Q
costs

O S
output

Which distance represents the firm’s fixed costs?

A PS B QR C QS D RS

15 When it produces 100 units, a firm’s total variable cost is $300 and its total fixed cost is $2700.

What is the average cost?

A $3 B $24 C $27 D $30

16 Which are two aims that a Government normally pursues when managing the performance of the
whole economy?

A to encourage an increase in production and to prevent high inflation

B to ensure no one is unemployed and to reduce exports
C to give everyone equal incomes and to increase government revenues
D to protect the environment and to reduce interest rates

© UCLES 2014 2281/11/M/J/14 [Turn over

 6

17 The Mexican government has passed a law which prevents any monopoly charging a price
significantly above its production costs. Any monopoly that breaks the law is fined.

Which type of policy measure is this?

A minimum price
B regulation
C subsidy
D tax

18 Governments aim to encourage stable prices because inflation can result in a current account
deficit on the balance of payments.

How does high inflation contribute to a current account deficit?

A Countries have to barter manufactured goods for raw materials.

B Goods manufactured for export lose their competitiveness.
C Numbers of foreign visitors increase.
D Spending on imported goods is reduced.

19 A government collects the following revenue in a year.

$m

taxes on goods 30
taxes on income 500
taxes on services 20
customs and excise duties 50

What is the amount of indirect tax revenue?

A $30 m B $70 m C $100 m D $500 m

20 What is the definition of inflation?

A an increase in demand
B an increase in output
C an increase in the general price level
D an increase in wages

© UCLES 2014 2281/11/M/J/14

 7

21 It was reported in 2011 that an economy had negative economic growth for six months in a row.

What would be evidence for such a situation?

A an increase in GDP
B an increase in profit levels
C an increase in the level of unemployment
D an increase in the standard of living

22 The diagram shows the rate of unemployment and the periods of recession in Britain between
1978 and 2012.

12

10

8
Britain’s key
unemployment 6 recession years
rate %
4

0
1980 1990 2000 2010

What can be concluded from the diagram?

A Each recession lasted for more than two years.

B Recessions occurred at regular intervals.
C The unemployment rate peaked in a recession period.
D The unemployment rate rose during recession periods.

23 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?

first aim second aim

A full employment price stability

B high economic growth full employment
C price stability stable balance of payments
D stable balance of payments more even distribution of income

© UCLES 2014 2281/11/M/J/14 [Turn over

 8

24 Which statement about poverty is correct?

A Absolute poverty occurs when income falls below what is needed for survival.
B An advanced economy is likely to have a higher level of absolute poverty than relative
poverty.
C It is impossible for relative poverty to rise as absolute poverty falls.
D Relative poverty measures the same goods and services in all countries.

25 Developing countries often wish to prevent the population in rural areas moving to the towns.
Investment grants are given to companies if they set up their businesses in rural areas.

What is this policy intended to achieve?

A decreased transport costs

B decreased external cost
C increased economies of scale
D increased use of labour

26 The table shows data collected in 2010 for the average number of children a woman gave birth to
and the education she received during her lifetime.

average number
education received
of children

none 4.5
primary school level 3.0
secondary school level 2.0
university level 1.7

What can be concluded from this information?

A Average fertility was 2.8 in 2010.

B Most girls do not go to school.
C Providing more education for girls would reduce fertility rates.
D There is no relationship between education and fertility rates.

© UCLES 2014 2281/11/M/J/14

 9

27 The table gives information about four countries.

Which country has the lowest standard of living?

life % of labour
GDP per head
force in
expectancy (US $)
agriculture

A 48 120 80
B 48 250 70
C 54 350 75
D 60 380 60

28 The Sri Lankan government decides to offer financial support to local firms.

Of what is this an example?

A a quota
B a subsidy
C a tariff
D exchange control

29 In 2012 the UK held the Olympic Games which attracted a large number of visitors from foreign
countries.

Which item of the UK’s current account balance will have benefitted directly from this event?

A export trade in goods

B export trade in services
C import trade in goods
D import trade in services

© UCLES 2014 2281/11/M/J/14 [Turn over

 10

30 Countries in Europe were in a recession in 2012. Usually a recession would mean oil prices fall.
In fact in 2012, oil prices rose.

Which international events might have explained these changes?

possible causes of an oil possible causes of an oil

price fall in the recession price rise in 2012

A European industrial China increased

production declined its car production
B India invested huge Japan’s economy
amounts in road building had negative growth
C Middle East conflicts made Saudi Arabia increased
oil supplies uncertain oil production
D new oil exploration in demand for alternative
Poland was successful fuels increased

© UCLES 2014 2281/11/M/J/14

 11

BLANK PAGE

© UCLES 2014 2281/11/M/J/14

 12

BLANK PAGE

Copyright Acknowledgements:

Question 22 © The Office for National Statistics; 2012; Open Government Licence.
Question 30 © Telegraph Business; Telegraph Media Group Ltd; 5 March 2012.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2014 2281/11/M/J/14

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2014
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*2596164428*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 9 printed pages and 3 blank pages.

IB14 06_2281_12/FP
© UCLES 2014 [Turn over
 2

1 What is the cause of economic scarcity?

A limited wants with limited resources

B limited wants with unlimited resources
C unlimited wants with limited resources
D unlimited wants with unlimited resources

2 How is an immediate effect of an increase in unemployment illustrated on a production possibility

curve diagram?

A a movement of the production point closer to the curve

B a movement of the production point further inside the curve
C a shift of the production possibility curve inwards
D a shift of the production possibility curve outwards

3 What is a factor of production?

A a semi-skilled, young worker

B direct taxes received by a government
C shares in a manufacturing company
D stocks of money held a bank

4 A supply curve shows the link between the quantity supplied and

A demand.
B equilibrium output.
C the price of the product.
D the scale of production.

5 Which headline could apply to a mixed economy but not a free market economy?

A ‘Cheap imports put domestic producers out of business.’

B ‘Local government planning decision angers residents.’
C ‘Many fish die as a company pollutes a river with waste material.’
D ‘Small shops close as large supermarkets open in the area.’

© UCLES 2014 2281/12/M/J/14

 3

6 In 2012 the local government of a city decided to increase parking charges for motorists. It was
intended to raise money to correct a deficit in the local government’s budget. The local
government said if they did not increase charges they would not be able to provide all their
current services. Businesses complained about the likely loss of revenue if parking charges were
increased.

Which concepts does this statement involve?

A inflation and the private sector

B opportunity cost and public expenditure
C private benefit and the free market
D unlimited resources and a centrally planned economy

7 In 2011 the US Government declared that the country must increase the manufacture of fuel from
crops such as corn that have previously only been used for food.

What is likely to happen in the market for corn?

A a movement along the demand curve for corn

B a movement along the supply curve for corn
C a shift to the left in the demand curve for corn
D a shift to the left in the supply curve for corn

8 What may cause an individual to save a higher proportion of their income?

A a belief that the price of goods will rise in the future

B a fall in the rate of interest paid by the country’s banks
C a fear that income will fall in the future
D a rise in the individual’s wish to enjoy higher consumption immediately

9 In a particular industry, male workers on average are paid more than female workers.

What might explain this?

A Female workers are less likely to take time off work.

B Female workers are more likely to be in trade unions.
C Male workers have higher qualifications.
D Male workers live nearer to their place of work.

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 4

10 In South Africa, the rate of consumer spending is relatively high compared with other developing
countries. However, the unemployment rate is high at 25% and only 27% of students complete
the 12 years of basic education.

As a result, what is also likely to be found in South Africa?

A a high average standard of living

B a high current rate of savings
C a high level of debt among consumers
D a high supply of skilled workers

11 A trade union is negotiating a wage rise for its members.

What will increase the chance of the wage rise being granted?

A The company’s product has many substitutes.

B The economy is entering a period of recession.
C The government has made strike action illegal.
D Wages are a small part of the company’s costs.

12 When a shoe manufacturer doubles all factors of production output more than doubles.

Which economic concept does this illustrate?

A diseconomies of scale
B economies of scale
C increasing profits
D opportunity cost

13 Which market conditions apply to firms that operate in perfect competition and which to a
monopoly?

perfect competition monopoly

A demand influenced by advertising demand not influenced by advertising

B many barriers to entry no barriers to entry
C no influence on price strong influence on price
D sales of branded products sales of unique products

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14 The diagram shows the fixed costs, variable costs and total costs of a firm.

Q
costs

O S
output

Which distance represents the firm’s fixed costs?

A PS B QR C QS D RS

15 When it produces 100 units, a firm’s total variable cost is $300 and its total fixed cost is $2700.

What is the average cost?

A $3 B $24 C $27 D $30

16 Which policy is an example of an expansionary monetary policy?

A lower interest rates

B lower money supply growth
C lower public sector spending
D lower taxation

17 What is not a public sector expenditure?

A claims paid on travel insurance for cancelled flights

B collections of rubbish by a local council to meet regulations on recycling waste
C grants from central funds to compensate people whose property has been damaged by
storms
D the establishment of a national database to assist the police in finding criminals

18 Which pair of government actions combines a fiscal policy with a supply-side policy?

A changing government spending with changing interest rates

B cutting tax rates with providing information on job vacancies
C limiting bank lending with the privatisation of industry
D restricting credit with less control over labour markets

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19 A government collects the following revenue in a year.

$m

taxes on goods 30
taxes on income 500
taxes on services 20
customs and excise duties 50

What is the amount of indirect tax revenue?

A $30 m B $70 m C $100 m D $500 m

20 Which type of unemployment occurs when the total demand for goods and services in the
economy falls?

A cyclical
B frictional
C seasonal
D structural

21 Why is the Human Development Index (HDI) often considered to be better than GDP per head as
a measure of living standards?

A GDP per head excludes economic growth.

B GDP per head ignores population growth.
C HDI includes more than the production of goods and services.
D HDI is calculated by the national government.

22 In 2013 there was a period of low interest rates and high inflation in an economy.

Who would be most likely to benefit and who most likely to lose during such a period?

benefit lose

A borrowers savers
B consumers on fixed incomes firms wishing to invest
C credit card companies sellers of luxury goods
D exporters banks

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23 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?

first aim second aim

A full employment price stability

B high economic growth full employment
C price stability stable balance of payments
D stable balance of payments more even distribution of income

24 Which combination of influences must have occurred for a population to be falling when there is
no migration?

birth rate death rate fertility rate

A falling falling falling

B falling rising falling
C falling rising rising
D rising falling falling

25 Developing countries often wish to prevent the population in rural areas moving to the towns.
Investment grants are given to companies if they set up their businesses in rural areas.

What is this policy intended to achieve?

A decreased transport costs

B decreased external cost
C increased economies of scale
D increased use of labour

26 Increasing numbers of qualified medical workers from developing economies migrate to

developed economies.

What explains this migration?

A There are better working conditions in hospitals and clinics in developed economies.
B There are fewer patients requiring medical treatment in developing countries.
C There is a lack of training opportunities for medical staff in developed economies.
D There is an oversupply of qualified medical workers in developing countries.

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27 The table gives information about four countries.

Which country has the lowest standard of living?

life % of labour
GDP per head
force in
expectancy (US $)
agriculture

A 48 120 80
B 48 250 70
C 54 350 75
D 60 380 60

28 The citizens of a country which avoids international trade may benefit from

A an increase in specialisation.
B better political and cultural ties.
C competitive pressure to improve the quality of goods.
D more employment in their industries.

29 In 2012, Nokia, a mobile phone manufacturer, produced 18% of Finland’s exports.

Why might this be undesirable for Finland?

A Foreign demand for mobile phone firms may grow continuously.

B Nokia may introduce new technology which raises total costs by less than output.
C There may be a reduction in trade restrictions on mobile phones.
D There may be an industrial dispute at Nokia.

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30 The table shows the values of the items in a country’s current account in two years.

year 1 year 2
item
($m) ($m)

balance of goods and services –30 0

net income –30 –20
net transfers ? ?
balance of current account –50 +10

How did the value of the net transfers change between year 1 and year 2?

A decreased by $10m
B decreased by $20m
C increased by $20m
D increased by $30m

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© UCLES 2014 2281/12/M/J/14

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© UCLES 2014 2281/12/M/J/14

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2014 2281/12/M/J/14

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2015
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*3771473007*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 11 printed pages and 1 blank page.

IB15 06_2281_11/FP
© UCLES 2015 [Turn over
 2

1 The following are four ways factors of production are used.

What is likely to require the greatest use of the factor enterprise?

A a carpenter making wooden articles in his leisure time for sale at a monthly market
B a corn farmer negotiating with other farmers to hire expensive machinery
C a food shop owner sometimes selling flowers in the shop
D a householder harvesting vegetables grown at home

2 To help reduce the price of oil, new supplies are needed. However, in 2013, objectors opposed
attempts to explore new sites because of the environmental damage the exploration might cause.

How does this illustrate the basic economic problem?

A Oil is a limited resource.

B Oil is expensive.
C The exploration involves demand and supply.
D There are external costs involved in production.

3 With a given level of resources, an economy that can produce food or computers is at point Q on
its production possibility curve. Population growth means more resources need to be allocated to
food production.

At which point in the short term will the economy be in the diagram?

A Q
output
D
of food C

O output of computers

© UCLES 2015 2281/11/M/J/15

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4 A person makes sandwiches at home for five hours each day. She makes 20 sandwiches per
hour, and she sells each sandwich for $2 each.

What is the opportunity cost if she takes a holiday on a working day?

A $2
B $40
C 20 sandwiches
D 100 sandwiches

5 What can be found in a mixed economy but not in a market economy?

A a national economic development plan

B an unequal distribution of income and wealth
C the operation of the price mechanism
D the private ownership of factors of production

6 Newspapers recently reported there had been a decrease in the demand for beef and that its
price per kilogram had increased.

From the initial equilibrium point X, which point in the diagram illustrates the new market
equilibrium?

S2
B
A S1

price S3
X
C
D

D2 D1 D3
O
quantity

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 4

7 The diagram shows the market for fresh fish in the Caribbean with equilibrium point X.

A new type of fishing boat increases production, which reduces costs.

Which point represents the new equilibrium?

S3
S1
S2
B
A
price X C

D D2
D1

O quantity

8 A large supermarket applied to build on land which was in an area of natural beauty. The local
government allowed the building, even though the natural beauty of the area would be lost,
because many jobs would be created and much needed income would be brought to the local
community.

Which economic ideas cannot be found in the above statement?

A external cost and private enterprise

B free market and the conservation of resources
C opportunity cost and improved standards of living
D public sector and external benefit

9 Cigarettes have been used as money in exceptional circumstances.

What is the most likely reason that they are not acceptable as money in normal circumstances?

A cigarettes lack durability

B cigarettes lack intrinsic value
C cigarettes lack portability
D cigarettes lack uniformity

© UCLES 2015 2281/11/M/J/15

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10 The table shows a country’s trade union membership in millions between 2008 and 2011.

trade union trade union

members in the members in the
year
private sector public sector
(millions) (millions)

2008 8.4 3.6

2009 6.6 4.2
2010 5.1 6.0
2011 3.4 7.1

What can be concluded about the country’s trade union membership in the period 2008 to 2011?

A Trade unions had least members in 2010.

B Trade unions had most members in 2011.
C Trade union membership fell between 2008 and 2009.
D Trade union membership rose between 2009 and 2011.

11 A bus driver works longer hours if the wage rate increases. As his earnings increase there
reaches a point when he prefers more leisure to work.

Which supply curve, S, represents this situation?

A B C D
S S

wage S wage wage wage

S
rate rate rate rate

O worker O worker O worker O worker

hours hours hours hours

12 In 2013, a German company that manufactured medicines bought a UK company that ran a chain
of pharmacies that sold medicines.

What term best describes this takeover?

A conglomerate
B horizontal
C vertical integration backwards
D vertical integration forwards

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 6

13 When is a firm considered more capital-intensive than another firm?

A when it has a lower ratio of workers to machines than the other firm
B when it has fewer workers than the other firm
C when it has higher variable costs than the other firm
D when it has more machines than the other firm

14 In 2009, Gulf Airlines, which was making a loss, stated it would reduce the number of new aircraft
on order.

If it did this, which of its costs would be directly affected?

A fixed costs
B marginal costs
C opportunity costs
D variable costs

15 The diagram shows the costs of a firm.

60

50

40
cost
($ 000s) 30

20

10

0
100
output

What is the firm's total variable cost at an output of 100 units?

A $100 B $500 C $10 000 D $50 000

© UCLES 2015 2281/11/M/J/15

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16 A government lowers the rate of interest.

Who is most likely to be disadvantaged by this policy?

A house buyers
B manufacturers
C retailers
D savers

17 Which is a supply-side policy that would increase output in the long-run?

A an increase in benefit payments

B an increase in places at training colleges
C an increase in the rate of income tax
D an increase in the rate of tax employers pay

18 Russia exports wheat. In 2010, a bad harvest led the Russian government to prevent the export
of wheat, to ensure enough supplies were kept for domestic use.

What was the most likely outcome of the government’s action?

A prices were fixed by the wheat producers

B the amount produced was determined by the government
C the price of wheat abroad fell
D there was a redistribution of domestic production

19 The government reduces the rate of income tax and increases the rate of tax on producers.

From the initial equilibrium point X, which letter indicates the new equilibrium point in the market?

S2
B
A S1

price S3
X
C
D

D2 D1 D3
O
quantity

© UCLES 2015 2281/11/M/J/15 [Turn over

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20 What is most likely to cause economic growth?

A a better educated workforce

B a reduction in the right to own property
C decreased wages
D higher taxation

21 A worker earns $250 each week, which leaves a disposable income of $175.

What will affect the real value of the worker’s $250 earned income?

A a change in government spending

B a change in interest rates
C a change in the price level
D a change in the tax rate

22 The table shows the unemployment rate in three developed economies in June 2013.

United States 7.6

Sweden 8.2
France 10.9

What is the main cause of high rates of unemployment in developed economies in periods of
recession?

A decreases in total demand

B movement of labour between countries
C reduced levels of technological change
D regional inequalities of wealth

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23 From 2012 to 2013, European economies experienced weak economic growth.

Based on the information on GDP, industrial production and unemployment in the table, which
economy performed worst?

Percentage change 2012-2013

industrial
GDP unemployment
production

A UK +1.0 –2.3 –0.1

B Germany +0.3 –1.1 0.0
C Italy –1.8 –4.2 +1.5
D Spain –1.7 –1.3 +1.3

24 What is not a reason why the average size of families is likely to be greater in developing
countries than in developed countries?

A Children offer the prospect of security in old age.

B Government child care support is widely available.
C Means of birth control are less available and more expensive.
D Women are less likely to be part of the workforce.

25 The table shows the proportion of GDP produced by each sector of production in three fictitious
countries.

Farland Highland Lowland

(% of GDP) (% of GDP) (% of GDP)

primary sector 30 10 35
secondary sector 20 60 25
tertiary sector 50 30 40

What can be concluded from the table?

A Farland is the least developed economy.

B Highland is the most developed economy.
C It is uncertain which is the most developed economy.
D Lowland is the least developed economy.

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26 In rural areas in developing countries, farmers grow food for their own consumption.

Why might this mean that the GDP is a weak measure of the standard of living in those
countries?

A The food grown is not exported.

B The GDP does not include agricultural production.
C The GDP only refers to the public sector.
D The value of the food is unknown.

27 The charts show the population structure of a country in 1960 and 2010.

age age
85+ 85+
80-84 80-84
75-79 75-79
male 70-74 female male 70-74 female
65-69 65-69
60-64 60-64
55-59 55-59
50-54 50-54
45-49 45-49
40-44 40-44
35-39 35-39
30-34 30-34
25-29 25-29
20-24 20-24
15-19 15-19
10-14 10-14
5-9 5-9
0-4 0-4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions

1960 2010

During this period, how did birth and death rates change?

birth rates death rates

A fell fell
B fell no change
C rose fell
D rose no change

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28 What is an advantage of international specialisation?

A choice is limited
B countries become overdependent on each other
C resources are used more efficiently
D transport costs are decreased

29 Skin creams preventing sunburn made in the European Union (EU) are more effective than those
made in the United States (US). US tourists stock up on the creams when visiting Europe. Such
creams are banned from production in the US because of the chemicals in them. In 2013,
negotiations began to remove this ban in order to allow production in the US.

How is this freer trade likely to affect manufacturers of skin creams in the US and the EU?

manufacturers manufacturers
in the US in the EU

A gain gain
B gain lose
C lose gain
D lose lose

30 The table shows the trade in goods balance and the current account balance of the balance of
payments for four countries during a year.

Which country had the largest surplus on its trade in services, assuming no other transfers or
income flows?

trade in goods current account

country balance balance
($ billion) ($ billion)

A Hong Kong 6.2 6.2

B Indonesia 4.4 4.3
C Mexico 7.8 7.6
D Singapore 5.3 5.4

© UCLES 2015 2281/11/M/J/15

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2015 2281/11/M/J/15

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2015
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*8431840839*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB15 06_2281_12/FP
© UCLES 2015 [Turn over
 2

1 What is the basic economic problem?

A finite resources and limited wants

B finite resources and unlimited wants
C infinite resources and limited wants
D infinite resources and unlimited wants

2 New oil reserves are discovered.

What has increased in supply?

A capital
B enterprise
C labour
D land

3 The diagram shows production possibility curves (PPC) for a country that can produce
agricultural products or manufactured products.

Its current PPC passes through points Q and S but the country is currently experiencing
unemployment.

Q R

agricultural
products
P S

O
manufactured products

If there is now full employment at the same time as new agricultural techniques enable an
increase in productivity, what would be the movement on the PPC diagram?

A P to R B P to S C Q to R D S to Q

© UCLES 2015 2281/12/M/J/15

 3

4 A person makes sandwiches at home for five hours each day. She makes 20 sandwiches per
hour, and she sells each sandwich for $2 each.

What is the opportunity cost if she takes a holiday on a working day?

A $2
B $40
C 20 sandwiches
D 100 sandwiches

5 What would not be an example of the working of a market system?

A a high price charged because of costly research to produce the good

B a high price charged for a well-known painting
C a low price charged because of economies of scale
D a low price charged for subsidised bus travel

6 A product has a price elasticity of supply of +2. A change in price causes the quantity supplied to
change from 100 units to 120 units.

What is the price change?

A a fall of 10%
B a fall of 40%
C a rise of 10%
D a rise of 40%

© UCLES 2015 2281/12/M/J/15 [Turn over

 4

7 The diagram shows the market for fresh fish in the Caribbean with equilibrium point X.

A new type of fishing boat increases production, which reduces costs.

Which point represents the new equilibrium?

S3
S1
S2
B
A
price X C

D D2
D1

O quantity

8 A large supermarket applied to build on land which was in an area of natural beauty. The local
government allowed the building, even though the natural beauty of the area would be lost,
because many jobs would be created and much needed income would be brought to the local
community.

Which economic ideas cannot be found in the above statement?

A external cost and private enterprise

B free market and the conservation of resources
C opportunity cost and improved standards of living
D public sector and external benefit

9 A businesswoman seeks a 10-year loan from a bank. She has listed her four most valuable
possessions which could be offered to the bank in order to obtain the loan.

Which item would the bank be least likely to accept as security for the loan?

A a collection of gold coins, jewellery and antiques

B a house in a desirable part of town
C a part ownership in a race horse
D a portfolio of government bonds

© UCLES 2015 2281/12/M/J/15

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10 A trade union and employers agree a minimum wage (W1) which is above the market equilibrium
wage (W) for that industry.

supply of labour
W1

W
wage

demand for labour

O Q
labour employed

What is the effect of paying the minimum wage (W1)?

A demand for workers will exceed the supply

B fewer workers will be employed
C some workers will continue to be paid at wage W
D workers will be less willing to work for the minimum wage

11 In choosing their occupation, people often take into account aspects of the job other than pay.

Which would not be a good match for the aspects of employment a worker is looking for?

desired aspect occupation

A a wish for an outdoor lifestyle army officer

and to develop teamwork
B a wish for foreign travel airline pilot
and to have responsibility
C a wish for public respect and heart surgeon
to undertake precise work
D a wish to work with the general marine biologist
public and investigate nature

12 What may exist in monopoly but not in perfect competition?

A barriers to entry
B identical products
C market price
D perfect knowledge

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13 What is not a reason for the decline in manufacturing industries in developed economies in
recent years?

A growth of newly industrialised competitor countries

B invention of automated production methods
C rising costs of factor inputs in the steel industry
D considerable skill shortages as school-leavers prefer to work in the service sector

14 In 2013, Barclays Bank had two branches in a city. It decided to close them both, move to a
different building and employ fewer hourly-paid staff.

What is likely to have happened to the bank’s fixed and variable costs?

fixed cost variable cost

A fall fall
B fall rise
C rise fall
D rise rise

15 The diagram shows the costs of a firm.

60

50

40
cost
($ 000s) 30

20

10

0
100
output

What is the firm's total variable cost at an output of 100 units?

A $100 B $500 C $10 000 D $50 000

© UCLES 2015 2281/12/M/J/15

 7

16 What is most likely to cause a fall in the rate of inflation?

A an increase in consumer spending

B an increase in import prices
C an increase in income tax
D an increase in wage rates

17 In recent years, governments have had to manage the effects of a world recession.

Which supply-side policy could have been used to stimulate economic growth?

A increases in income tax

B investment in skills training schemes
C payments of unemployment benefits
D reduction in interest rates

18 Russia exports wheat. In 2010, a bad harvest led the Russian government to prevent the export
of wheat, to ensure enough supplies were kept for domestic use.

What was the most likely outcome of the government’s action?

A prices were fixed by the wheat producers

B the amount produced was determined by the government
C the price of wheat abroad fell
D there was a redistribution of domestic production

19 A government increases expenditure on infrastructure to stimulate an economy.

With which of the other government aims for an economy might this conflict?

A a decrease in income inequality

B a higher rate of economic growth
C a lower level of unemployment
D a steady price level

20 Who is most likely to benefit during a period of inflation?

A creditors (lenders)
B debtors (borrowers)
C fixed income earners
D holders of cash

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21 The Human Development Index (HDI) measures more than just average incomes.

What are two additional measures it includes?

A life expectancy years of schooling

B percentage unemployed number of hospitals
C poverty rate years of schooling
D years of schooling access to clean water

22 The table shows some economic indicators for four countries.

country inflation unemployment GDP growth

P 3.0% 11.3% 3.5%

Q 4.2% 7.6% 1.0%
R 1.3% 12.2% 3.0%
S 3.5% 10.1% 2.3%

What can be concluded from the table?

A high GDP growth occurred with low unemployment

B high inflation occurred with high GDP growth
C low GDP growth occurred with low inflation
D low inflation occurred with high unemployment

23 When would an increase in aggregate demand be least likely to result in inflation in an economy?

A when it is the result of an increase in government expenditure

B when it is the result of an increase in expenditure on consumer goods
C when there are substantial unemployed resources in the economy
D when there is a substantial increase in expenditure on imports

24 In 2013, subsistence farming, which involved a large percentage of the population, was a
significant activity in the Philippines and Indonesia.

What can be concluded about the Philippines and Indonesia from this information?

A a good use was being made of natural resources

B production was likely to involve skilled labour
C the GDP in these countries was likely to be underestimated
D there was no need to import food because the population was self-sufficient

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25 Which feature is not a typical characteristic of a developed country?

A a high death rate

B a high literacy rate
C a large elderly population
D a low number of doctors per head

26 The charts show the population structure of a country in 1960 and 2010.

age age
85+ 85+
80-84 80-84
75-79 75-79
male 70-74 female male 70-74 female
65-69 65-69
60-64 60-64
55-59 55-59
50-54 50-54
45-49 45-49
40-44 40-44
35-39 35-39
30-34 30-34
25-29 25-29
20-24 20-24
15-19 15-19
10-14 10-14
5-9 5-9
0-4 0-4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions

1960 2010

During this period, how did birth and death rates change?

birth rates death rates

A fell fell
B fell no change
C rose fell
D rose no change

© UCLES 2015 2281/12/M/J/15 [Turn over

 10

27 Which combination of changes is most likely to result in a fall in living standards in a country?

GDP inflation population

A fall fall rise

B fall rise rise
C rise fall fall
D rise rise fall

28 What is an advantage of international specialisation?

A choice is limited
B countries become overdependent on each other
C resources are used more efficiently
D transport costs are decreased

29 The table shows information on the trading position of four major economies in 2013.

Which country had the strongest trading position?

current account
currency unit
country balance % of GDP
per US $
(US $ billion)

A China +211.7 +1.9 6.12

B Germany +246.0 +6.4 0.75
C Japan +54.1 +1.0 79.4
D UK –96.7 –2.8 0.64

30 The table shows the trade in goods balance and the current account balance of the balance of
payments for four countries during a year.

Which country had the largest surplus on its trade in services, assuming no other transfers or
income flows?

trade in goods current account

country balance balance
($ billion) ($ billion)

A Hong Kong 6.2 6.2

B Indonesia 4.4 4.3
C Mexico 7.8 7.6
D Singapore 5.3 5.4

© UCLES 2015 2281/12/M/J/15

 11

BLANK PAGE

© UCLES 2015 2281/12/M/J/15

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2015 2281/12/M/J/15

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2016
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*2536405131*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 11 printed pages and 1 blank page.

IB16 06_2281_11/FP
© UCLES 2016 [Turn over
 2

1 The diagram shows an initial production possibility curve of PPC1.

PPC2

capital PPC1
goods

O consumer goods

What may cause the movement of the production possibility curve from PPC1 to PPC2?

A a better educated workforce

B a decrease in availability of raw materials
C increased wages
D lower productivity

2 An increase in the number of manufacturing robots in the car manufacturing industry represents
an increase in the quantity of which factor of production?

A capital
B enterprise
C labour
D land

© UCLES 2016 2281/11/M/J/16

 3

3 The diagram shows the choices for an individual between leisure and earnings.

18

15

12
hours of leisure X
9
per day
Y
6

0
10 20 30 40 50 60
earnings $

What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?

A $10
B $40
C 3 hours of leisure per day
D 9 hours of leisure per day

4 A government taxes the production of cars.

What is likely to decrease?

A the cost of supplying cars

B the price of cars
C the revenue for the government
D the supply of cars at every price

5 Which pair of economic institutions can be found in a market economy?

A charities and public corporations

B multinationals and commercial banks
C public corporations and private companies
D stock exchange and government hospitals

© UCLES 2016 2281/11/M/J/16 [Turn over

 4

6 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 directly 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

7 The diagram shows the market for rice.

S2
S1

P2
price P1

D
O Q2 Q1
quantity

What would have caused the equilibrium price to rise from OP1 to OP2?

A a government subsidy to rice farmers

B a successful advertising campaign for rice
C improved rice farming methods
D poor weather conditions

8 What might a trade union usually be expected to do for its members?

A arrange childcare facilities for members’ children

B ensure adequate promotion prospects exist
C negotiate better working conditions
D provide medical insurance

© UCLES 2016 2281/11/M/J/16

 5

9 What is the usual reason why citizens trust their country’s banknotes?

A They are acceptable for trade and exchange.

B They are backed by gold at the central bank.
C They are convertible into the US$ or Chinese Yuan.
D They are recognisable and in infinite supply.

10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.

An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.

D1 S1

S2
W

wage
($)

S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)

How many people will be employed if the minimum wage legislation is then abolished?

A 4 million B 5 million C 6 million D 7 million

© UCLES 2016 2281/11/M/J/16 [Turn over

 6

11 The table shows how three people spend their income.

person X person Y person Z

food, clothing and housing 30% 25% 50%

entertainment and leisure 35% 35% 25%
luxury goods 35% 40% 25%

For these three people, what is the most likely order of income, from highest income to lowest
income?

A X→Y→Z

B Y→X→Z

C Y→Z→X

D Z→X→Y

12 How does a firm guarantee that it makes the maximum profit?

A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost

13 Which characteristic does a firm in perfect competition have in common with a monopoly?

A the ability to exclude rivals

B the benefit of internal economies of scale
C the problem of diseconomies of scale
D the wish to maximise profits

© UCLES 2016 2281/11/M/J/16

 7

14 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.

land labour capital output

5 2 4 100
10 4 8 150

What is the firm experiencing?

A constant returns to scale

B diseconomies of scale
C external diseconomies of scale
D external economies of scale

15 The diagram shows the demand and supply of places in independent (private) schools which
charge fees. The equilibrium position is X.

The costs of independent (private) schools rise. Also a report is issued which states that
Government schools achieve very good examination results.

What is likely to be the new equilibrium position?

C
B
price A X

O quantity

16 A government wishes to stimulate economic recovery.

Which action will assist this?

A decreasing government investment

B decreasing income tax
C increasing indirect taxation
D increasing interest rates

© UCLES 2016 2281/11/M/J/16 [Turn over

 8

17 What is an expansionary monetary policy?

A a decrease in the interest rate

B a decrease in the rate of value added tax
C an increase in the power of trade unions
D an increase in the standard rate of income tax

18 A government decides to make two changes to its taxation policies. It lowers the tax on petrol and
raises the tax on food.

How do these changes affect the regressive nature of the taxes?

lower petrol higher food

tax tax

A less regressive less regressive

B less regressive more regressive
C more regressive less regressive
D more regressive more regressive

19 The table shows a government’s receipts from taxation.

$m

air passenger duty 10

company profits tax 100
import duty 75
income tax 200
insurance policy tax 10
sales tax (VAT) 400

What is the total amount of revenue raised by indirect taxes?

A $95 m B $300 m C $400 m D $495 m

20 What is Gross Domestic Product (GDP) divided by to calculate GDP per head?

A net migration
B the birth rate
C the total population
D the working population

© UCLES 2016 2281/11/M/J/16

 9

21 Who is made worse off during a period of deflation?

A cash holders
B creditors
C debtors
D fixed income earners

22 The table gives information about three economic indicators in four countries.

inflation interest rates unemployment

% % %

country W 1.4 3.4 10.2

country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.

B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

23 What must result when a country experiences economic growth?

A a higher Gross Domestic Product

B a lower rate of inflation
C a surplus on the balance of trade
D an improved standard of living for everybody

24 Why may the figure calculated for a developing country’s Gross Domestic Product be inaccurate?

A There are unused resources.

B There is a high reliance on imports.
C There is a large amount of subsistence farming.
D There is a small amount of skilled labour.

© UCLES 2016 2281/11/M/J/16 [Turn over

 10

25 The table gives information on four countries.

Which country is likely to be most developed?

Gross Domestic life

population Product expectancy
(m) ($ billion) (years)

A 100 800 51
B 200 6000 62
C 300 600 48
D 1000 1600 63

26 It has been predicted that by 2050 China will have 53 million fewer children under 14, 100 million
fewer workers and 234 million more people aged over 60.

What will be the likely effect in China of these changes?

A The dependency ratio will fall.

B The Government’s expenditure will fall.
C The Government’s income will fall.
D The total population will fall.

27 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya

B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels

28 A country says that it wishes to increase its trade protection policies.

What might that involve?

A conservation of resources and taxes on external costs

B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries

© UCLES 2016 2281/11/M/J/16

 11

29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.

What would happen if this occurred?

A The balance of payments on current account of countries exporting weapons would

immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers of
weapons.
D There would be no overall effect on the balance of payments as countries would produce
their own weapons.

30 70% of the 10 million kilograms of tea produced in India is exported. The UK, Japan, and
Germany buy the most.

Wholesale prices rose 10% in 2013 as supply was restricted because of a strike.

How would these circumstances be shown in international trade accounts?

A a credit on the goods and services account for Germany

B a debit on the goods and services account for Japan
C a 10% fall in the balance of the goods and services account for India
D a 10% rise in the balance of goods and services account for the UK

© UCLES 2016 2281/11/M/J/16

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 2281/11/M/J/16

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2016
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*6819512628*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 11 printed pages and 1 blank page.

IB16 06_2281_12/RP
© UCLES 2016 [Turn over
 2

1 What economic concept must be at work when there is movement by a country along its
production possibility curve?

A economies of scale
B equilibrium price
C maximum profit
D opportunity cost

2 The diagram shows the choices for an individual between leisure and earnings.

24

20

16
hours of leisure 12 X
per day
Y
8

0
20 40 60 80 100 120
earnings $

The person decides to take a job that gives more leisure time.

What is the opportunity cost to the individual of moving from position Y to position X?

A $20
B $80
C 4 hours of leisure per day
D 12 hours of leisure per day

3 What is the best example of the existence of the economic problem?

A A government provides accommodation for all those who are homeless.

B A police force has a lengthening list of unsolved crimes.
C Janitha hands her homework in at the last permitted deadline.
D Musa completes his journey without putting petrol in his car.

© UCLES 2016 2281/12/M/J/16

 3

4 A government taxes the production of cars.

What is likely to decrease?

A the cost of supplying cars

B the price of cars
C the revenue for the government
D the supply of cars at every price

5 Which pair of economic institutions is most likely found in a market economy?

A free accident and emergency hospitals and charities

B partnerships and public corporations
C stock exchange and monopolies
D trade unions and local government schools

6 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 directly 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

© UCLES 2016 2281/12/M/J/16 [Turn over

 4

7 The diagram shows the price of a product during year 1 and year 2.

price
($)

O year 1 year 2

Which changes in demand and supply are consistent with the price behaviour in year 2?

demand supply

A falls by 5% falls by 10%

B falls by 10% falls by 5%
C unchanged falls by 10%
D rises by 15% falls by 5%

8 A trade union agrees on a ‘closed shop’ policy with employers in an industry.

How does this operate?

A All workers will be members of the trade union.

B Employment will be open only to skilled workers.
C The employers cannot make workers redundant.
D Workers cannot move between employers.

9 When will a central bank act as lender of last resort to a commercial bank?

A when a commercial bank faces a liquidity crisis

B when a commercial bank fails to make a profit
C when a commercial bank needs to raise share capital
D when a commercial bank reduces its lending rates

© UCLES 2016 2281/12/M/J/16

 5

10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.

An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.

D1 S1

S2
W

wage
($)

S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)

How many people will be employed if the minimum wage legislation is then abolished?

A 4 million B 5 million C 6 million D 7 million

11 The table shows how three people spend their income.

person X person Y person Z

food, clothing and housing 35% 50% 20%

entertainment and leisure 25% 20% 40%
luxury goods 40% 30% 40%

For these three people, what is the most likely order of income, from lowest income to highest
income?

A X→Y→Z

B Y→X→Z

C Y→Z→X

D Z→X→Y

© UCLES 2016 2281/12/M/J/16 [Turn over

 6

12 How does a firm guarantee that it makes the maximum profit?

A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost

13 Two firms agree to integrate their activities.

What must result?

A a change in their ownership structure

B a lowering of average costs of production
C a move from national to international markets
D a reduction in the level of market risk

14 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.

land labour capital output

6 8 4 100
9 12 6 200

What is the firm experiencing?

A constant returns to scale

B economies of scale
C external diseconomies of scale
D external economies of scale

© UCLES 2016 2281/12/M/J/16

 7

15 By 2014, government subsidies for the Chinese steel industry led to 200 million tonnes of excess
output.

The diagrams show the market for Chinese steel.

Which would represent the position after the subsidy but before the market adjusted?

A B

price price
($) ($)

0 100 300 0 100 200 400

output (million tonnes) output (million tonnes)

C D

price price
($) ($)

0 100 200 300 0 100 200 400

output (million tonnes) output (million tonnes)

16 A government wishes to stimulate economic recovery.

Which action will assist this?

A decreasing government investment

B decreasing income tax
C increasing indirect taxation
D increasing interest rates

© UCLES 2016 2281/12/M/J/16 [Turn over

 8

17 A government fixes the rate of income tax at $0.20 per dollar earned.

What describes this type of taxation?

A indirect
B progressive
C proportional
D regressive

18 A government introduces a law to reduce the restrictive practices of trade unions.

What would be the most likely purpose of this law?

A to change from a mixed to a planned economy

B to ensure a fairer distribution of earnings
C to increase competition in labour markets
D to reduce government expenditure on job training

19 The table shows a government’s receipts from taxation.

$m

air passenger duty 10

company profits tax 100
import duty 75
income tax 200
inheritance tax 50
sales tax (VAT) 300

What is the total amount of revenue raised by indirect taxes?

A $300 m B $350 m C $385 m D $435 m

20 What would best indicate the start of an economic boom?

A negative growth of Gross Domestic Product

B rising interest rates
C rising levels of employment
D steadily falling price levels

© UCLES 2016 2281/12/M/J/16

 9

21 A country has a very high Gross Domestic Product and a small population but has a low standard
of living.

What may be the cause of this low standard of living?

A There is a high inequality of income distribution and a high provision of merit goods.
B There is a high inequality of income distribution and a limited provision of merit goods.
C There is equality of income distribution and a high provision of merit goods.
D There is equality of income distribution and a low provision of merit goods.

22 The table gives information about three economic indicators in four countries.

inflation interest rates unemployment

% % %

country W 1.4 3.4 10.2

country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.

B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

23 The weight for a product in the consumer price index was increased.

What is most likely to have caused this adjustment?

A The product has become more expensive to produce.

B The product has been offered for sale in more retail outlets.
C The product has improved in quality and performance.
D The product has taken a bigger share of consumers’ income.

© UCLES 2016 2281/12/M/J/16 [Turn over

 10

24 China is classified as a developing country. Recently, contributions to its Gross Domestic Product
(GDP) were agriculture 10%, construction 13%, manufacturing 32% and services 45%.

Which contribution to GDP usually decreases first when countries move to a higher level of
development?

A agriculture
B construction
C manufacturing
D services

25 Some people think that the debts and interest payments of the poorest countries in the world
should be cancelled.

What might be a disadvantage for the poorest countries if this were done?

A International banks might be less willing to give loans to poor countries.

B Interest payments to the lenders would fall.
C The standard of living of people in the poorest countries would fall.
D Trade between the poorest countries and the rest of the world would increase.

26 Which country is likely to have the highest standard of living?

infant mortality
birth rate death rate life expectancy
rate

A 41 20 31 49
B 32 14 29 59
C 25 6 25 79
D 25 5 22 79

27 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya

B increased transport of Mauritian goods in Greek ships
C increased spending by Mauritians on holidays in South Africa
D increased spending by tourists in Mauritian hotels

© UCLES 2016 2281/12/M/J/16

 11

28 A country says that it wishes to increase its trade protection policies.

What might that involve?

A conservation of resources and taxes on external costs

B eliminating waste in the use of resources and grants to multinational companies
C increased self sufficiency and increased tariffs
D price controls and increased regulations on domestic monopoly industries

29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.

What would happen if this occurred?

A The balance of payments on current account of countries exporting weapons would

immediately improve.
B The price of existing weapons would fall.
C There would be a risk of structural unemployment in countries that are major producers of
weapons.
D There would be no overall effect on the balance of payments as countries would produce
their own weapons.

30 The US currently trades in oil with the UK. The discovery of new oil and gas deposits in the US
will mean that its oil imports decrease and its oil exports increase.

From the initial equilibrium point of X, which letter indicates the new equilibrium point for the US
exchange rate?

S1
B
A S
price
of $ X S2

C
D

D1 D D2
O
quantity of $

© UCLES 2016 2281/12/M/J/16

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 2281/12/M/J/16

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2017
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*6101459133*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB17 06_2281_11/FP
© UCLES 2017 [Turn over
 2

1 Which combination of terms gives the general definition of the economic problem?

A bigger families, less food, starvation

B falling supply, rising demand, shortage
C higher population, fewer jobs, unemployment
D limited resources, unlimited wants, scarcity

2 Helium is a gas that is limited in supply. It takes thousands of years to form from decaying
radioactive rocks. The US government holds 35% of the world’s supply and has been selling its
stocks. Helium is essential in medical scanners. It is also used for party balloons which some say
is a wasteful alternative use of a valuable good.

Which concepts can be applied to the above statement?

A demand and supply, government subsidy

B excess demand, resource allocation
C factors of production, private monopoly
D opportunity cost, public sector

3 The diagram shows a production possibility curve for an economy.

Which point on the diagram is the most efficient for the economy to produce both consumer
goods and capital goods?

capital A
goods

C
B

D
O
consumer goods

© UCLES 2017 2281/11/M/J/17

 3

4 The diagram shows the market for a product.

S
price

W X

Z Y

D
O quantity

Which statement about the points marked on the diagram is correct?

A The distance from W to X shows a shortage of the product.

B The distance from Z to Y shows a surplus of the product.
C The movement from W to Y shows a fall in the quantity demanded of the product.
D The movement from X to Z shows a fall in the quantity supplied of the product.

5 The diagram shows the demand for chocolate.

price
X

D
O
quantity demanded
per week

What could cause the movement from point X to point Y?

A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate

© UCLES 2017 2281/11/M/J/17 [Turn over

 4

6 A football club raises all stadium seat prices by 5%. The stadium is divided into four zones. The
demand for seats falls by 1% in zone W, by 3% in zone X, by 5% in zone Y and by 6% in zone Z.

In which zone is the responsiveness of demand for seats to the price change elastic?

A zone W
B zone X
C zone Y
D zone Z

7 A project to build one of the world’s biggest coal mines was planned in Australia. The project was
estimated to cost $US12.5 million. It would create employment but threaten endangered species
as large coal ships would damage the Great Barrier Reef.

What effects would this project have on the following costs and benefits?

private cost private benefit external cost

A decrease uncertain uncertain

B increase decrease increase
C increase increase increase
D uncertain increase increase

8 What is likely to happen when the rate of interest increases?

A consumer spending increases

B firms buy fewer machines
C people hold more cash
D savers earn lower rewards

9 In which type of work are employees most likely to earn their highest income at a relatively young
age?

A manual building work

B professional legal work
C skilled craft work
D university teaching work

© UCLES 2017 2281/11/M/J/17

 5

10 Individuals produced their own goods. They then decided to specialise. They formed a group and
offered their skills to each other but without the use of money.

What is not likely to be the result for the group?

A It will enjoy a rise in its material standard of living.

B It will have a wider choice of goods and services.
C It will need to use a system of barter.
D It will save time in obtaining goods and services.

11 Tea is a very popular drink in Turkey and Morocco but coffee is an alternative drink preferred by
many people. Many cafés provide a small biscuit with either a cup of tea or coffee. Some people
put sugar in the drinks to sweeten them.

How would the relation between these goods be classified?

tea and coffee tea and biscuits coffee and sugar

A complement complement complement

B complement substitute substitute
C substitute complement complement
D substitute complement substitute

12 To achieve horizontal integration, a firm producing tyres could merge with another firm producing

A motor cars.
B rubber.
C tyre-producing machinery.
D tyres.

13 Which cost would be considered variable by a bus company?

A a new bus
B diesel fuel
C loan repayment
D rent

© UCLES 2017 2281/11/M/J/17 [Turn over

 6

14 A monopoly takes over an industry from competitive firms.

What is not likely to be true about a monopoly compared with a competitive firm?

A A monopoly will earn a higher rate of profit.

B A monopoly will gain a greater share of the market.
C A monopoly will offer a wider choice to the consumer.
D A monopoly will operate on a larger scale of production.

15 The table shows how a firm’s production changes as it employs more workers.

number of workers 10 20 30 40
total production (kilos) 50 100 300 600

What happens to productivity as more workers are employed?

A It is constant then falls.

B It is constant then rises.
C It rises then becomes constant.
D It rises continuously.

16 When is a tax progressive?

A when some goods have a higher tax than others

B when the rate of tax increases as income increases
C when the tax is linked to the rate of inflation
D when the tax is on incomes rather than on goods or services

17 A government intends to improve skills by offering free training to school leavers at age 16 until
they reach 18 years. It proposes to pay for this by taxing the profits of firms.

Which policies do these proposals involve?

provision of payment for

skills training skills training

A fiscal fiscal
B monetary monetary
C supply-side fiscal
D supply-side monetary

© UCLES 2017 2281/11/M/J/17

 7

18 In trying to achieve one of its aims a government may make it difficult to achieve another aim.

What is an example of this conflict?

A Achieving a more even distribution of income may prevent a rise in the average standard of
living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of payments.

19 The charts relate to the Financial Statement of the government of New Zealand for 2014.

sales of goods
state
and services other enterprises
tax from 18% $21.0b $20.7b
incomes
31%
$89.4 other $92.2
billion (b) revenue billion (b)
total 14% total
revenue expenses education
health $12.3b
$14.9b
corporate
tax goods and
10% other services tax welfare
taxes 18% $23.3b
9%

What can be concluded?

A Expenditure on welfare was higher than the combined expenditure on education and health.
B The government was $2.8 billion in surplus.
C The largest source of the government’s income was from direct taxation.
D The number of business corporations was very small.

20 A newspaper reported that a country’s economy had grown by 3% during the last year.

What must have increased in that year?

A costs of production
B gross domestic product
C unemployment
D wage levels

© UCLES 2017 2281/11/M/J/17 [Turn over

 8

21 A country has a low GDP and a large population but ranks relatively highly on the HDI.

Which combination may exist in the country?

provision of education and

income per head
healthcare (merit goods)

A high high
B high low
C low low
D low high

22 The information below refers to an economy for a financial year.

government expenditure = $2866 million

government revenue = $1940 million

What was the budget balance of the government in that year?

A $926 million in deficit

B $4806 million in deficit
C $926 million in surplus
D $4806 million in surplus

23 In a developing country real incomes have risen.

Which situation would definitely have caused this?

money
price level
incomes

A fell fell
B fell rose
C rose unchanged
D rose fell

24 Which characteristic do developed and developing economies have in common?

A participation in international trade

B high birth rates and high death rates
C rapid economic growth
D stable financial conditions and institutions

© UCLES 2017 2281/11/M/J/17

 9

25 The diagram shows population projections until the year 2075 for selected areas.

12
billion
10 Africa
8
other Asia
6
India
4
China
2 Latin America
developed countries
0
1950 2000 2050 2075

Assuming no migration, which situation must exist if the population is to change in the manner
shown in the diagram?

A birth rate falling and death rate falling

B birth rate greater than death rate
C death rate greater than birth rate
D death rate rising and birth rate falling

26 The table gives information about four countries.

Which country is likely to have the highest standard of living?

% of labour force
GDP per head
life expectancy in service
($)
industries

A 51 250 48
B 51 400 52
C 61 450 52
D 61 400 40

27 Which government policy is most likely to increase the volume of exports?

A devaluation
B embargoes
C quotas
D tariffs

© UCLES 2017 2281/11/M/J/17 [Turn over

 10

28 What is necessarily involved in international free trade?

A the absence of transport costs

B the gift of foreign aid from charities
C the supply of zero interest rate government loans
D the unrestricted exchange of goods and services

29 In recent years, the US has experienced a deficit on its overall current account of the balance of
payments.

What could have led to an increase in the size of the deficit?

A increased competitiveness of goods made in the US

B increased earnings by US investors in foreign companies
C increased numbers of overseas visitors to the US
D increased spending on US military bases abroad

30 In 2015, China was the world’s largest exporter of manufactured goods and a major importer of
oil and minerals. China devalued the yuan (renminbi) by 2%.

According to economic theory, what would have been a consequence of this devaluation?

A China paid less in foreign currencies for imports.

B China reduced its demand for oil and minerals.
C China’s exports became less competitive.
D China’s trading partners improved their balance of trade with China.

© UCLES 2017 2281/11/M/J/17

 11

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© UCLES 2017 2281/11/M/J/17

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 2281/11/M/J/17

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2017
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*1952977135*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 9 printed pages and 3 blank pages.

IB17 06_2281_12/FP
© UCLES 2017 [Turn over
 2

1 Which is not a factor of production?

A a farm
B a farmer
C a farmer’s bank account
D a second-hand tractor

2 Heavy rain caused floods in an area of a country.

What may be an opportunity cost of repairing the damage caused?

A the allocation of government funds to the area instead of on a new airport

B the cost of providing shelter for those made homeless
C the decline in the tourist industry in the area
D the loss of profits from businesses affected by the flood

3 The diagram shows a production possibility curve for cars and furniture.

W
cars
X

Y Z

O furniture

A recession causes a decrease in production in both cars and furniture.

Which movement would represent this change?

A X to W B X to Y C Z to W D Z to Y

4 In response to an increase in price from $5 per kilo to $6 per kilo a chicken 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

© UCLES 2017 2281/12/M/J/17

 3

5 The diagram shows the demand for chocolate.

price
X

D
O
quantity demanded
per week

What could cause the movement from point X to point Y?

A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate

6 A bee-keeper maintains hives of bees to produce honey. The bees can pollinate neighbours’ fruit
trees but also give a painful sting to gardeners.

If both of these events occur, how will costs and benefits be affected?

A External benefits will fall and social costs will fall.

B External costs will rise and social benefits will fall.
C Social costs and social benefits will fall.
D Social costs and social benefits will rise.

7 In 2015 there was a significant fall in the world price of petrol (gasoline).

What would not have been a cause of the price fall?

A the continuing global recovery from the world economic recession

B the increasing exploitation of US oil reserves
C the re-entry of Iranian producers to the world oil market
D the shorter journeys from using the new Suez Canal

© UCLES 2017 2281/12/M/J/17 [Turn over

 4

8 Which statement about financial matters is correct?

A Commercial banks’ main activity is the finance of international trade.

B Paper banknotes possess all the desirable properties needed to act as money.
C Stock exchanges trade mainly in second-hand stocks and shares.
D The central bank acts as the lender of last resort to companies facing bankruptcy.

9 What is most likely to be used to support a claim for wage increases in an industry?

A a decrease in the industry’s sales

B a decrease in the need for specialist training
C an increase in cheap imports of a rival product
D an increase in wages in a similar industry

10 The government increases the rate of income tax and decreases the rate of a sales tax (VAT).

From the initial equilibrium point of X, which letter indicates the new equilibrium point in a market
for normal goods?

price
S1
B
A S
X
S2
C
D

D1 D D2
O quantity

11 In South Africa, the number of skilled workers is relatively low. However, average wages in South
Africa are double the average wage in Brazil and Turkey and they are 1.6 times higher than in
Malaysia.

What may be concluded from this information?

A Malaysian workers are more skilled than South African workers.

B Prices in South Africa are double those in Brazil.
C South Africa’s labour productivity is low.
D South African trade union bargaining power is strong.

© UCLES 2017 2281/12/M/J/17

 5

12 To achieve horizontal integration, a firm producing tyres could merge with another firm producing

A motor cars.
B rubber.
C tyre-producing machinery.
D tyres.

13 Which costs will necessarily fall continuously as output increases?

A average fixed costs

B average variable costs
C opportunity costs
D repayment costs of borrowing

14 A monopoly takes over an industry from competitive firms.

What is not likely to be true about a monopoly compared with a competitive firm?

A A monopoly will earn a higher rate of profit.

B A monopoly will gain a greater share of the market.

C A monopoly will offer a wider choice to the consumer.
D A monopoly will operate on a larger scale of production.

15 The table shows the costs of a firm.

units of output variable cost ($) total cost ($)

10 15 85
20 25 95
30 35 105
40 45 115

What is the value of the firm’s fixed costs?

A $10 B $15 C $70 D $85

© UCLES 2017 2281/12/M/J/17 [Turn over

 6

16 When is a tax progressive?

A when some goods have a higher tax than others

B when the rate of tax increases as income increases
C when the tax is linked to the rate of inflation
D when the tax is on incomes rather than on goods or services

17 A government wishes to try to make the distribution of income in the country more equal.

Which policy would be most likely to achieve this?

A reducing housing subsidies

B reducing indirect tax on food
C reducing inheritance tax
D reducing tax on the dividends on stocks and shares

18 In trying to achieve one of its aims a government may make it difficult to achieve another aim.

What is an example of this conflict?

A Achieving a more even distribution of income may prevent a rise in the average standard of
living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of payments.

19 Which policy combination will be the most effective if a government wishes to increase the level
of employment?

A decrease general taxation and decrease the rate of interest

B decrease general taxation and increase the rate of interest
C increase general taxation and decrease the rate of interest
D increase general taxation and increase the rate of interest

© UCLES 2017 2281/12/M/J/17

 7

20 A newspaper reported that a country’s economy had grown by 3% during the last year.

What must have increased in that year?

A costs of production
B gross domestic product
C unemployment
D wage levels

21 What is meant by deflation?

A a fall in the general price level

B a fall in the international value of a currency
C a fall in the rate of inflation
D a fall in the real value of money

22 The information below refers to an economy for a financial year.

government expenditure = $2866 million

government revenue = $1940 million

What was the budget balance of the government in that year?

A $926 million in deficit

B $4806 million in deficit
C $926 million in surplus
D $4806 million in surplus

23 What is the change in GDP per head, after taking account of price increases (real change),
between 2000 and 2013?

population consumer prices

year GDP $billion
million index (CPI)

2000 3 100 4000

2013 4 120 6000

A from $15 to $125

B from $1250 to $1333
C from $1333 to $1250
D from $1333 to $1500

© UCLES 2017 2281/12/M/J/17 [Turn over

 8

24 Which statement about the poorest families in developing economies is not likely to be correct?

A The children will be expected to work to help provide income.

B The family will find it easy to obtain loans to develop their farms.
C The family will have a low earning capacity.
D The family will suffer from malnutrition and lack of medical care.

25 The diagram shows population projections until the year 2075 for selected areas.

12
billion
10 Africa
8
other Asia
6
India
4
China
2 Latin America
developed countries
0
1950 2000 2050 2075

Assuming no migration, which situation must exist if the population is to change in the manner
shown in the diagram?

A birth rate falling and death rate falling

B birth rate greater than death rate
C death rate greater than birth rate
D death rate rising and birth rate falling

26 The table shows information about four countries.

Which country is likely to be least developed?

% of labour force GDP per head

life expectancy
in service industries ($)

A 20 49 380
B 35 49 350
C 40 53 350
D 45 63 450

© UCLES 2017 2281/12/M/J/17

 9

27 Which government policy is most likely to increase the volume of exports?

A devaluation
B embargoes
C quotas
D tariffs

28 What might encourage international specialisation between countries?

A free trade
B inefficiencies in production
C labour immobility
D tariffs

29 In 2015, Russia banned the imports of food, such as milk, from the European Union (EU).

Which outcomes are most likely to happen as a result?

milk market price of milk profits of

in Europe in Russia EU farmers

A excess demand fall rise

B excess demand rise rise
C excess supply fall fall
D excess supply rise fall

30 In 2010, Vietnam experienced a deficit in the value of its trade in goods (visible) despite exporting
a greater number of goods than it imported.

What could explain this?

A The average price of its goods imported exceeded the average price of its goods exported.
B The average value of its goods exported exceeded the average value of its goods imported.
C The country had a deficit on its trade in services.
D The country’s government imposed tariffs on imports.

© UCLES 2017 2281/12/M/J/17

 10

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© UCLES 2017 2281/12/M/J/17

 11

BLANK PAGE

© UCLES 2017 2281/12/M/J/17

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 2281/12/M/J/17

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2018
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*0598752778*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB18 06_2281_11/FP
© UCLES 2018 [Turn over
 2

1 The Norwegian government chose to spend the profits from oil on stocks, bonds and property.
The possibility of improving domestic infrastructure, therefore, was not taken.

Which economic concept does this best illustrate?

A cost of production
B finite resources
C opportunity cost
D production possibility frontier

2 What would be classified by an economist as the factor of production known as land?

A a discovery of oil in the South China sea

B an oil rig bought by an oil company
C money held by the oil companies in their bank accounts
D the productivity of oil workers

3 What is the cause of the economic problem facing all countries?

A climate change and global warming

B significant quantities of unemployed resources
C uneven distribution of income and wealth
D unlimited wants in relation to limited resources

4 Which activity takes place in the tertiary sector?

A assembling computers
B giving legal advice
C harvesting grain
D making bread

© UCLES 2018 2281/11/M/J/18

 3

5 In the diagram, suppliers have set the price of a product at PS. Economic theory predicts that the
equilibrium price of the product will rise to PE.

S
price

PE

PS

D
O
quantity

What is the reason for this movement in price?

A Demand for the product will increase.

B No more of the product can be supplied.
C Some consumers are willing to pay higher prices.
D Suppliers are facing rising costs.

6 A government approved the construction of a new railway line connecting major cities. It would be
built by a private company but be funded partly through taxation. It would create many jobs.
People living on the route worried about the harm to their environment.

Which concepts are directly involved in this statement?

A excess demand and public corporation

B government subsidies and perfect competition
C market system and income distribution
D private benefit and external cost

© UCLES 2018 2281/11/M/J/18 [Turn over

 4

7 The diagram shows the supply curve for a good.

S
price
($) 4

0 10 20 30
quantity (units)

What is the price elasticity of supply when the price rises from $2 to $4?

A 0.2 B 0.5 C 1 D 2

8 What is a function of a central bank?

A accepting deposits from the public

B determining tax rates
C implementing monetary policy
D lending to businesses

9 What is likely to lead to an increase in the wages of university lecturers?

A an increase in the fringe benefits provided to university lecturers

B an increase in the tuition fees paid by university students
C government policies reducing the length of the training for university lecturers
D increased demand from students to study at university

10 When is a trade union likely to have more power to increase its members’ wages?

A when imports are increasing

B when labour supply is increasing
C when output is increasing
D when unemployment is increasing

© UCLES 2018 2281/11/M/J/18

 5

11 The table shows the percentage (%) of income saved by different age groups.

age (years) 15–29 30–39 40–49 50–64 65+

% of income saved –30 –5 +15 +30 –10

What can be concluded from the table?

A Over the age range shown total savings equalled total dissavings.
B The 15–29 age group has the lowest level of income.
C The 50–64 age group saves the highest percentage of its income.
D The 65+ age group has a lower income than the 30–39 age group.

12 Which characteristic can exist both in monopoly and in perfect competition?

A freedom of entry
B many buyers
C many sellers
D perfectly elastic demand curve

13 An industry is experiencing diseconomies of scale.

What will be happening to long run average cost and total cost?

long run
total cost
average cost

A decreasing decreasing
B decreasing increasing
C increasing decreasing
D increasing increasing

© UCLES 2018 2281/11/M/J/18 [Turn over

 6

14 A firm that sells its product for $6 a unit has the following total costs.

output (units) 0 10 20 30
total costs ($) 40 100 120 150

Which statement is correct?

A Average cost is lowest when 10 units are produced.

B The firm does not make any profit when 20 units are sold.
C The firm has no fixed costs.
D Total variable costs fall continuously over these outputs.

15 Which statement about fixed costs is correct?

A They exist only in the long run.

B They include raw material and direct labour costs.
C They increase at the same rate as output.
D They must be paid even if there is no output.

16 What would a government reduce as part of an expansionary monetary policy to increase

employment?

A government spending
B the money supply
C the rate of interest
D unemployment benefit

17 What is an aim of government policy?

A income tax
B interest rates
C stable prices
D unemployment

© UCLES 2018 2281/11/M/J/18

 7

18 The table shows the amount of tax to be paid at different weekly incomes.

weekly income ($) 100 150 200 250

weekly tax ($) 20 30 36 40

Which statement describes the system of income tax as income rises over this range?

A It is progressive throughout.
B It is proportional then becomes progressive.
C It is proportional then becomes regressive.
D It is regressive throughout.

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

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

20 An economy is experiencing two consecutive quarters of negative economic growth.

What is this economy experiencing?

A budget deficit
B inflation
C recession
D trade deficit

21 What is included in the calculation of a consumer prices index (CPI)?

A the price of a basket of goods and services

B the price of exports and the price of imports
C the value of the currency on international markets
D the wages of consumers

© UCLES 2018 2281/11/M/J/18 [Turn over

 8

22 There was a fall in investment spending by businesses in the third quarter of 2015.

What would be the likely result of this?

A an increase in economic growth

B an increase in exports
C an increase in incomes
D an increase in unemployment

23 The table shows units of output, value of output and number of people employed in an industry
over three years.

output output value number employed

(units, millions) ($ millions) (000)

year 1 10 10 5
year 2 21 25 7
year 3 32 40 8

What can be concluded from the table?

A Inflation has increased.

B Productivity has increased.
C Profit has increased.
D Working population has increased.

24 What is found in a typical developed country?

A fast rate of economic growth

B high population growth
C limited use of technology
D significant tertiary employment

25 Which characteristic will show that a country has significant absolute poverty?

A A majority of the population will have less than average income.

B Basic living needs are not being met.
C Most people do not have mobile phones.
D There is a high number of people living in rural areas.

© UCLES 2018 2281/11/M/J/18

 9

26 The government of a developing country allows a multinational mining company to mine minerals
in order to improve the standard of living of the local people.

Which action by the multinational company (MNC) will not lead to an improvement in the
standard of living of the local people?

A building roads to assist transport

B exporting mineral ore

C providing skills training
D returning profits overseas

27 A country has decided that it wants to increase free trade with its trading partners.

Which measure would help it achieve this objective?

A a higher quota on imported cars

B a subsidy to domestic car producers
C an embargo on cars produced in other countries
D higher tariffs on imported goods

28 In 2012 the UK held the Olympic Games, which attracted a large number of visitors from foreign
countries.

Which item of the UK’s current account balance will have benefited directly from this event?

A export trade in goods

B export trade in services
C import trade in goods
D import trade in services

29 The Mexican currency (the peso) has fallen in value against the US dollar.

What will be the effect of this on the Mexican economy?

A a decrease in tariffs on imports

B a decrease in the price of exports
C a decrease in the price of imports
D a decrease in the volume of exports

© UCLES 2018 2281/11/M/J/18 [Turn over

 10

30 The table shows the rice yield in four countries.

rice yield
country
(kilos per hectare)

Japan 64
China 53
Bangladesh 20
Thailand 20

What may be concluded from this information?

A Bangladesh and Thailand produce the same amount of rice.

B Japan produces more than three times as much rice as Bangladesh.
C Japan produces the largest amount of rice per hectare.
D Japan produces the largest amount of rice per person employed.

© UCLES 2018 2281/11/M/J/18

 11

BLANK PAGE

© UCLES 2018 2281/11/M/J/18

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 2281/11/M/J/18

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2018
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3968875776*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB18 06_2281_12/FP
© UCLES 2018 [Turn over
 2

1 In economics, natural sunlight is classified as a free good.

What is the reason for this?

A Sunlight is a gift of nature.

B Sunlight is a renewable resource.
C There is no opportunity cost of using sunlight.
D Unlimited amounts of sunlight can be consumed.

2 What would be classified as the factor of production capital for an airline?

A the aircraft operated by the airline

B the money the airline keeps in the bank
C the pilots the airline uses
D the shares of the airline quoted on the stock market

3 The diagram shows a production possibility curve (PPC).

Which position is most likely to lead to the greatest outward shift of the PPC?

consumer
goods
B
A

C
D

O
capital goods

4 What is a major advantage of a market economic system over a mixed economic system?

A All production of goods and services is determined by consumer demand.

B Ownership of resources is divided between private and public sectors.
C Producers include any external costs they create in the price of the good.
D There will always be an even distribution of income and wealth.

© UCLES 2018 2281/12/M/J/18

 3

5 The diagram shows the market for beef in the US with the original equilibrium at X.

What will be the new equilibrium position if incomes in the US rise?

S3
price S1
S2

B C
X
A
D
D2
D1
D3
O
quantity

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

$ million

private benefits 250

external benefits 325
private costs 200
external costs 150

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

© UCLES 2018 2281/12/M/J/18 [Turn over

 4

7 The diagram shows the supply curve for a good.

S
price
($) 4

0 10 20 30
quantity (units)

What is the price elasticity of supply when the price rises from $2 to $4?

A 0.2 B 0.5 C 1 D 2

8 What does a commercial bank not provide?

A cash
B bonds
C loans
D mortgages

9 What will be likely to increase the wages of airline pilots?

A Incomes increase in the world’s major economies.

B Terrorist attacks decrease tourist travel.
C The cost of aviation fuel rises.
D The world economy goes into recession.

10 What is most likely to help a trade union’s claim for wage increases in an industry?

A a decrease in the price of a close substitute for the product

B a decrease in the qualifications needed for the job
C an increase in the number of workers
D an increase in the profits of the industry

© UCLES 2018 2281/12/M/J/18

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11 The table shows some information for a computer engineer in 2015.

salary 40 000
fees earned from consultancy 15 000
credit card repayment 5 000

Income tax is fixed at 20%. The engineer saved 10% of the disposable income.

How much was saved?

A $3200 B $4000 C $4400 D $5500

12 What is a characteristic of a perfectly competitive firm?

A absence of competitors
B non-price competition
C one dominant firm
D price taker

13 What is a possible cause of diseconomies of scale?

A an increase in extra administration

B an increase in raw materials costs
C an increase in taxation on company profits
D an increase in the national minimum wage

14 A firm that sells its product for $6 a unit has the following total costs.

output (units) 0 10 20 30
total costs ($) 40 100 120 150

Which statement is correct?

A Average cost is lowest when 10 units are produced.

B The firm does not make any profit when 20 units are sold.
C The firm has no fixed costs.
D Total variable costs fall continuously over these outputs.

© UCLES 2018 2281/12/M/J/18 [Turn over

 6

15 Which statement about fixed costs is correct?

A They exist only in the long run.

B They include raw material and direct labour costs.
C They increase at the same rate as output.
D They must be paid even if there is no output.

16 Which is a supply-side policy?

A increasing interest rates

B increasing taxation
C providing training courses
D selling government bonds

17 What is an aim of government policy?

A income tax
B interest rates
C stable prices
D unemployment

18 A government has the following revenue.

revenue
($ m)

corporation profits tax 20

inheritance tax 30
duty on imports 40
income tax 50
sales tax (VAT) 200

What is the total amount of indirect tax revenue?

A $140 m B $200 m C $240 m D $270 m

© UCLES 2018 2281/12/M/J/18

 7

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

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

20 The table shows the change in Gross Domestic Product (GDP) of four countries.

Which country has experienced a recession?

quarterly percentage change in GDP

Q1 Q2 Q3 Q4
% % % %

A – 6.0 1.0 – 2.0 1.0

B 0.0 –1.0 0.0 – 0.1
C 0.1 0.1 0.1 – 3.0
D 1.0 1.0 – 0.5 – 0.5

21 What determines the weights in the consumer prices index (CPI)?

A the average income received by the various households

B the average increase in the prices of the different goods
C the proportion of income spent by the average household on particular goods
D the proportion of income that the average household saves

22 There was a fall in investment spending by businesses in the third quarter of 2015.

What would be the likely result of this?

A an increase in economic growth

B an increase in exports
C an increase in incomes
D an increase in unemployment

© UCLES 2018 2281/12/M/J/18 [Turn over

 8

23 The table shows units of output, value of output and number of people employed in an industry
over three years.

output output value number employed

(units, millions) ($ millions) (000)

year 1 10 10 5
year 2 21 25 7
year 3 32 40 8

What can be concluded from the table?

A Inflation has increased.

B Productivity has increased.
C Profit has increased.
D Working population has increased.

24 Which feature is found in a developed country rather than a developing country?

A high levels of rural to urban migration

B highly organised international financial markets
C low proportion of workforce in service industries
D low school-leaving age

25 Over two-thirds of the world’s poorest people live in rural areas. They are mainly involved in
subsistence agriculture.

What explains why poverty remains at a high level for subsistence farming families?

A a lack of finance to buy machinery to improve productivity

B low international prices for food due to overproduction
C the size of families is too small to work the land
D women are discouraged from doing agricultural work

© UCLES 2018 2281/12/M/J/18

 9

26 The government of a developing country allows a multinational mining company to mine minerals
in order to improve the standard of living of the local people.

Which action by the multinational company (MNC) will not lead to an improvement in the
standard of living of the local people?

A building roads to assist transport

B exporting mineral ore

C providing skills training
D returning profits overseas

27 A country wishes to follow a policy of trade protection.

Which action would it take?

A increase the level of import quotas

B reduce import tariffs
C remove exchange controls
D subsidise export producers

28 In 2012 the UK held the Olympic Games, which attracted a large number of visitors from foreign
countries.

Which item of the UK’s current account balance will have benefited directly from this event?

A export trade in goods

B export trade in services
C import trade in goods
D import trade in services

29 In 2015, the value of the South African currency (the rand) depreciated against the US dollar.

What effect did this have on the US economy?

A Exports to South Africa became more expensive.

B The current account deficit of the US decreased.
C The US experienced higher levels of inflation.
D Unemployment in the US decreased.

© UCLES 2018 2281/12/M/J/18 [Turn over

 10

30 The table shows the rice yield in four countries.

rice yield
country
(kilos per hectare)

Japan 64
China 53
Bangladesh 20
Thailand 20

What may be concluded from this information?

A Bangladesh and Thailand produce the same amount of rice.

B Japan produces more than three times as much rice as Bangladesh.
C Japan produces the largest amount of rice per hectare.
D Japan produces the largest amount of rice per person employed.

© UCLES 2018 2281/12/M/J/18

 11

BLANK PAGE

© UCLES 2018 2281/12/M/J/18

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 2281/12/M/J/18

 Cambridge Assessment International Education
Cambridge Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2019
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*0593654605*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 9 printed pages and 3 blank pages.

IB19 06_2281_11/RP
© UCLES 2019 [Turn over
 2

1 What would an economist regard as an example of the factor of production capital?

A an individual’s purchase of stocks and shares

B borrowing by a firm to pay for electricity
C the building by a firm of a new factory
D total savings by individuals in a country

2 The diagram shows a production possibility curve (PPC).

goods

O services

Why is the curve usually drawn like this?

A International free trade exists.

B Opportunity cost changes.
C Resources are unlimited in supply.
D Some resources will be unemployed.

3 In recent years more golf courses, which use large quantities of water, have opened in China.

What may be the opportunity cost of this?

A cost of water
B loss of farmland
C sales of golf equipment
D wages of golf course staff

4 Which situation indicates a mixed economy?

A Economic activity is controlled entirely by the private sector.

B Individual choices are unaffected by government actions.
C Services are provided by both private and public sectors.
D The government carries out all planning and decision making.

© UCLES 2019 2281/11/M/J/19

 3

5 What causes market failure?

A government provision of services

B social costs equal private costs
C the existence of external benefits
D the existence of perfect competition

6 A newspaper reported that ‘The world market for coffee has returned to equilibrium’.

Which situation supports this statement?

A A sequence of poor harvests resulted in shortages.

B Decreased transport costs led to a surplus of supply.
C Farmers matched demand by planting more coffee bushes.
D The price of coffee was fixed between producers.

7 The table shows the demand schedule for a good at different prices.

price quantity
$ demanded

8 200
10 160
12 120
14 60

The current market price for the good is $10.

Following a 20% increase in price, what will be the change in the quantity demanded?

A – 60 B – 40 C +120 D +200

8 Carlos has been offered a new job with a large multinational company. He is undecided whether
to accept the position.

What is a non-wage factor he might consider?

A bonus payments
B holiday entitlement
C overtime rate
D salary level

© UCLES 2019 2281/11/M/J/19 [Turn over

 4

9 Unlike the UK and US, a significant proportion of the shares on the stock exchanges of China and
Russia are of state-owned enterprises.

Which judgement about China and Russia can be made from this information?

A their distribution of income and wealth

B their level of development
C their stages of production
D their type of economic system

10 What is the most important factor that affects how much a family saves?

A the income of the family

B the level of taxation
C the rate of inflation
D the reliability of banks

11 The table shows the change in real incomes for a number of occupations between 1985 and
2015.

change in
occupation 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 2015 than in 1985.

B Fork-lift truck drivers earned the lowest wages in 2015.
C Doctors have earned more than lawyers since 1985.
D Professionals received higher percentage increases in income than manual workers.

© UCLES 2019 2281/11/M/J/19

 5

12 A large bakery buys a flour mill.

Which form of integration is this?

A conglomerate
B horizontal
C vertical backwards
D vertical forwards

13 Why is the energy supply industry dominated by very large firms in many economies?

A Government controls prevent the exploitation of consumers.

B High fixed capital costs exist.
C Labour-intensive production techniques are used.
D Non-price advertising increases competition.

14 The diagram shows the fixed costs, variable costs and total costs of a firm.

costs
W

O Z
output

Which distance represents the firm’s fixed costs?

A WX B WY C XY D XZ

15 An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of
operation he spends $70 000 on materials, employs ten production workers paid by the amount
produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.

What are his total variable costs?

A $100 000 B $150 000 C $220 000 D $370 000

© UCLES 2019 2281/11/M/J/19 [Turn over

 6

16 A government increases the rate of income tax in order to pay for extra transfer payments,
including cash benefits to the poor.

What must occur as a result of this?

A It changes the distribution of income.

B It ensures the equality of incomes.
C It leads to more people paying income taxes.
D It reduces the level of unemployment.

17 The standard rate for Value Added Tax (sales tax) is 20% in a country. Different consumers
buying the same product have to pay the same amount of tax.

What kind of tax is this?

A direct
B progressive
C proportional
D regressive

18 The diagram shows the demand curve D1 and supply curve S1 for a good. The government
introduces a subsidy to encourage production.

price S1
$ S2

30
25
20

D1

0 4 5
quantity

What will be the total cost of the subsidy to the government?

A $40 B $50 C $100 D $150

© UCLES 2019 2281/11/M/J/19

 7

19 Which statement about interest rate changes is accurate?

A A fall in interest rates will always increase inflation.

B A rise in interest rates may increase cost-push inflation.
C A rise in interest rates will raise the level of investment in a country.
D Interest rate changes have no impact on the level of production.

20 In Uganda, the rate of inflation fell from 5% in 2014 to 2% in 2015.

Which conclusion can be drawn from this information?

A Prices were higher in 2015 than in 2014.

B The cost of living fell between 2014 and 2015.
C The standard of living fell between 2014 and 2015.
D Ugandan citizens were better off in 2015 than 2014.

21 What would not increase the Human Development Index (HDI) of a country?

A an increase in the level of car ownership

B an increase in life expectancy at birth
C a rise in the GDP per head
D a rise in the number of years of schooling

22 A country is experiencing a period of full employment.

What is most likely to lead to an increase in demand-pull inflation?

A an increase in government spending

B an increase in imports
C an increase in income tax rates
D an increase in sales tax

© UCLES 2019 2281/11/M/J/19 [Turn over

 8

23 The table shows the percentage change from 2015–2016 in gross domestic product (GDP) and
consumer prices for selected countries.

Which country was suffering from economic recession and inflation?

country GDP consumer prices

A Australia +1.8 +1.3

B Brazil –2.9 +8.3
C China +6.7 +2.0
D Japan +1.1 –0.2

24 Which policy is most likely to reduce relative poverty?

A make income tax rates less progressive

B reduce benefit payments
C reduce the minimum wage
D reduce the rate of sales tax

25 Given the following information, which country is most likely to have the highest standard of
living?

birth death life infant

rate rate expectancy mortality rate

A Bangladesh 27 10 58 93
B Bhutan 36 14 53 107
C Botswana 31 21 40 57
D Brunei 25 5 72 22

26 In a country the birth rate increased but the population decreased.

What could have happened to other factors to cause this?

A a fall in infant mortality but no change in the death rate

B a rise in net immigration but no change in the death rate
C no change in migration but the death rate rose
D the death rate fell with no change in migration

© UCLES 2019 2281/11/M/J/19

 9

27 The US government decides to reduce the size of the quota on a good it buys from China.

What is likely to happen?

A The good will become cheaper in the US.

B The US balance of trade will worsen.
C The US government’s revenue will decline.
D There will be less of the good imported into the US.

28 What is the most accurate definition of a foreign exchange rate?

A a rate at which exports are exchanged for imports

B a rate determined by the demand and supply of the currency
C a value of a currency as fixed by the government
D a value of a currency expressed in terms of another currency

29 In 2013, the European Union (EU) levied a 48% tariff on low-priced Chinese solar panels
because the low price was the result of subsidies from the Chinese government.

Which argument for protectionism was the EU using?

A the anti-dumping argument

B the infant industry argument
C the strategic industry argument
D the sunset industry argument

30 A large amount of the agricultural products in a country were damaged by floods.

What is likely to have happened to the price of agricultural products and the volume of imports of
agricultural products?

price of products volume of imports

A fall fall
B fall rise
C rise fall
D rise rise

© UCLES 2019 2281/11/M/J/19

 10

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© UCLES 2019 2281/11/M/J/19

 11

BLANK PAGE

© UCLES 2019 2281/11/M/J/19

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 2281/11/M/J/19

 Cambridge Assessment International Education
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2019
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*7838807023*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB19 06_2281_12/RP
© UCLES 2019 [Turn over
 2

1 A government wishes to increase agricultural output. It gives farmers the tools to irrigate the
farmers’ fields.

Which factors of production are provided by the farmers?

A capital and enterprise

B enterprise and labour
C labour and land
D land and capital

2 The diagram shows a production possibility curve (PPC) for an economy that produces both
capital goods and consumer goods.

At which point will the economy show the highest potential for sustained long run economic
growth?

D
consumer
goods
C

O
capital goods

3 In recent years more golf courses, which use large quantities of water, have opened in China.

What may be the opportunity cost of this?

A cost of water
B loss of farmland
C sales of golf equipment
D wages of golf course staff

4 Cuba is implementing free market reforms.

What is a likely advantage of this?

A a wider variety of goods and services produced

B greater equality between the different groups in society
C increased provision of public goods
D less consumption of goods with external costs

© UCLES 2019 2281/12/M/J/19

 3

5 An airline upgrades its services by providing bigger aircraft. The airline claims it will reduce
catering waste and lower carbon (CO2) emissions per passenger journey although fares may rise.

What is a private cost and an external benefit of this decision?

private cost external benefit

A bigger aircraft higher fares

B higher fares lower CO2
C less catering waste bigger aircraft
D lower CO2 less catering waste

6 What can be concluded from the demand curve for the product shown in the diagram?

price demand

0 20 40
quantity

A Price increases will raise the producers’ revenue.

B Producers are unable to respond to a price rise.
C The product is one with many substitutes.
D There are 20 people able to buy the product.

7 A mobile (cell) phone operator increases the price of making calls on its network. After the price
increase, the revenue of the mobile phone operator falls by 10%.

What is the price elasticity of demand (PED) for the mobile operator’s service?

A elastic
B inelastic
C perfectly elastic
D unit elastic

© UCLES 2019 2281/12/M/J/19 [Turn over

 4

8 Why does specialisation increase the productivity of employees?

A Average cost of production increases.

B Staff turnover is high.
C Time is saved by not moving between tasks.
D Workers lose interest in their job.

9 In recent years some central banks have reduced interest rates below 1% per year.

What is the purpose of this monetary policy?

A to discourage lending by the commercial banks

B to encourage investment to stimulate the economy
C to increase individual savings
D to reduce inflation

10 What is the most important factor that affects how much a family saves?

A the income of the family

B the level of taxation
C the rate of inflation
D the reliability of banks

© UCLES 2019 2281/12/M/J/19

 5

11 The table shows the change in real incomes for a number of occupations between 1985 and
2015.

change in
occupation 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 2015 than in 1985.

B Fork-lift truck drivers earned the lowest wages in 2015.
C Doctors have earned more than lawyers since 1985.
D Professionals received higher percentage increases in income than manual workers.

12 What is the main difference between capital-intensive production and labour-intensive

production?

A the market structure of the production process

B the output that the production process creates
C the resources on which the production relies
D the size of the firm that uses the production process

13 What is the definition of diseconomies of scale?

A the decrease in average revenue as output increases

B the decrease in fixed cost as output increases
C the increase in average total costs as output increases
D the increase in total costs as output increases

© UCLES 2019 2281/12/M/J/19 [Turn over

 6

14 The diagram shows the fixed costs, variable costs and total costs of a firm.

costs
W

O Z
output

Which distance represents the firm’s fixed costs?

A WX B WY C XY D XZ

15 An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of
operation he spends $70 000 on materials, employs ten production workers paid by the amount
produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.

What are his total variable costs?

A $100 000 B $150 000 C $220 000 D $370 000

16 What is most likely to cause a rise in the rate of inflation in an economy?

A a fall in import prices

B a fall in wage rates
C a rise in the level of government spending
D a rise in the level of unemployment

17 The government increases taxation in order to fund an increase in spending on government

training schemes.

Which policy combination would this involve?

A fiscal policy and monetary policy only

B fiscal policy and supply-side policy only
C monetary policy and supply-side policy only
D monetary policy, supply-side policy and fiscal policy

© UCLES 2019 2281/12/M/J/19

 7

18 The diagram shows the effect of the imposition of a tax on a product.

S2
price
S1

U V W
X Y Z

D1

O Q2 Q1
quantity

Which area represents the part of the tax paid by consumers of the product?

A U+V
B U+V+W
C U+V+X+Y
D U+X

19 Why might a government decide to subsidise a high-cost steel industry?

A if cheaper imports of steel are improving the balance of payments

B if economic growth is increasing due to the success of other industries
C if redundant steel workers can easily be retrained
D if unemployment in steel producing areas is increasing

20 The table shows possible sequences between the rate of interest and other economic variables.

Which sequence is the most likely?

interest rate borrowing investment GDP

A higher decrease increase increase

B higher increase decrease decrease
C lower decrease decrease decrease
D lower increase increase increase

© UCLES 2019 2281/12/M/J/19 [Turn over

 8

21 Why is the Human Development Index (HDI) a better measure of living standards than GDP per
head?

A It takes into account changes in output.

B It takes into account changes in population.
C It takes into account health and education data.
D It takes into account inflation.

22 What describes frictional unemployment?

A unemployment caused by a general fall in economic activity

B unemployment caused by the time of year
C unemployment caused by wages being too high
D unemployment caused by workers searching for jobs

23 In January 2016 the rate of inflation in a country changed from 3% to 2%. In March 2016 the rate
of inflation was 4%.

What happened to the price level in January and March?

January March

A fell fell
B fell rose
C rose fell
D rose rose

24 What usually happens as a developing country becomes more developed?

A The average age of the population falls.

B The fertility rate declines.
C The infant mortality rate increases.
D The primary sector expands.

© UCLES 2019 2281/12/M/J/19

 9

25 Given the following information, which country is most likely to have the highest standard of
living?

birth death life infant

rate rate expectancy mortality rate

A Bangladesh 27 10 58 93
B Bhutan 36 14 53 107
C Botswana 31 21 40 57
D Brunei 25 5 72 22

26 In a country the birth rate increased but the population decreased.

What could have happened to other factors to cause this?

A a fall in infant mortality but no change in the death rate

B a rise in net immigration but no change in the death rate
C no change in migration but the death rate rose
D the death rate fell with no change in migration

27 The US government decides to reduce the size of the quota on a good it buys from China.

What is likely to happen?

A The good will become cheaper in the US.

B The US balance of trade will worsen.
C The US government’s revenue will decline.
D There will be less of the good imported into the US.

28 The world demand for oil is price-inelastic and oil is paid for in US dollars.

If the price of oil falls rapidly, how might it affect the exchange rate of the US dollar?

market for US dollar exchange rate for US dollar

A greater demand for US$ value increases

B greater supply of US$ value falls
C less demand for US$ value falls
D less supply of US$ value increases

© UCLES 2019 2281/12/M/J/19 [Turn over

 10

29 What is the most likely disadvantage of international specialisation?

A decreased levels of global output

B increased average production costs
C increased productivity levels
D overdependence on other economies

30 A large amount of the agricultural products in a country were damaged by floods.

What is likely to have happened to the price of agricultural products and the volume of imports of
agricultural products?

price of products volume of imports

A fall fall
B fall rise
C rise fall
D rise rise

© UCLES 2019 2281/12/M/J/19

 11

BLANK PAGE

© UCLES 2019 2281/12/M/J/19

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 2281/12/M/J/19

 Cambridge O Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2020
45 minutes

You must answer on the multiple choice answer sheet.

*3020139109*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• 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 multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_2281_11/FP
© UCLES 2020 [Turn over
 2

1 What is an example of the purchase of a consumer good?

A A farm owner buys a television.

B A farm owner buys additional land.
C A farm owner buys fertiliser for their crops.
D A farm owner buys some farming equipment.

2 What is the function of the factors of production in an economy?

A to make goods and services to fulfil wants and needs

B to provide an even distribution of income
C to provide tax income for the government
D to reduce the existence of external costs

3 The diagram shows a production possibility curve (PPC) for an economy that can produce cotton
and cars. The economy is at point Q.

W
output Z
of cotton

Q X

O
output of cars

There is improved technology that can only be used in the production of cars.

How would this be represented on this diagram?

A by a movement from Q to W
B by a movement from Q to X
C by a movement from Q to Y
D by a movement from Q to Z

© UCLES 2020 2281/11/M/J/20

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4 Which topic is included in microeconomics?

A economic growth
B elasticity of demand
C inflation
D the balance of payments

5 What aspect of demerit goods means they are overproduced?

A clear product information

B high external costs
C high product taxes
D low customer demand

6 The diagram shows market demand and supply curves.

S1
P2
price

P1

P3
D1

O Q2 Q3 Q1 Q4 Q5
quantity

To what extent is the market in disequilibrium at price P3?

A OQ1 – OQ2 B OQ1 – OQ3 C OQ2 – OQ4 D OQ3 – OQ5

7 Lithium is an essential metal for the production of electric cars. Following a 10% increase in the
price of lithium, supplies increase by 15%. This led to a 5% increase in the price of
electric cars.

What is the price elasticity of supply (PES) for lithium?

A 0.33 B 0.66 C 1.50 D 2.0

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8 The wage of labour in a firm increases.

What is the most likely effect on the production process?

A Capital replaces labour immediately.

B Capital replaces labour in the long run.
C Labour replaces capital immediately.
D Labour replaces capital in the long run.

9 Which combination of influences would increase the level of borrowing by a household?

influence 1 influence 2

A becoming pensioners higher rate of inflation

B greater wealth lower consumer confidence
C higher consumer confidence lower rate of interest
D higher rate of interest greater availability of credit

10 The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2.

85

percent 80

75 year 2
70

65
year 1
60

55

27 30 35 40 45 50 55 60 62

age

Which statement is shown by the graph to be true?

A Younger women earn more than older women.

B Women’s wages remain about the same between the ages of 40–50.
C In year 2, all women were earning more than men.
D In year 2, women were earning a higher percentage of men’s wages than in year 1.

© UCLES 2020 2281/11/M/J/20

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11 People’s income decreases.

How is the proportion spent on food and leisure likely to change?

food leisure

A decrease decrease
B decrease increase
C increase decrease
D increase increase

12 The table shows total fixed and total variable costs at different levels of output for a firm.

At which level of output is average total cost lowest?

total total
output
fixed cost variable cost
(tonnes)
($) ($)

A 100 1200 1200

B 200 1200 2000
C 300 1200 2700
D 400 1200 3600

13 The following information refers to a firm producing shoes.

At which level of output does the firm maximise profits?

total output of total cost total revenue

pairs of shoes ($) ($)

A 100 1000 1300

B 200 1800 2200
C 300 2700 3000
D 400 3200 3400

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 6

14 What is most likely to lead to an improvement in labour productivity in an industry?

A an increase in capital investment

B an increase in income tax rates
C an increase in the demand for the industry’s product
D an increase in the number of firms in the industry

15 How is a government most likely to prevent the growth of monopolies?

A by encouraging mergers in the private sector

B by establishing nationalised industries
C by promoting the benefits of economies of scale
D by reducing barriers to entry into an industry

16 What is not included in public expenditure?

A capital spending by firms

B interest payments on government borrowing
C investment in defence by the central government
D subsidies to bus companies from local government

17 When is the budget described as balanced?

A when direct taxes and indirect taxes are equal

B when exports and imports are equal
C when government spending and government revenue are equal
D when the demand for money and the supply of money are equal

18 The government wishes to increase economic growth in its economy.

What would not be likely to achieve this aim?

A The central bank encourages bank lending.

B The central bank lowers interest rates.
C The government increases sales tax (VAT).
D The government subsidises new industries.

© UCLES 2020 2281/11/M/J/20

 7

19 The government redistributes income more evenly.

What is most likely to increase?

A the incentive to work

B the level of savings
C the need for welfare payments
D the rate of inflation

20 The table shows selected indicators for the labour market of an economy in 2014 and 2018.

2014 2018
(millions) (millions)

total labour force 30 30

employed workers 25 28
long-term unemployed 1 2
employment in manufacturing 4 2
employment in services 13 16

According to the table, what is the most likely type of unemployment in 2018?

A cyclical
B frictional
C seasonal
D structural

21 What may directly cause economic growth?

A higher imports
B higher levels of resources
C higher taxation
D higher unemployment

22 What would not be required in the construction of an index of consumer prices?

A the selection of a base year

B the selection of a representative range of items
C the calculation of average wage levels
D the weighting of each item in the index

© UCLES 2020 2281/11/M/J/20 [Turn over

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23 The table gives information about three economic indicators in four countries.

rate of rate of rate of

inflation interest unemployment
% % %

country W 1.4 3.4 10.2

country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.

B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

24 What distinguishes a more developed country from a less developed country?

A Inflation rates are higher in the more developed country.

B Interest rates are higher in the more developed country.
C Natural resources are higher in the more developed country.
D Real incomes are higher in the more developed country.

25 An additional 700 000 UK children and pensioners fell into relative poverty between 2013 and
2017.

What might be the reason for this?

A Direct taxes had increased, and indirect taxes had fallen.

B Real gross domestic product was rising faster than the population.
C The death rate was exceeding the birth rate.
D The real value of government welfare benefits had fallen.

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26 Which changes usually result when a country develops and is able to provide free healthcare and
good living conditions?

labour
birth rate death rate
productivity

A falls falls rises

B falls rises falls
C rises falls falls
D rises rises rises

27 What is a quota in international trade?

A a government grant to encourage production

B an administrative and technical barrier
C a limit on the quantity of imports
D a tax on imports

28 Many low-income countries rely on exports of raw materials such as coffee or iron ore to earn
them foreign currency.

What is a disadvantage of this?

A Countries have a constant demand for raw materials.

B International trade only benefits the importing countries.
C It is necessary for low-income countries to belong to a free trade area.
D Raw materials have fluctuating prices.

29 What is included as part of the current account of the balance of payments?

A all government income and expenditure

B money withdrawn from a bank account
C investments in other countries by manufacturers
D trade in goods and services

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30 The table shows components of Japan’s current account balance in trillion Yen (¥) for 2011 and
2012.

balance of balance of balance of

balance of goods
year services primary income secondary income
¥ trillion
¥ trillion ¥ trillion ¥ trillion

2011 –1.61 –1.76 14.04 –1.11

2012 –5.23 –2.33 13.55 –1.02

Which balance improved between 2011 and 2012?

A balance of goods
B balance of services
C balance of primary income
D balance of secondary income

© UCLES 2020 2281/11/M/J/20

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BLANK PAGE

© UCLES 2020 2281/11/M/J/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 2281/11/M/J/20

 Cambridge O Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2020
45 minutes

You must answer on the multiple choice answer sheet.

*3390334831*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• 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 multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_2281_12/FP
© UCLES 2020 [Turn over
 2

1 In 2016, 20 billion barrels of oil and 1.6 billion barrels of natural gas were discovered in Texas,
US.

Which factor of production has increased in the US due to this discovery?

A capital
B enterprise
C labour
D land

2 The diagram shows a production possibility curve (PPC).

Which of these points shows the largest possible output of product Y currently achievable?

product Y
A

B
C

O
product X

3 A student decides to take up a two year apprenticeship for which she will earn $10 000 per year.
After that she expects to earn $25 000 per year. She could take an unskilled job which pays
$16 000 per year instead of the apprenticeship.

What is the opportunity cost in the two years of completing the apprenticeship?

A $10 000 B $12 000 C $25 000 D $32 000

4 Microeconomics analyses choices in various situations.

Which area of economic study does it not include?

A costs and revenues of a firm

B individual consumer behaviour
C policies for economic growth
D wages for different occupations

© UCLES 2020 2281/12/M/J/20

 3

5 What is a cause of market failure?

A many firms
B monopoly
C profit maximisation
D specialisation

6 The diagrams show the supply curve for an individual grower of tomatoes and for the total market
supply of tomatoes.

individual grower total market

3.0 3.0
price price
per kg per kg
($) ($)

1.5 1.5

0.5 0.5

0 0
1000 3000 6000 100 000 300 000 600 000
quantity quantity
(kilograms) (tonnes)

What explains the similarity of the two curves?

A As costs rise growers need to get a higher price to increase output.

B At the lower prices each grower supplies more tomatoes.
C The profitability per unit is the same for all growers irrespective of output.
D Supply is not always influenced by price.

7 The price of bread rose by 5% and the quantity demanded fell by 4%.

What was the price elasticity of demand for bread?

A –0.4 B –0.8 C –1.25 D –2.0

© UCLES 2020 2281/12/M/J/20 [Turn over

 4

8 Saudi Arabia specialises in oil extraction and refining. This is a capital-intensive industry with
highly skilled labour.

What might be a disadvantage of this specialisation?

A Oil companies have increased training costs as each worker needs many different skills.
B Oil companies may find it difficult to achieve economies of scale.
C Resource allocation is not efficient because a narrow range of goods is being produced.
D Workers may face a restricted range of job opportunities.

9 What would most likely cause a person to increase their savings?

A a decision to plan for retirement

B a fall in income
C a fall in interest rates
D a reduction in tax-free saving schemes

10 The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2.

85

percent 80

75 year 2
70

65
year 1
60

55

27 30 35 40 45 50 55 60 62

age

Which statement is shown by the graph to be true?

A Younger women earn more than older women.

B Women’s wages remain about the same between the ages of 40–50.
C In year 2, all women were earning more than men.
D In year 2, women were earning a higher percentage of men’s wages than in year 1.

© UCLES 2020 2281/12/M/J/20

 5

11 People’s income decreases.

How is the proportion spent on food and leisure likely to change?

food leisure

A decrease decrease
B decrease increase
C increase decrease
D increase increase

12 The table shows total fixed and total variable costs at different levels of output for a firm.

total total
output fixed cost variable cost
$ $

100 1000 1000

200 1000 1500
300 1000 2000
400 1000 2500

What happens as output rises?

A Average fixed cost falls.

B Average fixed cost rises.
C Average variable cost remains constant.
D Average variable cost rises.

13 The following information refers to a firm producing shoes.

At which level of output does the firm maximise profits?

total output of total cost total revenue

pairs of shoes ($) ($)

A 100 1000 1300

B 200 1800 2200
C 300 2700 3000
D 400 3200 3400

© UCLES 2020 2281/12/M/J/20 [Turn over

 6

14 Which statement proves there has been an increase in productivity for a factory making tractors?

A 10% more workers results in a 10% increase in tractors produced each week.
B Output per worker increases from 3 tractors to 4 tractors per month.
C Production increases as more workers are hired.
D Starting a night shift leads to an increase in production of 10 tractors a day.

15 When do economies of scale take place?

A in the short run

B if variable factors become fixed
C when all factors of production are fixed
D when all factors of production are variable

16 What is not included in public expenditure?

A capital spending by firms

B interest payments on government borrowing
C investment in defence by the central government
D subsidies to bus companies from local government

17 When is the budget described as balanced?

A when direct taxes and indirect taxes are equal

B when exports and imports are equal
C when government spending and government revenue are equal
D when the demand for money and the supply of money are equal

18 A government increased revenue by increasing taxes on firms.

Which tax did it increase?

A inheritance tax
B profits tax
C sales tax
D value added tax

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 7

19 Why are governments responsible for the defence of the country?

A It is impossible to charge a price for defence.

B It prevents individual citizens having access to weapons.
C Only governments can manufacture weapons.
D Providing defence is very expensive.

20 Information about job vacancies on a government website has led to a decrease in short-term
unemployment.

What is the term for this type of unemployment?

A cyclical unemployment
B frictional unemployment
C structural unemployment
D technological unemployment

21 The table shows figures for the real GDP of a country.

quarter 1 quarter 2 quarter 3 quarter 4

($bn) ($bn) ($bn) ($bn)

100 101 99 98

A quarter is three months.

During which quarters was the country experiencing a recession?

A quarters 1 and 2
B quarters 2 and 3
C quarters 3 and 4
D the entire period

22 What would not be required in the construction of an index of consumer prices?

A the selection of a base year

B the selection of a representative range of items
C the calculation of average wage levels
D the weighting of each item in the index

© UCLES 2020 2281/12/M/J/20 [Turn over

 8

23 The table gives information about three economic indicators in four countries.

rate of rate of rate of

inflation interest unemployment
% % %

country W 1.4 3.4 10.2

country X 3.7 8.7 12.3
country Y 3.6 7.3 14.2
country Z 2.1 6.0 7.7

What may be concluded from this information?

A Countries with higher inflation have higher interest rates.

B Countries with higher interest rates have lower unemployment.
C The country with the lowest inflation had the highest unemployment.
D The country with the lowest unemployment had the lowest inflation.

24 Due to war, some people are living in absolute poverty.

What is the main indicator of absolute poverty for these people?

A dependence on aid for medical treatment

B lack of transport to escape abroad
C living in tents in temporary camps
D receiving insufficient food for basic nutrition

25 Which country would be classified as the most developed based on the data in the table?

gross domestic
population
country product per year
(millions)
($m)

A 600 3
B 700 2
C 12 000 40
D 15 000 100

© UCLES 2020 2281/12/M/J/20

 9

26 Which changes usually result when a country develops and is able to provide free healthcare and
good living conditions?

labour
birth rate death rate
productivity

A falls falls rises

B falls rises falls
C rises falls falls
D rises rises rises

27 Which protectionist measure would be most suitable for a government to use to support the
growth in exports of an industry?

A embargo
B quota
C subsidy
D tariff

28 There has been an appreciation of the value of a country’s currency against other currencies.

What effects will this have on prices of imports of raw materials and prices of exports of
manufactured goods?

prices of imports of prices of exports of

raw materials manufactured goods

A cheaper cheaper
B cheaper more expensive
C more expensive cheaper
D more expensive more expensive

29 What is a disadvantage of increased specialisation by a country?

A It becomes more reliant on imports to meet all its needs.

B It reduces the potential for international trade.
C It results in access to a greater variety of goods for consumers.
D It results in lower costs for home produced goods.

© UCLES 2020 2281/12/M/J/20 [Turn over

 10

30 The table shows components of Japan’s current account balance in trillion Yen (¥) for 2011 and
2012.

balance of balance of balance of

balance of goods
year services primary income secondary income
¥ trillion
¥ trillion ¥ trillion ¥ trillion

2011 –1.61 –1.76 14.04 –1.11

2012 –5.23 –2.33 13.55 –1.02

Which balance improved between 2011 and 2012?

A balance of goods
B balance of services
C balance of primary income
D balance of secondary income

© UCLES 2020 2281/12/M/J/20

 11

BLANK PAGE

© UCLES 2020 2281/12/M/J/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 2281/12/M/J/20

 Cambridge O Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2021
45 minutes

You must answer on the multiple choice answer sheet.

*7842959067*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_2281_11/FP
© UCLES 2021 [Turn over
 2

1 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.

2 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

3 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

O
consumer
goods

4 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

© UCLES 2021 2281/11/M/J/21

 3

5 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

6 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

7 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

8 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

© UCLES 2021 2281/11/M/J/21 [Turn over

 4

9 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.

10 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.

11 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

O R S T
quantity of labour

What identifies the change in employment?

A OR B OT C RS D RT

© UCLES 2021 2281/11/M/J/21

 5

12 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.

13 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

14 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

15 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

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16 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

17 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.

18 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

19 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.

© UCLES 2021 2281/11/M/J/21

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20 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

21 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.

22 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

© UCLES 2021 2281/11/M/J/21 [Turn over

 8

23 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

24 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

© UCLES 2021 2281/11/M/J/21

 9

25 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

26 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.

27 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.

28 Which method of protection always reduces the supply of an imported good to zero?

A embargo
B quota
C subsidy
D tariff

29 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

© UCLES 2021 2281/11/M/J/21 [Turn over

 10

30 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

© UCLES 2021 2281/11/M/J/21

 11

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© UCLES 2021 2281/11/M/J/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 2281/11/M/J/21

 Cambridge O Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2021
45 minutes

You must answer on the multiple choice answer sheet.

*0772616870*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_2281_12/FP
© UCLES 2021 [Turn over
 2

1 What is an advantage of competitive markets?

A Competition causes inequalities of wealth.

B Competition encourages the efficient use of resources.
C The economic problem of scarcity is eliminated.
D The right quantity of merit goods is guaranteed.

2 A multinational company (MNC) wishes to invest in a low-income country to expand its palm oil
production.

What is most likely to make this investment possible?

A high cost of clearing forests to increase land for plantations

B increased demand for palm oil
C shortages of labour in the rural economy
D the removal of subsidies for palm oil production

3 A farmer sells land used for crops to a firm that will use the land for wind turbines to produce
electric power.

What is the opportunity cost of this decision by the farmer?

A the cost of installing wind turbines

B the loss of revenue from crops that grow on the land
C the profit made from selling the land
D the reduced cost of producing renewable energy

4 What is not included in microeconomics?

A economies of scale
B forms of competition
C individual demand
D the inflation rate

© UCLES 2021 2281/12/M/J/21

 3

5 What determines a consumer’s demand for a product?

the consumer’s
the consumer’s the price
willingness to buy
income of the product
the product

A
B
C
D

6 Which problem will be reduced by a government subsidy to a firm?

A absence of a public good

B abuse of monopoly power
C overconsumption of a demerit good
D underconsumption of a merit good

7 The diagram shows the market for information technology (IT) graduates. The original equilibrium
was X. Later, more IT students graduated from university and greater use of artificial intelligence
(AI) increased the demand for IT staff.

What is the new equilibrium?

D1 D D2

wage B S1
($) A

S
X

C S2
D

O quantity of labour

8 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

© UCLES 2021 2281/12/M/J/21 [Turn over

 4

9 What might cause consumers in a high-income economy to both save more and spend more?

A an increase in the rate of interest

B an increase in wealth
C expectation that prices will fall in the future
D inflation rising at a faster rate than wages

10 What would be a disadvantage of specialisation for a worker?

A a low price of the product that they make

B boredom due to repetition of the same task
C higher quality of the good
D the opportunity to undertake training

11 The diagram shows a market for labour. X is the original equilibrium. A trade union negotiates a
minimum wage at W, and the government restricts the supply of immigrant labour.

What is the new equilibrium?

S2
wages S1
($)
B
A C D
W
X

D
O quantity of
labour

12 Which cost of production falls continuously as output increases?

A average fixed cost

B average total cost
C average variable cost
D total variable cost

© UCLES 2021 2281/12/M/J/21

 5

13 A Swedish furniture maker bought a Romanian firm that owned 83 000 hectares of trees.

Which type of merger is this most likely to be?

A diversification
B horizontal
C vertical backward
D vertical forward

14 What is calculated when price is multiplied by the quantity demanded of a product?

A average revenue
B profit
C total cost
D total revenue

15 A private sector firm is the only supplier of rail services between two cities.

What will stop the firm charging very high ticket prices?

A barriers to entry into rail services

B competition from public road transport
C government policy encouraging monopoly power
D high costs of maintaining rail tracks

16 What is a fiscal policy measure?

A direct tax
B exchange rates
C interest rates
D regulation

17 A government uses expansionary monetary policy.

What does the government decrease?

A bank lending
B interest rates
C the budget deficit
D the money supply

© UCLES 2021 2281/12/M/J/21 [Turn over

 6

18 A country is experiencing unemployment. It has a progressive income tax policy and benefits for
the poor. The government aims to increase employment and reduce income inequality.

Which fiscal policy measures are most likely to achieve these aims?

income tax benefits for the poor

A decrease the highest tax rate decrease

B increase the highest tax rate decrease
C decrease the lowest tax rate increase
D increase the lowest tax rate increase

19 The table shows changes in the Consumer Prices Index (CPI) from the base year, 1, and for the
next three years.

year 1 2 3 4
CPI 100 101.1 101.8 102.1

Which statement is correct?

A Consumer prices were highest in year 3.

B The rate of inflation was 2.1% in year 4.
C The rate of inflation was highest in year 2.
D The rate of inflation was lowest in year 1.

20 What is likely to happen when a country is experiencing deflation?

A Consumers delay spending.

B Governments raise interest rates.
C The level of imports increases.
D The real value of money falls.

21 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.

© UCLES 2021 2281/12/M/J/21

 7

22 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

23 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

© UCLES 2021 2281/12/M/J/21 [Turn over

 8

24 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

25 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

26 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.

© UCLES 2021 2281/12/M/J/21

 9

27 What is the most likely benefit for a low-income economy if it removes tariffs on imported goods
and services?

A more choice for domestic consumers

B more employment in declining industries
C more exports by domestic firms
D more tax revenue from imports

28 Economies have become increasingly linked through globalisation.

What would discourage this?

A creation of a single world market

B direct foreign investment by multinational companies
C expansion of trade in financial services
D protectionist policies by trading groups

29 What may result from a balance of payments trade surplus?

A The exchange rate appreciates and causes export prices to fall.

B The exchange rate appreciates and causes export prices to rise.
C The exchange rate depreciates and causes export prices to fall.
D The exchange rate depreciates and causes export prices to rise.

30 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

© UCLES 2021 2281/12/M/J/21

 10

BLANK PAGE

© UCLES 2021 2281/12/M/J/21

 11

BLANK PAGE

© UCLES 2021 2281/12/M/J/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 2281/12/M/J/21

 Cambridge O Level

ECONOMICS 2281/11
Paper 1 Multiple Choice May/June 2022
45 minutes

You must answer on the multiple choice answer sheet.

*7332540328*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_2281_11/FP
© UCLES 2022 [Turn over
 2

1 A government uses different supply-side policy measures to improve economic performance.

Which policy measure would not satisfy one of the government’s macroeconomic aims?

A changing the tax system which leads to more tax evasion

B encouraging foreign investment which improves the balance of payments
C privatising state industries which increases economic growth
D retraining redundant workers which lowers unemployment

2 What could cause an increase in demand for a factor of production?

A decrease in the efficiency of the factor of production

B decrease in the price of an alternative factor of production
C increase in the demand for the good or service produced
D increase in the price of the factor of production

3 Which components, in addition to Gross Domestic Product (GDP) per head, are included in the
Human Development Index (HDI)?

A average earnings and inequalities of incomes

B balance of trade and balance of payments
C life expectancy at birth and expected years of schooling
D size of population and age structure of population

4 The US government introduces tariffs on steel imported from China. This increases the price of
imported Chinese steel.

Whose income would be likely to increase as a direct result?

Chinese steel
US government
producers

A yes yes
B yes no
C no yes
D no no

© UCLES 2022 2281/11/M/J/22

 3

5 A government retrains unemployed industrial workers to increase employment opportunities. The

policy may have adverse effects on other government macroeconomic aims.

What illustrates this situation?

A Better skilled workers may increase productivity and improve economic growth.
B Increased wage-earning capacity may lead to demand-pull inflation.
C More employed workers may reduce government expenditure on benefit payments.
D Near full employment may result in a more stable balance of payments.

6 The diagram shows the demand and supply for apples.

3.00 S
$ per
kilo 2.50

2.00

1.50

1.00 D

0.50

0
0 200 400 600 800 1000
tonnes (000)

To what extent is the market for apples in disequilibrium at a price of $2.50 per kilo?

A Demand exceeds supply by 200 000 tonnes.

B Demand exceeds supply by 400 000 tonnes.
C Supply exceeds demand by 200 000 tonnes.
D Supply exceeds demand by 400 000 tonnes.

© UCLES 2022 2281/11/M/J/22 [Turn over

 4

7 The diagram shows the fixed costs, variable costs and total costs of a firm at output S.

costs
P

O S
output

Which distance represents the firm’s variable costs?

A PQ B PS C QR D QS

8 The table shows the world output of iron ore and the average yearly price for four years.

world output of iron ore average yearly price

year
(billion tonnes) ($ per tonne)

year 1 2.86 128

year 2 2.98 135
year 3 2.22 97
year 4 2.28 95

What can be concluded about the relationship between world output of iron ore and the average
yearly price over the four years?

average
world output
yearly price

A highest highest
B highest lowest
C lowest highest
D lowest lowest

© UCLES 2022 2281/11/M/J/22

 5

9 A firm has a high price elasticity of supply for its product.

What does this indicate?

A It can increase revenue by reducing the price.

B It can quickly respond to changes in price.
C It keeps very low volumes of product in stock.
D It produces a good that has close substitutes.

10 A manufacturer of medical supplies benefits from improved road links to its main markets.

What benefit definitely occurs as a result?

A increased average revenue

B increased external economies of scale
C increased internal economies of scale
D increased market share

11 Which row shows an essential characteristic of competitive markets and monopoly markets?

competitive markets monopoly markets

A many buyers single seller

B many sellers single buyer
C single buyer many buyers
D single seller many sellers

12 A student has nothing to do on a Friday evening. She withdraws $5 from the $100 she has in a
savings account and buys a present to take to a party, to which admission is free.

What does this involve?

A an opportunity cost equal to $95

B an opportunity cost equal to other goods she could have bought for $5
C no opportunity cost, as entrance to the party is free
D no opportunity cost, as she had no better way of using the time

© UCLES 2022 2281/11/M/J/22 [Turn over

 6

13 The development of artificial intelligence in machines raises the productivity of capital.

What will be the effect of this?

A The costs of production will increase.

B The demand for capital will increase.
C The price of capital will fall.
D The supply of capital will decrease.

14 Which combination is necessary for the construction of a consumer prices index?

a base year price stability weights

A yes yes yes

B yes no yes
C yes no no
D no yes yes

15 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production

B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

16 What is an advantage of a country having a market economic system with a large private sector?

A Firms can become unprofitable if they do not produce what consumers want.
B Market forces often fail to ensure maximum benefits for society.
C Some goods may not be provided at all or not in sufficient quantity.
D There is an unequal distribution of income which can increase over time.

17 What is an example of a fiscal policy measure?

A increasing the exchange rate

B reducing the power of trade unions
C reducing the rate of corporation tax
D setting a lower interest rate

© UCLES 2022 2281/11/M/J/22

 7

18 Why would an increase in the interest rate potentially lead to lower inflation?

A Consumers will be more willing to save when interest rates are high.
B Consumers will be more willing to spend when interest rates are high.
C Producers will be more willing to borrow from banks when interest rates are high.
D Producers will be more willing to invest when interest rates are high.

19 Which government action will not add directly to the quantity or quality of human resources?

A improvement in health facilities

B investment in education and training
C provision of better food and nutrition
D reclamation of land from the sea

20 What is a likely cause of economic growth?

A decreased employment
B decreased investment
C decreased productivity
D decreased taxation

© UCLES 2022 2281/11/M/J/22 [Turn over

 8

21 An economy experiences a recession and moves from full employment to 5% unemployment.

Which movement from X to Y on the PPC diagram shows the consequence for the economy?

A B

capital capital
goods goods
X
X
Y Y

O consumer goods O consumer goods

C D

capital capital
goods goods X
Y
Y
X

O consumer goods O consumer goods

22 The table shows how three people, X, Y and Z, spend their income.

person X person Y person Z

food, clothing and housing 30% 25% 50%

entertainment and leisure 35% 35% 25%
luxury goods 35% 40% 25%

What is the likely order of income, from lowest income to highest income, for these three people?

A YXZ

B YZX

C ZXY

D ZYX

© UCLES 2022 2281/11/M/J/22

 9

23 Why would standards of living fall when there is a recession?

A The government would increase taxes to combat the recession.

B The purchasing power of households would fall.
C The value of the domestic currency would increase.
D There would be a rise in the level of immigration.

24 What is the purpose of an economy’s production possibility curve (PPC)?

A It answers the question of what to produce in an economy.

B It enables microeconomic decisions to be taken by firms.
C It measures the supply of goods and services available in an economy.
D It shows the productive capacity in an economy at a point in time.

25 The governments of low-income countries often allow foreign multinational companies (MNCs) to
mine minerals in their country.

Which conflict between benefit and cost might this cause the low-income countries?

benefit cost

A improved balance of trade training by the MNCs

B higher employment loss of a finite resource
C increased profits for the MNCs efficient production
D more sustainable development economic growth

26 The table shows some economic indicators.

Which increase in the first indicator is most likely to lead to an increase in the second indicator?

first indicator second indicator

A budget surplus consumer saving

B consumer spending unemployment
C inflation trade surplus
D productivity living standards

© UCLES 2022 2281/11/M/J/22 [Turn over

 10

27 What is the definition of foreign exchange rate?

A the difference between emigration and immigration

B the difference between the values of imports and exports
C the price of one currency in terms of another
D the price of one good in terms of another

28 Which activity is correctly linked to the organisation that provides it?

organisation activity

A central bank regulate the rate of inflation

B central bank set direct tax rates
C commercial bank manage the government’s financial accounts
D commercial bank safeguard the country’s foreign reserves

29 Which topic is not included in microeconomics?

A consumer demand
B economies of scale
C forms of competition
D inflation

30 What is likely to cause an immediate decrease in the size of the labour force?

A a fall in the average size of families

B a fall in the birth rate
C a reduction in the age of retirement
D an increase in net immigration

© UCLES 2022 2281/11/M/J/22

 11

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© UCLES 2022 2281/11/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 2281/11/M/J/22

 Cambridge O Level

ECONOMICS 2281/12
Paper 1 Multiple Choice May/June 2022
45 minutes

You must answer on the multiple choice answer sheet.

*3209236737*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_2281_12/FP
© UCLES 2022 [Turn over
 2

1 What is an example of a free good?

A defence
B education
C health services
D sunshine

2 A student has nothing to do on a Friday evening. She withdraws $5 from the $100 she has in a
savings account and buys a present to take to a party, to which admission is free.

What does this involve?

A an opportunity cost equal to $95

B an opportunity cost equal to other goods she could have bought for $5
C no opportunity cost, as entrance to the party is free
D no opportunity cost, as she had no better way of using the time

3 The diagram shows two production possibility curves for a country.

capital
goods

L
O consumer
goods

What might cause a shift from point K to point L in the country’s production?

A a change in what consumers want to buy

B a recession
C more investment
D the use of previously unemployed resources

4 Which relationship would be studied by an economist specialising in macroeconomics?

A the relationship between the inflation rate and the unemployment rate
B the relationship between the output of a firm and its costs of production
C the relationship between the price of a product and the quantity demanded by a consumer
D the relationship between the wage rate of workers and demand for labour in an occupation

© UCLES 2022 2281/12/M/J/22

 3

5 In recent years, a government has started to make more use of the free market system. However,
they are doing it very slowly to avoid the disadvantages that a free market system might bring.

What is a possible disadvantage of the free market system?

A decreased incentive to work

B decreased levels of pollution
C increased efficiency
D increased inequality of income

6 What will cause the demand curve for a good to shift to the right?

A a decrease in the disposable income of consumers

B a decrease in the price of a complement good
C a decrease in the price of a substitute good
D a decrease in the price of the good

7 In the diagram, which demand curve has perfectly elastic demand?

A B
C
price

O quantity

© UCLES 2022 2281/12/M/J/22 [Turn over

 4

8 The table shows the demand and supply schedules for rice. The current price is $2.00 per kilo.

quantity demanded quantity supplied

price per kilo $
(million tonnes) (million tonnes)

2.50 5 30
2.00 10 25
1.50 20 20
1.00 30 15
0.50 40 10

What will happen if the price is reduced to $1.00 per kilo?

A The demand schedule will shift to the left.

B The market will move from shortage to surplus.
C The market will move from surplus to shortage.
D The supply schedule will shift to the right.

9 The diagram shows the fixed costs, variable costs and total costs of a firm at output S.

costs
P

O S
output

Which distance represents the firm’s variable costs?

A PQ B PS C QR D QS

10 What could cause profits to be high in a monopoly market?

A barriers to entry
B diseconomies of scale
C elastic demand for the product
D high number of substitutes for the product

© UCLES 2022 2281/12/M/J/22

 5

11 Which firm is most likely to be classified as a small firm in the tertiary sector?

A a farm
B a hairdresser
C a steelworks
D a supermarket

12 Germany is considered a capital-intensive economy while Indonesia is considered a

labour-intensive economy.

What does this mean about the economies of Germany and Indonesia?

A Capital is relatively cheaper than labour in Germany while labour is relatively cheaper than
capital in Indonesia.
B Germany has many primary sector workers while Indonesia has many tertiary sector
workers.
C Indonesia has a higher growth in its population size than Germany.
D Relatively more low-cost labour is available in Germany while capital is more efficient than
labour in Indonesia.

13 A bank continues to operate loss-making branches.

Which objective is the bank trying to achieve?

A growth
B efficiency
C profit maximisation
D social welfare

14 The table shows how three people, X, Y and Z, spend their income.

person X person Y person Z

food, clothing and housing 30% 25% 50%

entertainment and leisure 35% 35% 25%
luxury goods 35% 40% 25%

What is the likely order of income, from lowest income to highest income, for these three people?

A YXZ

B YZX

C ZXY

D ZYX

© UCLES 2022 2281/12/M/J/22 [Turn over

 6

15 Which activity is correctly linked to the organisation that provides it?

organisation activity

A central bank regulate the rate of inflation

B central bank set direct tax rates
C commercial bank manage the government’s financial accounts
D commercial bank safeguard the country’s foreign reserves

16 The chart shows a government’s spending in a year.

40 000
$ (millions) 35 000 34 006

30 000
25 000
20 000 18 660
15 280
15 000
10 000
5050
5000 2390
0
social security health education law and defence
and welfare order

What was the total government spending on public goods?

A $2390 million
B $5050 million
C $7440 million
D $33 940 million

© UCLES 2022 2281/12/M/J/22

 7

17 A government levies a specific tax on the supply of cigarettes. At the same time it starts a
campaign to explain the health risks of smoking cigarettes.

Which diagram illustrates the effects on the demand and supply of cigarettes?

A B

price price S1
S2 S2
S1

D D
O quantity O quantity

C D

price price
S2 S1
S1 S2

D2 D1 D1 D2
O quantity O quantity

18 A government wishes to pursue an expansionary monetary policy.

What should it do?

A discourage bank lending
B give subsidies to firms
C lower income tax thresholds
D lower interest rates

19 A government introduces a series of economic measures.

What is a supply-side policy measure?

A building more affordable homes to improve labour mobility

B controlling consumer spending to reduce inflation
C lowering interest rates to encourage purchase of expensive goods
D raising pensions to help retired people pay their fuel bills

© UCLES 2022 2281/12/M/J/22 [Turn over

 8

20 What is identified as economic growth?

A a fall in labour productivity

B an increase in the productive capacity of the economy
C an increase in the Consumer Prices Index (CPI)
D the economy enters a period of recession

21 The retail trade in a country has unemployed workers in one region and job vacancies in another
region.

What could explain this?

A Costs of employing workers are lower when there is unemployment.

B It is more expensive to live in the area where the retail jobs are available.
C Retailing demands the same skills everywhere.
D The geographical mobility of labour has increased.

22 A country wishes to reduce the level of inflation.

Which combination of policy measures will be most successful?

policy measure 1 policy measure 2

A decrease exchange rates increase interest rates

B decrease interest rates increase exchange rates
C increase government spending decrease interest rates
D increase interest rates decrease government spending

23 A government wants to reduce both its budget deficit and the amount of poverty in its country.

Which fiscal policy measure is most likely to achieve both of these aims?

A decreasing the rate of progressive income tax

B decreasing government spending on welfare benefits
C increasing the rate of progressive income tax
D increasing government spending on welfare benefits

© UCLES 2022 2281/12/M/J/22

 9

24 Which components, in addition to Gross Domestic Product (GDP) per head, are included in the
Human Development Index (HDI)?

A average earnings and inequalities of incomes

B balance of trade and balance of payments
C life expectancy at birth and expected years of schooling
D size of population and age structure of population

25 What is likely to cause an immediate decrease in the size of the labour force?

A a fall in the average size of families

B a fall in the birth rate
C a reduction in the age of retirement
D an increase in net immigration

26 The table shows some economic indicators.

Which increase in the first indicator is most likely to lead to an increase in the second indicator?

first indicator second indicator

A budget surplus consumer saving

B consumer spending unemployment
C inflation trade surplus
D productivity living standards

27 The price of a currency in a fixed exchange rate system is reduced.

What is this called?

A appreciation
B depreciation
C devaluation
D revaluation

© UCLES 2022 2281/12/M/J/22 [Turn over

 10

28 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production

B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

29 What is most likely to result from a reduction in the value of a country’s currency if there are no
other changes in the economy?

A A trade in goods surplus will fall.

B Export prices will rise.
C Import prices will rise.
D The inflation rate will fall.

30 The governments of low-income countries often allow foreign multinational companies (MNCs) to
mine minerals in their country.

Which conflict between benefit and cost might this cause the low-income countries?

benefit cost

A improved balance of trade training by the MNCs

B higher employment loss of a finite resource
C increased profits for the MNCs efficient production
D more sustainable development economic growth

© UCLES 2022 2281/12/M/J/22

 11

BLANK PAGE

© UCLES 2022 2281/12/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 2281/12/M/J/22

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice October/November 2010
1 hour
Additional Materials: Multiple Choice Answer Sheet
*0411267420*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 12 printed pages.

IB10 11_2281_11/2RP
© UCLES 2010 [Turn over
 2

1 What makes choice an important element in the basic economic problem?

A Increased demand leads to higher market prices.

B Limited resources have many alternative uses.
C Reaching a market equilibrium may take a long time.
D Scarce economic resources are distributed equally.

2 What is a factor of production?

A an advantage of producing on a large scale

B a resource used to produce goods and services
C a sub-section of a manufacturing process
D a unit of output

3 A government is faced with the choice of spending on either education or healthcare.

Of what is this an example?

A conservation of resources
B monetary policy
C opportunity cost
D substitution of factors

4 A farmer pays a landowner for the use of a field.

What is the income to the landowner called?

A interest
B profit
C rent
D wages

© UCLES 2010 2281/11/O/N/10

 3

5 The table shows the contribution to Gross Domestic Product made by different sectors for four
countries.

country services % industry % agriculture %

Bangladesh 40 13 47
China 18 45 37
Philippines 42 36 22
US 66 32 2

Which statement is correct?

A Most production in Bangladesh was in the tertiary sector.

B Most production in China was in the primary sector.
C Most production in the Philippines was in the secondary sector.
D Most production in the US was in the tertiary sector.

6 The diagram shows demand and supply curves for a product at its equilibrium price P.

S1
S
S2

P
price

D1
D
D2
O Q
quantity

How would the introduction of a subsidy be shown?

A Demand would shift to D1.

B Demand would shift to D2.
C Supply would shift to S1.
D Supply would shift to S2.

© UCLES 2010 2281/11/O/N/10 [Turn over

 4

7 Which statement could explain a decrease in the demand for natural rubber?

A Demand for car tyres has increased.

B New techniques of producing substitutes for rubber have been introduced.
C Productivity of rubber plantations has increased.
D The area of land on which rubber is grown has increased.

8 The table illustrates the demand and supply for rice in a market in Africa.

price per kg ($) quantity demanded (kg) quantity supplied (kg)

10 50 10
20 40 20
30 30 30
40 20 40

When the price rises from $20 to $30 per kg, what is the approximate price elasticity of demand
for rice?

A 0.25 B 0.5 C 1.0 D 2.0

9 The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the
price to the consumer rises from $4 to $5.

S2 S1

price 5
$ 4
3

D
0
75 100
quantity

What is the total tax yield to the government?

A $75 B $150 C $200 D $375

© UCLES 2010 2281/11/O/N/10

 5

10 The diagrams show different conditions of demand and supply for an agricultural product.

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

A B C D
S
D S
S
price price price price S
D D D

O quantity O quantity O quantity O quantity

11 A government intends to build a new international airport in an area of outstanding natural

beauty.

What would be an external cost of this decision?

A the cost of importing construction materials

B the countryside that is lost
C the increase in profits for local businesses
D the wages paid to the construction workers

12 A stock exchange is a market in which

A a system of barter operates.

B the interest rate is fixed.
C the value of the exchange rate is determined.
D shares are bought and sold.

13 ‘Savers suffer as inflation rises to 4.4 %.’

Which function of money is most involved in this statement?

A means of deferred payments

B medium of exchange
C store of value
D unit of account

© UCLES 2010 2281/11/O/N/10 [Turn over

 6

14 What is the most likely reason for a worker preferring to be employed by the government rather
than by a firm in the private sector?

A more chance of a fast changing environment

B more chance to work in a large organisation
C more opportunity to gain from successful risk taking
D more possibility of productivity bonuses

15 ‘There are actors who earn extremely high incomes.’

What best explains this?

A Acting is a popular career.

B Actors have regular employment.
C Actors work short hours.
D Some actors have a unique talent.

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

A Specialisation can enable the worker to become more skilled.

B Specialisation enables a better quality product to be produced.
C Specialisation enables the firm to introduce more machinery.
D Specialisation makes better use of resources.

17 Which change would be most likely to cause the earnings of hotel managers in Mauritius to rise
more than the earnings of sugar cane workers in Mauritius?

A a decrease in the number of tourists visiting Mauritius

B a decrease in the supply of sugar cane workers in Mauritius
C an increase in the price of sugar cane from Mauritius
D an increase in the productivity of hotel managers in Mauritius

18 A milk processing company takes over a group of dairy farms before merging with a chain of
supermarkets.

Which types of integration have taken place?

A diversification followed by horizontal

B horizontal followed by vertical backward
C vertical backward followed by vertical forward
D vertical forward followed by diversification

© UCLES 2010 2281/11/O/N/10

 7

19 What is usually an advantage of a small firm?

A the ability to benefit from bulk buying arrangements

B the ability to raise finance from a stock exchange
C the ability to respond quickly to changes in consumer demand
D the ability to run a national advertising campaign

20 In 2008, XL, the UK’s third largest tour operator went out of business.

What would have been the effect of this on the level of competition in the industry, the external
economies of scale experienced by the remaining firms and the level of business confidence in
the UK?

external economies UK business

level of competition
of scale confidence

A increase increase reduce

B increase reduce increase
C reduce increase increase
D reduce reduce reduce

21 In 2008, the world’s largest metal mining company, BHP, increased its profits by 20 %.

What could have helped that happen?

A a decrease in economic growth in the UK and the US

B an increase in demand from China
C more competition from other companies
D more difficult mining conditions

22 The table shows a firm’s fixed and variable costs at four levels of output.

output (units) fixed costs ($) variable costs ($)

2 50 110
3 50 130
4 50 210
5 50 300

At which level of output is average cost at its lowest?

A 2 B 3 C 4 D 5

© UCLES 2010 2281/11/O/N/10 [Turn over

 8

23 What is unlikely to be a feature of a large firm in a monopoly position in a market?

A It achieves economies of scale.

B It charges high prices.
C It removes barriers to entry.
D It will attract government attention.

24 Direct taxes can be used to

A place the burden of tax on sellers not buyers.

B protect domestic industries from foreign competition.
C raise revenue without affecting the number of hours employees work.
D redistribute incomes from rich to poor.

25 Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the
government were to cut tax rates, the government would actually receive more tax revenue.

Why may cutting taxes increase revenue?

A It may encourage emigration.

B It may increase the tax burden.
C It may lead to a fall in investment.
D It may reduce tax evasion.

26 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

© UCLES 2010 2281/11/O/N/10

 9

27 In September 2008, the Chinese government increased the sales tax on cars with large engines
whilst it reduced the sales tax on cars with small engines. Most cars in China with large engines
are imported whilst most cars with small engines are home produced.

Which effects would the changes in sales tax be expected to have on China’s trade surplus and
the demand for home produced cars?

demand for home

trade surplus
produced cars

A increase increase
B increase reduce
C reduce increase
D reduce reduce

28 Which policy would be most likely to reduce the rate of inflation in Malaysia?

A an increase in income tax

B an increase in sales tax (GST)
C an increase in the budget deficit
D an increase in the money supply

29 Which government policy would most likely lead to a redistribution of income?

A a change in the rate of exchange

B control of commercial bank lending
C control of interest rates
D expenditure on unemployment benefits

30 In Germany’s 2007 retail price index, transport received a higher weighting than clothing and
footwear.

What does this difference indicate?

A Households spent more on transport than on clothing and footwear.

B The price of transport rose by more than the price of clothing and footwear.
C Transport is more of a luxury good than clothing and footwear.
D Wage rises in the transport industry were higher than wage rises in the clothing and footwear
industry.

© UCLES 2010 2281/11/O/N/10 [Turn over

 10

31 How is the pattern of employment likely to change when a country becomes more developed?

A from rural employment to urban employment

B from skilled employment to primary employment
C from technical employment to manual employment
D from tertiary employment to secondary employment

32 In 2008, the US had a higher GDP per head than Iceland, but a lower Human Development Index
ranking than Iceland.

What could explain this difference?

A Average family size is higher in Iceland.

B Life expectancy is higher in Iceland.
C School enrolments are higher in the US.
D The population of the US is larger.

33 The number of people unemployed in an economy fell by 600 000 and the number employed rose
by 400 000.

Which change could explain this difference?

A Some of the unemployed have entered full-time education.

B Some of the unemployed have experienced a loss of skills.
C The length of the working week has declined.
D The size of the labour force has increased.

34 The table shows four countries in 2007.

Which country is most likely to have the lowest standard of living?

country GDP (US$ billion) population (million)

A Bangladesh 206.7 153.5

B India 2989.1 1147.9
C Nigeria 292.7 138.3
D South Africa 467.1 43.8

© UCLES 2010 2281/11/O/N/10

 11

35 What will be the likely effect on the remaining population of a developing country when newly
trained, skilled workers migrate to developed countries?

A Its average age will increase.

B Its mobility will increase.
C Its productivity will increase.
D Its total size will increase.

36 What is most likely to indicate that an economy is developed rather than developing?

A a high birth rate and a low death rate

B a large primary sector and a high population growth
C a large service sector and capital intensive production
D a low level of investment and a high rate of savings

37 What is more likely to result from rather than cause economic development?

A a depletion of non-renewable resources

B a move towards free trade
C a stable political and legal system
D more private and less public sector activity

38 One argument for protectionism is to prevent dumping.

What is meant by dumping?

A countries paying low wages to their workers to gain price advantage

B countries providing poor working conditions for their employees to keep costs low
C countries selling products abroad at less than the cost of production
D countries selling products abroad that do not meet health and safety standards

39 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya

B increased transport of Mauritian goods in Portuguese ships
C increased spending by Mauritians on holidays in Goa
D increased spending by tourists in Mauritian hotels

© UCLES 2010 2281/11/O/N/10 [Turn over

 12

40 Firms often advertise saying that they specialise in providing a certain product or service.

What is an advantage of such specialisation to the firm?

A Its workers are motivated by more varied tasks.

B Production is dependent on other firms supplying components.
C The firm’s average cost of production is likely to fall.
D The firm can quickly adapt production if their product or service is no longer required.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 2281/11/O/N/10

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2010
1 hour
Additional Materials: Multiple Choice Answer Sheet
*6595191662*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 12 printed pages.

IB10 11_2281_12/FP
© UCLES 2010 [Turn over
 2

1 A farmer pays a landowner for the use of a field.

What is the income to the landowner called?

A interest
B profit
C rent
D wages

2 The table shows the contribution to Gross Domestic Product made by different sectors for four
countries.

country services % industry % agriculture %

Bangladesh 40 13 47
China 18 45 37
Philippines 42 36 22
US 66 32 2

Which statement is correct?

A Most production in Bangladesh was in the tertiary sector.

B Most production in China was in the primary sector.
C Most production in the Philippines was in the secondary sector.
D Most production in the US was in the tertiary sector.

3 What makes choice an important element in the basic economic problem?

A Increased demand leads to higher market prices.

B Limited resources have many alternative uses.
C Reaching a market equilibrium may take a long time.
D Scarce economic resources are distributed equally.

4 What is a factor of production?

A an advantage of producing on a large scale

B a resource used to produce goods and services
C a sub-section of a manufacturing process
D a unit of output

© UCLES 2010 2281/12/O/N/10

 3

5 A government is faced with the choice of spending on either education or healthcare.

Of what is this an example?

A conservation of resources
B monetary policy
C opportunity cost
D substitution of factors

6 The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the
price to the consumer rises from $4 to $5.

S2 S1

price 5
$ 4
3

D
0
75 100
quantity

What is the total tax yield to the government?

A $75 B $150 C $200 D $375

7 The diagrams show different conditions of demand and supply for an agricultural product.

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

A B C D
S
D S
S
price price price price S
D D D

O quantity O quantity O quantity O quantity

© UCLES 2010 2281/12/O/N/10 [Turn over

 4

8 A government intends to build a new international airport in an area of outstanding natural

beauty.

What would be an external cost of this decision?

A the cost of importing construction materials

B the countryside that is lost
C the increase in profits for local businesses
D the wages paid to the construction workers

9 The diagram shows demand and supply curves for a product at its equilibrium price P.

S1
S
S2

P
price

D1
D
D2
O Q
quantity

How would the introduction of a subsidy be shown?

A Demand would shift to D1.

B Demand would shift to D2.
C Supply would shift to S1.
D Supply would shift to S2.

10 Which statement could explain a decrease in the demand for natural rubber?

A Demand for car tyres has increased.

B New techniques of producing substitutes for rubber have been introduced.
C Productivity of rubber plantations has increased.
D The area of land on which rubber is grown has increased.

© UCLES 2010 2281/12/O/N/10

 5

11 The table illustrates the demand and supply for rice in a market in Africa.

price per kg ($) quantity demanded (kg) quantity supplied (kg)

10 50 10
20 40 20
30 30 30
40 20 40

When the price rises from $20 to $30 per kg, what is the approximate price elasticity of demand
for rice?

A 0.25 B 0.5 C 1.0 D 2.0

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

A Specialisation can enable the worker to become more skilled.

B Specialisation enables a better quality product to be produced.
C Specialisation enables the firm to introduce more machinery.
D Specialisation makes better use of resources.

13 Which change would be most likely to cause the earnings of hotel managers in Mauritius to rise
more than the earnings of sugar cane workers in Mauritius?

A a decrease in the number of tourists visiting Mauritius

B a decrease in the supply of sugar cane workers in Mauritius
C an increase in the price of sugar cane from Mauritius
D an increase in the productivity of hotel managers in Mauritius

14 A stock exchange is a market in which

A a system of barter operates.

B the interest rate is fixed.
C the value of the exchange rate is determined.
D shares are bought and sold.

© UCLES 2010 2281/12/O/N/10 [Turn over

 6

15 ‘Savers suffer as inflation rises to 4.4 %.’

Which function of money is most involved in this statement?

A means of deferred payments

B medium of exchange
C store of value
D unit of account

16 What is the most likely reason for a worker preferring to be employed by the government rather
than by a firm in the private sector?

A more chance of a fast changing environment

B more chance to work in a large organisation
C more opportunity to gain from successful risk taking
D more possibility of productivity bonuses

17 ‘There are actors who earn extremely high incomes.’

What best explains this?

A Acting is a popular career.

B Actors have regular employment.
C Actors work short hours.
D Some actors have a unique talent.

18 The table shows a firm’s fixed and variable costs at four levels of output.

output (units) fixed costs ($) variable costs ($)

2 50 110
3 50 130
4 50 210
5 50 300

At which level of output is average cost at its lowest?

A 2 B 3 C 4 D 5

© UCLES 2010 2281/12/O/N/10

 7

19 What is unlikely to be a feature of a large firm in a monopoly position in a market?

A It achieves economies of scale.

B It charges high prices.
C It removes barriers to entry.
D It will attract government attention.

20 A milk processing company takes over a group of dairy farms before merging with a chain of
supermarkets.

Which types of integration have taken place?

A diversification followed by horizontal

B horizontal followed by vertical backward
C vertical backward followed by vertical forward
D vertical forward followed by diversification

21 What is usually an advantage of a small firm?

A the ability to benefit from bulk buying arrangements

B the ability to raise finance from a stock exchange
C the ability to respond quickly to changes in consumer demand
D the ability to run a national advertising campaign

22 In 2008, XL, the UK’s third largest tour operator went out of business.

What would have been the effect of this on the level of competition in the industry, the external
economies of scale experienced by the remaining firms and the level of business confidence in
the UK?

external economies UK business

level of competition
of scale confidence

A increase increase reduce

B increase reduce increase
C reduce increase increase
D reduce reduce reduce

© UCLES 2010 2281/12/O/N/10 [Turn over

 8

23 In 2008, the world’s largest metal mining company, BHP, increased its profits by 20 %.

What could have helped that happen?

A a decrease in economic growth in the UK and the US

B an increase in demand from China
C more competition from other companies
D more difficult mining conditions

24 In September 2008, the Chinese government increased the sales tax on cars with large engines
whilst it reduced the sales tax on cars with small engines. Most cars in China with large engines
are imported whilst most cars with small engines are home produced.

Which effects would the changes in sales tax be expected to have on China’s trade surplus and
the demand for home produced cars?

demand for home

trade surplus
produced cars

A increase increase
B increase reduce
C reduce increase
D reduce reduce

25 Which policy would be most likely to reduce the rate of inflation in Malaysia?

A an increase in income tax

B an increase in sales tax (GST)
C an increase in the budget deficit
D an increase in the money supply

26 Which government policy would most likely lead to a redistribution of income?

A a change in the rate of exchange

B control of commercial bank lending
C control of interest rates
D expenditure on unemployment benefits

© UCLES 2010 2281/12/O/N/10

 9

27 Direct taxes can be used to

A place the burden of tax on sellers not buyers.

B protect domestic industries from foreign competition.
C raise revenue without affecting the number of hours employees work.
D redistribute incomes from rich to poor.

28 Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the
government were to cut tax rates, the government would actually receive more tax revenue.

Why may cutting taxes increase revenue?

A It may encourage emigration.

B It may increase the tax burden.
C It may lead to a fall in investment.
D It may reduce tax evasion.

29 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

30 In 2008, the US had a higher GDP per head than Iceland, but a lower Human Development Index
ranking than Iceland.

What could explain this difference?

A Average family size is higher in Iceland.

B Life expectancy is higher in Iceland.
C School enrolments are higher in the US.
D The population of the US is larger.

© UCLES 2010 2281/12/O/N/10 [Turn over

 10

31 The number of people unemployed in an economy fell by 600 000 and the number employed rose
by 400 000.

Which change could explain this difference?

A Some of the unemployed have entered full-time education.

B Some of the unemployed have experienced a loss of skills.
C The length of the working week has declined.
D The size of the labour force has increased.

32 In Germany’s 2007 retail price index, transport received a higher weighting than clothing and
footwear.

What does this difference indicate?

A Households spent more on transport than on clothing and footwear.

B The price of transport rose by more than the price of clothing and footwear.
C Transport is more of a luxury good than clothing and footwear.
D Wage rises in the transport industry were higher than wage rises in the clothing and footwear
industry.

33 How is the pattern of employment likely to change when a country becomes more developed?

A from rural employment to urban employment

B from skilled employment to primary employment
C from technical employment to manual employment
D from tertiary employment to secondary employment

34 What is most likely to indicate that an economy is developed rather than developing?

A a high birth rate and a low death rate

B a large primary sector and a high population growth
C a large service sector and capital intensive production
D a low level of investment and a high rate of savings

35 What is more likely to result from rather than cause economic development?

A a depletion of non-renewable resources

B a move towards free trade
C a stable political and legal system
D more private and less public sector activity

© UCLES 2010 2281/12/O/N/10

 11

36 The table shows four countries in 2007.

Which country is most likely to have the lowest standard of living?

country GDP (US$ billion) population (million)

A Bangladesh 206.7 153.5

B India 2989.1 1147.9
C Nigeria 292.7 138.3
D South Africa 467.1 43.8

37 What will be the likely effect on the remaining population of a developing country when newly
trained, skilled workers migrate to developed countries?

A Its average age will increase.

B Its mobility will increase.
C Its productivity will increase.
D Its total size will increase.

38 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya

B increased transport of Mauritian goods in Portuguese ships
C increased spending by Mauritians on holidays in Goa
D increased spending by tourists in Mauritian hotels

39 Firms often advertise saying that they specialise in providing a certain product or service.

What is an advantage of such specialisation to the firm?

A Its workers are motivated by more varied tasks.

B Production is dependent on other firms supplying components.
C The firm’s average cost of production is likely to fall.
D The firm can quickly adapt production if their product or service is no longer required.

© UCLES 2010 2281/12/O/N/10 [Turn over

 12

40 One argument for protectionism is to prevent dumping.

What is meant by dumping?

A countries paying low wages to their workers to gain price advantage

B countries providing poor working conditions for their employees to keep costs low
C countries selling products abroad at less than the cost of production
D countries selling products abroad that do not meet health and safety standards

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 2281/12/O/N/10

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2010
1 hour
Additional Materials: Multiple Choice Answer Sheet
*3269522989*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB10 11_2281_13/FP
© UCLES 2010 [Turn over
 2

1 A government is faced with the choice of spending on either education or healthcare.

Of what is this an example?

A conservation of resources
B monetary policy
C opportunity cost
D substitution of factors

2 A farmer pays a landowner for the use of a field.

What is the income to the landowner called?

A interest
B profit
C rent
D wages

3 The table shows the contribution to Gross Domestic Product made by different sectors for four
countries.

country services % industry % agriculture %

Bangladesh 40 13 47
China 18 45 37
Philippines 42 36 22
US 66 32 2

Which statement is correct?

A Most production in Bangladesh was in the tertiary sector.

B Most production in China was in the primary sector.
C Most production in the Philippines was in the secondary sector.
D Most production in the US was in the tertiary sector.

4 What makes choice an important element in the basic economic problem?

A Increased demand leads to higher market prices.

B Limited resources have many alternative uses.
C Reaching a market equilibrium may take a long time.
D Scarce economic resources are distributed equally.

© UCLES 2010 2281/13/O/N/10

 3

5 What is a factor of production?

A an advantage of producing on a large scale

B a resource used to produce goods and services
C a sub-section of a manufacturing process
D a unit of output

6 The table illustrates the demand and supply for rice in a market in Africa.

price per kg ($) quantity demanded (kg) quantity supplied (kg)

10 50 10
20 40 20
30 30 30
40 20 40

When the price rises from $20 to $30 per kg, what is the approximate price elasticity of demand
for rice?

A 0.25 B 0.5 C 1.0 D 2.0

7 The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the
price to the consumer rises from $4 to $5.

S2 S1

price 5
$ 4
3

D
0
75 100
quantity

What is the total tax yield to the government?

A $75 B $150 C $200 D $375

© UCLES 2010 2281/13/O/N/10 [Turn over

 4

8 The diagrams show different conditions of demand and supply for an agricultural product.

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

A B C D
S
D S
S
price price price price S
D D D

O quantity O quantity O quantity O quantity

9 A government intends to build a new international airport in an area of outstanding natural

beauty.

What would be an external cost of this decision?

A the cost of importing construction materials

B the countryside that is lost
C the increase in profits for local businesses
D the wages paid to the construction workers

10 The diagram shows demand and supply curves for a product at its equilibrium price P.

S1
S
S2

P
price

D1
D
D2
O Q
quantity

How would the introduction of a subsidy be shown?

A Demand would shift to D1.

B Demand would shift to D2.
C Supply would shift to S1.
D Supply would shift to S2.

© UCLES 2010 2281/13/O/N/10

 5

11 Which statement could explain a decrease in the demand for natural rubber?

A Demand for car tyres has increased.

B New techniques of producing substitutes for rubber have been introduced.
C Productivity of rubber plantations has increased.
D The area of land on which rubber is grown has increased.

12 ‘There are actors who earn extremely high incomes.’

What best explains this?

A Acting is a popular career.

B Actors have regular employment.
C Actors work short hours.
D Some actors have a unique talent.

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

A Specialisation can enable the worker to become more skilled.

B Specialisation enables a better quality product to be produced.
C Specialisation enables the firm to introduce more machinery.
D Specialisation makes better use of resources.

14 Which change would be most likely to cause the earnings of hotel managers in Mauritius to rise
more than the earnings of sugar cane workers in Mauritius?

A a decrease in the number of tourists visiting Mauritius

B a decrease in the supply of sugar cane workers in Mauritius
C an increase in the price of sugar cane from Mauritius
D an increase in the productivity of hotel managers in Mauritius

15 A stock exchange is a market in which

A a system of barter operates.

B the interest rate is fixed.
C the value of the exchange rate is determined.
D shares are bought and sold.

© UCLES 2010 2281/13/O/N/10 [Turn over

 6

16 ‘Savers suffer as inflation rises to 4.4 %.’

Which function of money is most involved in this statement?

A means of deferred payments

B medium of exchange
C store of value
D unit of account

17 What is the most likely reason for a worker preferring to be employed by the government rather
than by a firm in the private sector?

A more chance of a fast changing environment

B more chance to work in a large organisation
C more opportunity to gain from successful risk taking
D more possibility of productivity bonuses

18 In 2008, the world’s largest metal mining company, BHP, increased its profits by 20 %.

What could have helped that happen?

A a decrease in economic growth in the UK and the US

B an increase in demand from China
C more competition from other companies
D more difficult mining conditions

19 The table shows a firm’s fixed and variable costs at four levels of output.

output (units) fixed costs ($) variable costs ($)

2 50 110
3 50 130
4 50 210
5 50 300

At which level of output is average cost at its lowest?

A 2 B 3 C 4 D 5

© UCLES 2010 2281/13/O/N/10

 7

20 What is unlikely to be a feature of a large firm in a monopoly position in a market?

A It achieves economies of scale.

B It charges high prices.
C It removes barriers to entry.
D It will attract government attention.

21 A milk processing company takes over a group of dairy farms before merging with a chain of
supermarkets.

Which types of integration have taken place?

A diversification followed by horizontal

B horizontal followed by vertical backward
C vertical backward followed by vertical forward
D vertical forward followed by diversification

22 What is usually an advantage of a small firm?

A the ability to benefit from bulk buying arrangements

B the ability to raise finance from a stock exchange
C the ability to respond quickly to changes in consumer demand
D the ability to run a national advertising campaign

23 In 2008, XL, the UK’s third largest tour operator went out of business.

What would have been the effect of this on the level of competition in the industry, the external
economies of scale experienced by the remaining firms and the level of business confidence in
the UK?

external economies UK business

level of competition
of scale confidence

A increase increase reduce

B increase reduce increase
C reduce increase increase
D reduce reduce reduce

© UCLES 2010 2281/13/O/N/10 [Turn over

 8

24 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

25 In September 2008, the Chinese government increased the sales tax on cars with large engines
whilst it reduced the sales tax on cars with small engines. Most cars in China with large engines
are imported whilst most cars with small engines are home produced.

Which effects would the changes in sales tax be expected to have on China’s trade surplus and
the demand for home produced cars?

demand for home

trade surplus
produced cars

A increase increase
B increase reduce
C reduce increase
D reduce reduce

26 Which policy would be most likely to reduce the rate of inflation in Malaysia?

A an increase in income tax

B an increase in sales tax (GST)
C an increase in the budget deficit
D an increase in the money supply

27 Which government policy would most likely lead to a redistribution of income?

A a change in the rate of exchange

B control of commercial bank lending
C control of interest rates
D expenditure on unemployment benefits

28 Direct taxes can be used to

A place the burden of tax on sellers not buyers.

B protect domestic industries from foreign competition.
C raise revenue without affecting the number of hours employees work.
D redistribute incomes from rich to poor.

© UCLES 2010 2281/13/O/N/10

 9

29 Brazil is a highly taxed economy. Some Brazilian economists have suggested that if the
government were to cut tax rates, the government would actually receive more tax revenue.

Why may cutting taxes increase revenue?

A It may encourage emigration.

B It may increase the tax burden.
C It may lead to a fall in investment.
D It may reduce tax evasion.

30 How is the pattern of employment likely to change when a country becomes more developed?

A from rural employment to urban employment

B from skilled employment to primary employment
C from technical employment to manual employment
D from tertiary employment to secondary employment

31 In 2008, the US had a higher GDP per head than Iceland, but a lower Human Development Index
ranking than Iceland.

What could explain this difference?

A Average family size is higher in Iceland.

B Life expectancy is higher in Iceland.
C School enrolments are higher in the US.
D The population of the US is larger.

32 The number of people unemployed in an economy fell by 600 000 and the number employed rose
by 400 000.

Which change could explain this difference?

A Some of the unemployed have entered full-time education.

B Some of the unemployed have experienced a loss of skills.
C The length of the working week has declined.
D The size of the labour force has increased.

© UCLES 2010 2281/13/O/N/10 [Turn over

 10

33 In Germany’s 2007 retail price index, transport received a higher weighting than clothing and
footwear.

What does this difference indicate?

A Households spent more on transport than on clothing and footwear.

B The price of transport rose by more than the price of clothing and footwear.
C Transport is more of a luxury good than clothing and footwear.
D Wage rises in the transport industry were higher than wage rises in the clothing and footwear
industry.

34 What will be the likely effect on the remaining population of a developing country when newly
trained, skilled workers migrate to developed countries?

A Its average age will increase.

B Its mobility will increase.
C Its productivity will increase.
D Its total size will increase.

35 What is most likely to indicate that an economy is developed rather than developing?

A a high birth rate and a low death rate

B a large primary sector and a high population growth
C a large service sector and capital intensive production
D a low level of investment and a high rate of savings

36 What is more likely to result from rather than cause economic development?

A a depletion of non-renewable resources

B a move towards free trade
C a stable political and legal system
D more private and less public sector activity

© UCLES 2010 2281/13/O/N/10

 11

37 The table shows four countries in 2007.

Which country is most likely to have the lowest standard of living?

country GDP (US$ billion) population (million)

A Bangladesh 206.7 153.5

B India 2989.1 1147.9
C Nigeria 292.7 138.3
D South Africa 467.1 43.8

38 Firms often advertise saying that they specialise in providing a certain product or service.

What is an advantage of such specialisation to the firm?

A Its workers are motivated by more varied tasks.

B Production is dependent on other firms supplying components.
C The firm’s average cost of production is likely to fall.
D The firm can quickly adapt production if their product or service is no longer required.

39 One argument for protectionism is to prevent dumping.

What is meant by dumping?

A countries paying low wages to their workers to gain price advantage

B countries providing poor working conditions for their employees to keep costs low
C countries selling products abroad at less than the cost of production
D countries selling products abroad that do not meet health and safety standards

40 What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya

B increased transport of Mauritian goods in Portuguese ships
C increased spending by Mauritians on holidays in Goa
D increased spending by tourists in Mauritian hotels

© UCLES 2010 2281/13/O/N/10

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 2281/13/O/N/10

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/11
Paper 1 Multiple Choice October/November 2011
1 hour
Additional Materials: Multiple Choice Answer Sheet
*2220314918*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB11 11_2281_11/3RP
© UCLES 2011 [Turn over
 2

1 Every business organisation faces the problem of satisfying wants.

What is the reason why wants are not fully satisfied?

A An economy can only produce a limited amount of goods and services.

B Governments cannot print enough money to pay for goods and services.
C There is an over-production of goods and services by business organisations.
D Workers are too skilled for the requirements of the jobs available.

2 A university rejects 2000 qualified applicants who wish to study there.

What factor of production could have caused the university to make this decision?

A infinite quantity of capital

B scarcity of labour
C surplus of land
D unlimited supply of enterprise

3 The diagram shows the choices for an individual between leisure and earnings.

24

20

16
hours of leisure 12 X
per day
Y
8

0
0 20 40 60 80 100 120
earnings $

What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?

A $20
B $80
C 4 hours of leisure per day
D 8 hours of leisure per day

© UCLES 2011 2281/11/O/N/11

 3

4 The table shows how employment in selected industries changed in a country between 2000 and
2010.

year 2000 year 2010

(thousands employed) (thousands employed)
banking and finance 2336 2881
distribution and catering 4678 5323
farming 2278 1594
manufacturing 4102 3128

According to the table, which type of employment has increased?

A primary
B secondary
C tertiary
D total

5 How are economic decisions determined in a pure market system?

A by a mixture of market forces and government regulation

B by central planners of production and consumption
C by government regulation of the price mechanism
D by the forces of demand and supply

6 What is always a feature of a mixed economy?

A All capital goods are produced in the public sector.

B Resources are used in the public sector and the private sector.
C The allocation of all resources is determined by the price mechanism.
D The public sector is larger than the private sector.

© UCLES 2011 2281/11/O/N/11 [Turn over

 4

7 Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the
government reduced the sales tax (VAT).

How would these events be shown on a demand and supply diagram for summer clothes?

demand curve supply curve

A move to the left move to the right

B move to the left no change
C move to the right move to the left
D no change move to the right

8 Drought in African countries often results in poor harvests. Other countries then help by sending
quantities of food.

What are the likely results of these events for the price of food in the drought-affected countries?

A It will fall and then rise.

B It will rise and continue to rise.
C It will rise and remain at this higher level.
D It will rise and then fall.

9 The graphs, drawn to the same scale, show the demand curves of four firms. The market price is
$10. The price then falls to $8.

Which firm will have the largest increase in total revenue?

A B C D

D
D
price price price price
$ $ $ $
10 D 10 10 10
D
0 Q1 0 Q1 0 Q1 0 Q1
quantity quantity quantity quantity

10 Which person would wish to encourage the use of the market system?

A someone who believes that people should have equal living standards
B someone who believes that people should have freedom of action
C someone who believes that profit maximisation is wrong
D someone who believes that the government should correct peoples’ bad behaviour

© UCLES 2011 2281/11/O/N/11

 5

11 What is an example of an external cost?

A a company’s transport costs

B the cost of bringing about a merger
C the cost of buying components from suppliers
D the cost of industrial pollution

12 Which motive is most likely to increase the wish to open a savings account?

A to have cash immediately available

B to prepare for future expenditure
C to satisfy essential needs
D to widen present consumption choices

13 In most countries, which organisation controls the banking system?

A central bank
B commercial bank
C investment bank
D World Bank

14 Share prices on the stock market are most likely to rise if

A employment falls.
B interest rates fall.
C interest rates rise.
D tax rates rise.

15 The ways of making and receiving payments continue to develop. As well as cash, debit cards
and credit cards, mobile (cell) phones are now being used to make payments.

Which method of paying for products provides no information to sellers about their customers?

A cash
B debit cards
C credit cards
D mobile (cell) phones

© UCLES 2011 2281/11/O/N/11 [Turn over

 6

16 A group of workers in a firm join a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

17 In 2009, the Chinese Government tried to increase household spending.

Which policy measure would have been most likely to achieve this objective?

A an increase in both direct and indirect taxes

B a reduction in subsidies given to manufacturers
C a requirement for commercial banks to reduce their lending
D a switch from public to private sector provision of health care and pensions

18 Mr Jones runs a small shop selling household appliances. His total revenue has declined due to
the opening of a large supermarket which sells a similar range of goods.

How could Mr Jones compete with the supermarket?

A develop financial economies of scale

B engage in a price-cutting war
C introduce a massive advertising campaign
D provide personal after-sales service

19 The table shows how a firm’s total cost rises with changes in output.

output total cost ($)

0 20 000
1000 30 000
2000 35 000
3000 40 000
4000 45 000
5000 50 000

What is the average fixed cost of producing 5000 units?

A $4 B $5 C $6 D $10

© UCLES 2011 2281/11/O/N/11

 7

20 General Motors, a large multi-national company based in the United States, sold some of its
European car assembly plants to other car manufacturers during the world recession (economic
downturn) in 2009.

Which economic reason would have been most likely to influence this decision?

A to benefit from horizontal integration of manufacturing

B to diversify and expand its product range
C to encourage vertical integration of sales and production
D to reduce its excess capacity in car production

21 A firm is producing an output which enables it to make more than normal profit.

What must be true at that output?

A Average revenue must be greater than total revenue.

B Average revenue must equal average cost.
C Total revenue must be greater than total cost.
D Variable cost must equal price.

22 Which statement about total fixed cost is correct?

A It falls as output increases.

B It is calculated by adding total cost and total variable cost.
C It is calculated by dividing total cost by output.
D It must be paid even if output is zero.

23 Which type of business organisation has its shares quoted on a stock exchange?

A co-operative
B private company
C public company
D public corporation

24 Which type of tax is a sales tax (VAT)?

A a direct tax
B an indirect tax
C a progressive tax
D a proportional tax

© UCLES 2011 2281/11/O/N/11 [Turn over

 8

25 What is a long-term advantage of economic growth?

A employment falls
B incomes rise
C prices rise
D savings fall

26 A tax on which of the following is usually progressive and is paid by a large number of tax
payers?

A company profits
B goods and services
C incomes
D sales of shares

27 Which government policy would be likely to help local companies expand?

A encouraging investment by foreign companies

B increasing income tax
C providing a subsidy
D raising interest rates

28 Between December 2008 and August 2009, the Central Bank of South Africa cut the rate of
interest from 12.5 % to 7 %.

What effect would this action be expected to have on economic growth and unemployment?

economic growth unemployment

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2011 2281/11/O/N/11

 9

29 A government decides to subsidise a major industry that is making a loss and also reduce sales
tax (VAT) to increase consumer demand.

Which aim would these policies be likely to help and which aim would they be likely to hinder?

aim policies would help aim policies would hinder

A balance of payments surplus economic growth

B economic growth full employment
C full employment stable prices
D stable prices economic growth

30 There was a fall in investment spending by businesses in the third quarter of 2008.

What would be the likely result of this?

A an increase in economic growth

B an increase in exports
C an increase in incomes
D an increase in unemployment

31 What is typical of a recession (economic downturn)?

A falling Gross Domestic Product

B falling unemployment
C rising living standards
D rising retail price index

32 A newspaper reported that there were signs of economic growth and inflation in an economy.

What would not be evidence of such a situation?

A an increase in employment
B an increase in the general price level
C an increase in the income tax rates
D an increase in the standard of living

© UCLES 2011 2281/11/O/N/11 [Turn over

 10

33 What is the most obvious sign of inflation?

A an increase in imports
B an increase in productivity
C an increase in retail prices
D an increase in total expenditure

34 The table gives information about four countries.

Which country is likely to have the lowest standard of living?

life expectancy GNP per head adult literacy

country
at birth (years) ($) (%)

A Ethiopia 43 110 66
B India 59 350 43
C Nigeria 51 290 43
D Mozambique 45 80 39

35 What is most likely to happen if there is a fall in the death rate while the birth rate and migration
remain unchanged?

A The population structure will remain the same.

B The population will increase.
C There will be a change in the proportion of men to women.
D The standard of living will increase.

36 Developing countries are sometimes given aid by charities and foreign governments.

Which aid programme would be least likely to lead to long-term economic growth?

A the building of an irrigation system

B the construction of a new airport
C the distribution of gifts of food
D the training of technical staff

© UCLES 2011 2281/11/O/N/11

 11

37 In 2008, the Peruvian Government set itself the target of reducing the number of its people in
poverty to 30 % of the population.

Which change would be most likely to indicate that the Peruvian Government had made progress
towards this objective?

A a fall in employment
B a fall in infant mortality
C a lower level of adult literacy
D a lower life expectancy

38 Many sportsmen and sportswomen from developing countries go to the United States (US) to
earn money, most of which they send back to their own countries.

What impact would this have on the Balance of Payments?

A The current account balance of the developing countries would improve.

B The current account balance of the US would improve.
C The trade balance of the developing countries would improve.
D The trade balance of the US would improve.

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

United Kingdom £6.99

Canada $11.99 (Canadian dollars)
Australia $14.99 (Australian dollars)
New Zealand $20.95 (New Zealand dollars)

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

A exchange rates
B indirect tax rates
C inflation rates
D retail price indices

40 What might encourage international specialisation between countries?

A free trade
B inefficiencies in production
C labour immobility
D tariffs

© UCLES 2011 2281/11/O/N/11

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011 2281/11/O/N/11

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2011
1 hour
Additional Materials: Multiple Choice Answer Sheet
*5293714038*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB11 11_2281_12/FP
© UCLES 2011 [Turn over
 2

1 The diagram shows the choices for an individual between leisure and earnings.

24

20

16
hours of leisure 12 X
per day
Y
8

0
0 20 40 60 80 100 120
earnings $

What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?

A $20
B $80
C 4 hours of leisure per day
D 8 hours of leisure per day

2 The table shows how employment in selected industries changed in a country between 2000 and
2010.

year 2000 year 2010

(thousands employed) (thousands employed)
banking and finance 2336 2881
distribution and catering 4678 5323
farming 2278 1594
manufacturing 4102 3128

According to the table, which type of employment has increased?

A primary
B secondary
C tertiary
D total

© UCLES 2011 2281/12/O/N/11

 3

3 Every business organisation faces the problem of satisfying wants.

What is the reason why wants are not fully satisfied?

A An economy can only produce a limited amount of goods and services.

B Governments cannot print enough money to pay for goods and services.
C There is an over-production of goods and services by business organisations.
D Workers are too skilled for the requirements of the jobs available.

4 A university rejects 2000 qualified applicants who wish to study there.

What factor of production could have caused the university to make this decision?

A infinite quantity of capital

B scarcity of labour
C surplus of land
D unlimited supply of enterprise

5 What is an example of an external cost?

A a company’s transport costs

B the cost of bringing about a merger
C the cost of buying components from suppliers
D the cost of industrial pollution

6 How are economic decisions determined in a pure market system?

A by a mixture of market forces and government regulation

B by central planners of production and consumption
C by government regulation of the price mechanism
D by the forces of demand and supply

7 What is always a feature of a mixed economy?

A All capital goods are produced in the public sector.

B Resources are used in the public sector and the private sector.
C The allocation of all resources is determined by the price mechanism.
D The public sector is larger than the private sector.

© UCLES 2011 2281/12/O/N/11 [Turn over

 4

8 Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the
government reduced the sales tax (VAT).

How would these events be shown on a demand and supply diagram for summer clothes?

demand curve supply curve

A move to the left move to the right

B move to the left no change
C move to the right move to the left
D no change move to the right

9 Drought in African countries often results in poor harvests. Other countries then help by sending
quantities of food.

What are the likely results of these events for the price of food in the drought-affected countries?

A It will fall and then rise.

B It will rise and continue to rise.
C It will rise and remain at this higher level.
D It will rise and then fall.

10 The graphs, drawn to the same scale, show the demand curves of four firms. The market price is
$10. The price then falls to $8.

Which firm will have the largest increase in total revenue?

A B C D

D
D
price price price price
$ $ $ $
10 D 10 10 10
D
0 Q1 0 Q1 0 Q1 0 Q1
quantity quantity quantity quantity

11 Which person would wish to encourage the use of the market system?

A someone who believes that people should have equal living standards
B someone who believes that people should have freedom of action
C someone who believes that profit maximisation is wrong
D someone who believes that the government should correct peoples’ bad behaviour

© UCLES 2011 2281/12/O/N/11

 5

12 In 2009, the Chinese Government tried to increase household spending.

Which policy measure would have been most likely to achieve this objective?

A an increase in both direct and indirect taxes

B a reduction in subsidies given to manufacturers
C a requirement for commercial banks to reduce their lending
D a switch from public to private sector provision of health care and pensions

13 Which motive is most likely to increase the wish to open a savings account?

A to have cash immediately available

B to prepare for future expenditure
C to satisfy essential needs
D to widen present consumption choices

14 In most countries, which organisation controls the banking system?

A central bank
B commercial bank
C investment bank
D World Bank

15 Share prices on the stock market are most likely to rise if

A employment falls.
B interest rates fall.
C interest rates rise.
D tax rates rise.

16 The ways of making and receiving payments continue to develop. As well as cash, debit cards
and credit cards, mobile (cell) phones are now being used to make payments.

Which method of paying for products provides no information to sellers about their customers?

A cash
B debit cards
C credit cards
D mobile (cell) phones

© UCLES 2011 2281/12/O/N/11 [Turn over

 6

17 A group of workers in a firm join a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

18 Which type of business organisation has its shares quoted on a stock exchange?

A co-operative
B private company
C public company
D public corporation

19 Mr Jones runs a small shop selling household appliances. His total revenue has declined due to
the opening of a large supermarket which sells a similar range of goods.

How could Mr Jones compete with the supermarket?

A develop financial economies of scale

B engage in a price-cutting war
C introduce a massive advertising campaign
D provide personal after-sales service

20 The table shows how a firm’s total cost rises with changes in output.

output total cost ($)

0 20 000
1000 30 000
2000 35 000
3000 40 000
4000 45 000
5000 50 000

What is the average fixed cost of producing 5000 units?

A $4 B $5 C $6 D $10

© UCLES 2011 2281/12/O/N/11

 7

21 General Motors, a large multi-national company based in the United States, sold some of its
European car assembly plants to other car manufacturers during the world recession (economic
downturn) in 2009.

Which economic reason would have been most likely to influence this decision?

A to benefit from horizontal integration of manufacturing

B to diversify and expand its product range
C to encourage vertical integration of sales and production
D to reduce its excess capacity in car production

22 A firm is producing an output which enables it to make more than normal profit.

What must be true at that output?

A Average revenue must be greater than total revenue.

B Average revenue must equal average cost.
C Total revenue must be greater than total cost.
D Variable cost must equal price.

23 Which statement about total fixed cost is correct?

A It falls as output increases.

B It is calculated by adding total cost and total variable cost.
C It is calculated by dividing total cost by output.
D It must be paid even if output is zero.

24 Between December 2008 and August 2009, the Central Bank of South Africa cut the rate of
interest from 12.5 % to 7 %.

What effect would this action be expected to have on economic growth and unemployment?

economic growth unemployment

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2011 2281/12/O/N/11 [Turn over

 8

25 Which government policy would be likely to help local companies expand?

A encouraging investment by foreign companies

B increasing income tax
C providing a subsidy
D raising interest rates

26 Which type of tax is a sales tax (VAT)?

A a direct tax
B an indirect tax
C a progressive tax
D a proportional tax

27 A government decides to subsidise a major industry that is making a loss and also reduce sales
tax (VAT) to increase consumer demand.

Which aim would these policies be likely to help and which aim would they be likely to hinder?

aim policies would help aim policies would hinder

A balance of payments surplus economic growth

B economic growth full employment
C full employment stable prices
D stable prices economic growth

28 A tax on which of the following is usually progressive and is paid by a large number of tax
payers?

A company profits
B goods and services
C incomes
D sales of shares

29 What is a long-term advantage of economic growth?

A employment falls
B incomes rise
C prices rise
D savings fall

© UCLES 2011 2281/12/O/N/11

 9

30 What is typical of a recession (economic downturn)?

A falling Gross Domestic Product

B falling unemployment
C rising living standards
D rising retail price index

31 There was a fall in investment spending by businesses in the third quarter of 2008.

What would be the likely result of this?

A an increase in economic growth

B an increase in exports
C an increase in incomes
D an increase in unemployment

32 What is the most obvious sign of inflation?

A an increase in imports
B an increase in productivity
C an increase in retail prices
D an increase in total expenditure

33 A newspaper reported that there were signs of economic growth and inflation in an economy.

What would not be evidence of such a situation?

A an increase in employment
B an increase in the general price level
C an increase in the income tax rates
D an increase in the standard of living

34 Many sportsmen and sportswomen from developing countries go to the United States (US) to
earn money, most of which they send back to their own countries.

What impact would this have on the Balance of Payments?

A The current account balance of the developing countries would improve.

B The current account balance of the US would improve.
C The trade balance of the developing countries would improve.
D The trade balance of the US would improve.

© UCLES 2011 2281/12/O/N/11 [Turn over

 10

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

United Kingdom £6.99

Canada $11.99 (Canadian dollars)
Australia $14.99 (Australian dollars)
New Zealand $20.95 (New Zealand dollars)

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

A exchange rates
B indirect tax rates
C inflation rates
D retail price indices

36 The table gives information about four countries.

Which country is likely to have the lowest standard of living?

life expectancy GNP per head adult literacy

country
at birth (years) ($) (%)

A Ethiopia 43 110 66
B India 59 350 43
C Nigeria 51 290 43
D Mozambique 45 80 39

37 Developing countries are sometimes given aid by charities and foreign governments.

Which aid programme would be least likely to lead to long-term economic growth?

A the building of an irrigation system

B the construction of a new airport
C the distribution of gifts of food
D the training of technical staff

© UCLES 2011 2281/12/O/N/11

 11

38 What is most likely to happen if there is a fall in the death rate while the birth rate and migration
remain unchanged?

A The population structure will remain the same.

B The population will increase.
C There will be a change in the proportion of men to women.
D The standard of living will increase.

39 What might encourage international specialisation between countries?

A free trade
B inefficiencies in production
C labour immobility
D tariffs

40 In 2008, the Peruvian Government set itself the target of reducing the number of its people in
poverty to 30 % of the population.

Which change would be most likely to indicate that the Peruvian Government had made progress
towards this objective?

A a fall in employment
B a fall in infant mortality
C a lower level of adult literacy
D a lower life expectancy

© UCLES 2011 2281/12/O/N/11

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011 2281/12/O/N/11

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2011
1 hour
Additional Materials: Multiple Choice Answer Sheet
*4064489362*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 12 printed pages.

IB11 11_2281_13/RP
© UCLES 2011 [Turn over
 2

1 A university rejects 2000 qualified applicants who wish to study there.

What factor of production could have caused the university to make this decision?

A infinite quantity of capital

B scarcity of labour
C surplus of land
D unlimited supply of enterprise

2 The diagram shows the choices for an individual between leisure and earnings.

24

20

16
hours of leisure 12 X
per day
Y
8

0
0 20 40 60 80 100 120
earnings $

What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?

A $20
B $80
C 4 hours of leisure per day
D 8 hours of leisure per day

© UCLES 2011 2281/13/O/N/11

 3

3 The table shows how employment in selected industries changed in a country between 2000 and
2010.

year 2000 year 2010

(thousands employed) (thousands employed)
banking and finance 2336 2881
distribution and catering 4678 5323
farming 2278 1594
manufacturing 4102 3128

According to the table, which type of employment has increased?

A primary
B secondary
C tertiary
D total

4 Every business organisation faces the problem of satisfying wants.

What is the reason why wants are not fully satisfied?

A An economy can only produce a limited amount of goods and services.

B Governments cannot print enough money to pay for goods and services.
C There is an over-production of goods and services by business organisations.
D Workers are too skilled for the requirements of the jobs available.

5 Which person would wish to encourage the use of the market system?

A someone who believes that people should have equal living standards
B someone who believes that people should have freedom of action
C someone who believes that profit maximisation is wrong
D someone who believes that the government should correct peoples’ bad behaviour

6 What is an example of an external cost?

A a company’s transport costs

B the cost of bringing about a merger
C the cost of buying components from suppliers
D the cost of industrial pollution

© UCLES 2011 2281/13/O/N/11 [Turn over

 4

7 How are economic decisions determined in a pure market system?

A by a mixture of market forces and government regulation

B by central planners of production and consumption
C by government regulation of the price mechanism
D by the forces of demand and supply

8 What is always a feature of a mixed economy?

A All capital goods are produced in the public sector.

B Resources are used in the public sector and the private sector.
C The allocation of all resources is determined by the price mechanism.
D The public sector is larger than the private sector.

9 Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the
government reduced the sales tax (VAT).

How would these events be shown on a demand and supply diagram for summer clothes?

demand curve supply curve

A move to the left move to the right

B move to the left no change
C move to the right move to the left
D no change move to the right

10 Drought in African countries often results in poor harvests. Other countries then help by sending
quantities of food.

What are the likely results of these events for the price of food in the drought-affected countries?

A It will fall and then rise.

B It will rise and continue to rise.
C It will rise and remain at this higher level.
D It will rise and then fall.

© UCLES 2011 2281/13/O/N/11

 5

11 The graphs, drawn to the same scale, show the demand curves of four firms. The market price is
$10. The price then falls to $8.

Which firm will have the largest increase in total revenue?

A B C D

D
D
price price price price
$ $ $ $
10 D 10 10 10
D
0 Q1 0 Q1 0 Q1 0 Q1
quantity quantity quantity quantity

12 A group of workers in a firm join a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

13 In 2009, the Chinese Government tried to increase household spending.

Which policy measure would have been most likely to achieve this objective?

A an increase in both direct and indirect taxes

B a reduction in subsidies given to manufacturers
C a requirement for commercial banks to reduce their lending
D a switch from public to private sector provision of health care and pensions

14 Which motive is most likely to increase the wish to open a savings account?

A to have cash immediately available

B to prepare for future expenditure
C to satisfy essential needs
D to widen present consumption choices

© UCLES 2011 2281/13/O/N/11 [Turn over

 6

15 In most countries, which organisation controls the banking system?

A central bank
B commercial bank
C investment bank
D World Bank

16 Share prices on the stock market are most likely to rise if

A employment falls.
B interest rates fall.
C interest rates rise.
D tax rates rise.

17 The ways of making and receiving payments continue to develop. As well as cash, debit cards
and credit cards, mobile (cell) phones are now being used to make payments.

Which method of paying for products provides no information to sellers about their customers?

A cash
B debit cards
C credit cards
D mobile (cell) phones

18 Which statement about total fixed cost is correct?

A It falls as output increases.

B It is calculated by adding total cost and total variable cost.
C It is calculated by dividing total cost by output.
D It must be paid even if output is zero.

19 Which type of business organisation has its shares quoted on a stock exchange?

A co-operative
B private company
C public company
D public corporation

© UCLES 2011 2281/13/O/N/11

 7

20 Mr Jones runs a small shop selling household appliances. His total revenue has declined due to
the opening of a large supermarket which sells a similar range of goods.

How could Mr Jones compete with the supermarket?

A develop financial economies of scale

B engage in a price-cutting war
C introduce a massive advertising campaign
D provide personal after-sales service

21 The table shows how a firm’s total cost rises with changes in output.

output total cost ($)

0 20 000
1000 30 000
2000 35 000
3000 40 000
4000 45 000
5000 50 000

What is the average fixed cost of producing 5000 units?

A $4 B $5 C $6 D $10

22 General Motors, a large multi-national company based in the United States, sold some of its
European car assembly plants to other car manufacturers during the world recession (economic
downturn) in 2009.

Which economic reason would have been most likely to influence this decision?

A to benefit from horizontal integration of manufacturing

B to diversify and expand its product range
C to encourage vertical integration of sales and production
D to reduce its excess capacity in car production

23 A firm is producing an output which enables it to make more than normal profit.

What must be true at that output?

A Average revenue must be greater than total revenue.

B Average revenue must equal average cost.
C Total revenue must be greater than total cost.
D Variable cost must equal price.

© UCLES 2011 2281/13/O/N/11 [Turn over

 8

24 Which government policy would be likely to help local companies expand?

A encouraging investment by foreign companies

B increasing income tax
C providing a subsidy
D raising interest rates

25 Which type of tax is a sales tax (VAT)?

A a direct tax
B an indirect tax
C a progressive tax
D a proportional tax

26 Between December 2008 and August 2009, the Central Bank of South Africa cut the rate of
interest from 12.5 % to 7 %.

What effect would this action be expected to have on economic growth and unemployment?

economic growth unemployment

A decrease decrease
B decrease increase
C increase decrease
D increase increase

27 A tax on which of the following is usually progressive and is paid by a large number of tax
payers?

A company profits
B goods and services
C incomes
D sales of shares

© UCLES 2011 2281/13/O/N/11

 9

28 A government decides to subsidise a major industry that is making a loss and also reduce sales
tax (VAT) to increase consumer demand.

Which aim would these policies be likely to help and which aim would they be likely to hinder?

aim policies would help aim policies would hinder

A balance of payments surplus economic growth

B economic growth full employment
C full employment stable prices
D stable prices economic growth

29 There was a fall in investment spending by businesses in the third quarter of 2008.

What would be the likely result of this?

A an increase in economic growth

B an increase in exports
C an increase in incomes
D an increase in unemployment

30 A newspaper reported that there were signs of economic growth and inflation in an economy.

What would not be evidence of such a situation?

A an increase in employment
B an increase in the general price level
C an increase in the income tax rates
D an increase in the standard of living

31 What is the most obvious sign of inflation?

A an increase in imports
B an increase in productivity
C an increase in retail prices
D an increase in total expenditure

© UCLES 2011 2281/13/O/N/11 [Turn over

 10

32 What is typical of a recession (economic downturn)?

A falling Gross Domestic Product

B falling unemployment
C rising living standards
D rising retail price index

33 What is a long-term advantage of economic growth?

A employment falls
B incomes rise
C prices rise
D savings fall

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

United Kingdom £6.99

Canada $11.99 (Canadian dollars)
Australia $14.99 (Australian dollars)
New Zealand $20.95 (New Zealand dollars)

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

A exchange rates
B indirect tax rates
C inflation rates
D retail price indices

35 Many sportsmen and sportswomen from developing countries go to the United States (US) to
earn money, most of which they send back to their own countries.

What impact would this have on the Balance of Payments?

A The current account balance of the developing countries would improve.

B The current account balance of the US would improve.
C The trade balance of the developing countries would improve.
D The trade balance of the US would improve.

© UCLES 2011 2281/13/O/N/11

 11

36 What might encourage international specialisation between countries?

A free trade
B inefficiencies in production
C labour immobility
D tariffs

37 What is most likely to happen if there is a fall in the death rate while the birth rate and migration
remain unchanged?

A The population structure will remain the same.

B The population will increase.
C There will be a change in the proportion of men to women.
D The standard of living will increase.

38 The table gives information about four countries.

Which country is likely to have the lowest standard of living?

life expectancy GNP per head adult literacy

country
at birth (years) ($) (%)

A Ethiopia 43 110 66
B India 59 350 43
C Nigeria 51 290 43
D Mozambique 45 80 39

39 In 2008, the Peruvian Government set itself the target of reducing the number of its people in
poverty to 30 % of the population.

Which change would be most likely to indicate that the Peruvian Government had made progress
towards this objective?

A a fall in employment
B a fall in infant mortality
C a lower level of adult literacy
D a lower life expectancy

Question 40 is on the next page.

© UCLES 2011 2281/13/O/N/11 [Turn over

 12

40 Developing countries are sometimes given aid by charities and foreign governments.

Which aid programme would be least likely to lead to long-term economic growth?

A the building of an irrigation system

B the construction of a new airport
C the distribution of gifts of food
D the training of technical staff

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011 2281/13/O/N/11

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2012
1 hour
Additional Materials: Multiple Choice Answer Sheet
* 0397730570*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB12 11_2281_12/3RP
© UCLES 2012 [Turn over
 2

1 In China the government is concerned about the level of poverty and the need for more resources
in the poorer regions of the country. As a result, it is increasing its expenditure there and reducing
it in the wealthier regions.

Which economic concept does this government policy illustrate best?

A diseconomies of scale
B market forces
C opportunity cost
D specialisation

2 A country with a low income per head discovers large quantities of oil, which eventually makes
everybody better off.

Why is the basic economic problem of scarcity not solved by this discovery?

A People may not get jobs in the oil industry.

B People’s wants are always changing and increasing.
C Prices of oil can fluctuate on the world market.
D Production of oil can damage the environment.

3 Two telecommunications companies are to merge to finance investments in new technology,

which will be more efficient and require smaller buildings. Three hundred workers will lose their
jobs.

What will happen to the factors of production used?

land labour capital enterprise

A fall fall rise fall

B fall fall uncertain rise
C rise rise rise rise
D uncertain rise fall fall

4 Why might a free market economy be more advantageous than a mixed economy?

A Equality of income is encouraged.

B In a mixed economy, governments use taxes which are inefficient.
C Production is determined solely by consumer wishes.
D Social costs are taken into consideration.

© UCLES 2012 2281/12/O/N/12

 3

5 An international company drilled for oil in deep water and caused a major oil leakage, which
affected the jobs of the fishing community. The government ordered the company to close the
well and to stop drilling in the area.

What are the external costs of this incident?

A the costs borne by the fishing community

B the costs of closing the well
C the costs to the company of drilling the well in deep water
D the loss of revenue when the oil company stopped drilling

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

A government taxes.
B income.
C tastes.
D the price of the commodity.

7 In 2010, floods caused severe damage to wheat production.

How would this be shown on a market demand and supply diagram for wheat?

supply curve demand curve

A no change shift to the right

B shift to the left no change
C shift to the left shift to the left
D shift to the right shift to the left

8 The demand for a good is totally inelastic with regard to price.

What will happen to the firm’s revenue if the price rises by 20 %?

A It will fall by 20 %.
B It will fall to zero.
C It will remain unchanged.
D It will rise by 20 %.

© UCLES 2012 2281/12/O/N/12 [Turn over

 4

9 Which is a type of market failure?

A a general increase in the price of hotel rooms in busy summer seasons

B an increase in house prices caused by easier borrowing for house buyers
C an increase in travel time caused by a road accident
D an increase in unsold goods because of a change in tastes

10 The market for a normal good is in equilibrium at point X. Consumers’ incomes fall and the cost of
producing the good rises.

In which area of the diagram will the new equilibrium be?

supply
A

price D X B

C demand
O
quantity

11 On average, doctors earn more than bus drivers.

Which change would be likely to reduce the earnings gap between doctors and bus drivers?

A a decrease in the profits earned by bus companies

B a decrease in the qualifications needed to be a doctor
C an increase in demand for medical care
D an increase in the number of people passing the driving test

12 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 to work in the shoe industry

© UCLES 2012 2281/12/O/N/12

 5

13 What might encourage a consumer to save rather than to spend?

A being made unemployed

B discounts on products
C government subsidies to producers
D high interest rates

14 Why do banknotes function as money?

A They are backed by gold.

B They are durable.
C They are generally acceptable.
D They have intrinsic value.

15 Which function is performed by both commercial banks and central banks?

A acting as bankers to the government

B advising the government on monetary policy
C dealing in foreign exchange
D fixing the main interest rate

16 The table shows the proportion of income saved for different age groups.

age 15 – 29 30 – 39 40 – 49 50 – 62 63+
% of income saved –34 % –4% 18 % 29 % –23 %

What can be concluded from this data?

A The 50 – 62 age group has the highest level of income.

B The 50 – 62 age group saves the highest proportion of its income.
C The older age groups earn more than the younger age groups.
D The youngest age group spends more than the oldest age group.

17 Which is an external economy of scale?

A availability of training facilities in local colleges

B greater production from employees
C increased credit facilities from banks
D lower costs through bulk buying

© UCLES 2012 2281/12/O/N/12 [Turn over

 6

18 What is a variable cost to a firm producing bicycles?

A the component parts of the bicycles

B the interest on money borrowed
C the rent of the bicycle factory
D the salaries of the senior managers

19 In January 2008, ICI, a major UK chemical firm, was bought by its rival, a Dutch chemical firm.

What definitely occurred when the Dutch firm bought ICI?

A a partnership
B economies of scale
C horizontal integration
D increased profits

20 Partnerships in the United States of America (US) can now issue tradable shares and can limit
the amount of money that shareholders may lose.

To which type of business organisation do these changes make US partnerships similar?

A co-operatives
B public corporations
C public limited companies
D sole traders

21 The graphs show the average total cost (ATC) curves of four firms and how they change as
output increases.

Which firm has the highest fixed costs?

A B C D

ATC ATC
cost cost cost cost
$ $ $ ATC $
ATC
O output O output O output O output

© UCLES 2012 2281/12/O/N/12

 7

22 What is a possible advantage to the consumer of a monopoly supplier in a market?

A It achieves average costs which are lower than if there were many suppliers.
B It achieves profits which are higher than if there were many suppliers.
C It conducts advertising campaigns to discourage competition.
D It decides which retail outlets may sell and distribute its goods.

23 Which government policy would best protect the environment?

A encouraging economic growth

B exploiting natural resources
C increasing tax on fuel
D removing controls on industry

24 In 2010, the Brazilian Government stated it was concentrating on making the country the world’s
fifth biggest economy by 2025, and on narrowing the gap between the rich and the poor in the
country.

What does the statement indicate were the main aims of the Brazilian Government?

A balance of payments stability and price stability

B economic growth and redistribution of income
C price stability and economic growth
D redistribution of income and balance of payments stability

25 A government wishes to stimulate economic recovery.

Which action will assist this?

A decreasing government investment

B decreasing income tax
C increasing indirect taxation
D increasing interest rates

26 A country has a proportional system of taxation.

A person pays $500 tax when earnings are $5000.

How much tax will be paid if earnings rise to $12 000?

A $120 B $500 C $1200 D $7500

© UCLES 2012 2281/12/O/N/12 [Turn over

 8

27 The graph shows government revenue and spending in a country, as a percentage of GDP,
between 2004 and 2011.

48
46
44 government spending

42
% of
40
GDP
38
36 government revenue
34
32
2004 2005 2006 2007 2008 2009 2010 2011
year

What can be concluded from the graph?

A The balance of payments position improved.

B The borrowing of the government increased.
C The economy went into recession (economic downturn).
D The government budget moved from deficit to surplus.

28 The government pays a subsidy for each worker employed by a firm in an area of high
unemployment.

When would this policy be most successful in reducing unemployment?

A when the firm is capital-intensive

B when the firm is labour-intensive, requiring mainly unskilled labour
C when the firm provides goods to the domestic market
D when the firm requires mainly specialist, skilled labour

29 What is not involved in the construction of a retail price index?

A a base year
B a basket of goods
C incomes
D weighting of products

© UCLES 2012 2281/12/O/N/12

 9

30 The Human Development Index (HDI) measures more than just average incomes.

What are two additional measures it includes?

A access to clean water number of doctors

B life expectancy years of schooling
C number of doctors poverty rate
D years of schooling poverty rate

31 Each year, extra cleaning staff were employed by a hotel on a temporary basis during the busy
holiday period. They were not employed when the hotel was not busy.

What type of unemployment occurred when the hotel was not busy?

A cyclical
B frictional
C seasonal
D technological

32 A country’s Gross Domestic Product (GDP) falls, while its population falls.

What happens to GDP per head?

A It falls.
B It is uncertain.
C It remains constant.
D It rises.

33 In the measurement of the UK’s Retail Prices Index, a greater weight was given to bottled water
in 2010 than 2009.

What does this change indicate?

A Government statisticians checked the price change of a greater range of bottled water in
2010 than in 2009.
B People spent a higher proportion of their total spending on bottled water in 2010 than in
2009.
C The price of bottled water increased more in 2010 than in 2009.
D There was an improvement in the quality of bottled water in 2010 compared with 2009.

© UCLES 2012 2281/12/O/N/12 [Turn over

 10

34 An Economics student described a typical developing country as having a large population, a low
GDP per head, a relatively large primary sector and an uneven income distribution.

Which of these features is not necessarily accurate?

A a large population

B a low GDP per head

C an uneven income distribution

D a relatively large primary sector

35 In the developing economies of southern Africa, both infant mortality and life expectancy have
fallen. Life expectancy now averages only 41 years.

What is the result of these changes?

A Current labour supply has fallen.

B Fewer primary schools are needed.
C Governments will pay for more retirement pensions.
D Less will need to be spent on health care.

36 Which feature is a typical characteristic of a developed country?

A a high death rate

B a high literacy rate
C a low number of doctors per head
D a small elderly population

37 The table shows the percentages of consumer spending on different items in four countries,
which have similar geographical conditions and climate.

Which country is likely to have the highest standard of living?

percentage of consumer spending on each item

country
food housing transport

A 20 30 30
B 40 25 15
C 50 20 10
D 45 20 15

© UCLES 2012 2281/12/O/N/12

 11

38 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 payments was this payment recorded?

A current transfer flows

B income flows
C trade in goods
D trade in services

39 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?

change in
impact in Asian countries expenditure in
Europe
A capital account will improve increase
B current account will improve uncertain
C exchange rate will fall uncertain
D terms of trade will fall decrease

40 The value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1.

What effect will this have on the price of Pakistani products sold in the US and the price of US
products sold in Pakistan?

price of Pakistani products price of US products sold in

sold in the US Pakistan

A increase increase
B increase reduce
C reduce increase
D reduce reduce

© UCLES 2012 2281/12/O/N/12

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2012 2281/12/O/N/12

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2012
1 hour
Additional Materials: Multiple Choice Answer Sheet
*8249061589*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.

There are forty 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.

This document consists of 11 printed pages and 1 blank page.

IB12 11_2281_13/2RP
© UCLES 2012 [Turn over
 2

1 In China the government is concerned about the level of poverty and the need for more resources
in the poorer regions of the country. As a result, it is increasing its expenditure there and reducing
it in the wealthier regions.

Which economic concept does this government policy illustrate best?

A diseconomies of scale
B market forces
C opportunity cost
D specialisation

2 As the need for energy increases, energy suppliers use a mix of resources.

Which resource is renewable?

A coal
B gas
C oil
D water

3 A public limited company delivers groceries which customers order on the Internet.

What is an example for the firm of the factor of production called capital?

A the computers required to receive the orders

B the fuel used by the delivery vehicles
C the money required to pay the firm’s costs
D the shares it sells on the stock exchange

4 What is likely to play a more important role in a mixed economy than in a free market economy?

A consumer wishes
B government intervention
C international trade
D the profit motive

5 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.

© UCLES 2012 2281/13/O/N/12

 3

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

A government taxes.
B income.
C tastes.
D the price of the commodity.

7 In June 2010, a government published a proposal to increase Value Added Tax (Goods and
Services Tax) on some goods from January 2011. Between June 2010 and January 2011
consumers bought more of those goods before the price increase occurred. After January,
consumers bought less of the goods.

How would the changes be shown on a demand diagram for the goods?

from June-January after January

A a movement down the curve a shift of the curve to the right

B a movement up the curve a shift of the curve to the right
C a shift of the curve to the left a movement down the curve
D a shift of the curve to the right a movement up the curve

8 The demand for a good is totally inelastic with regard to price.

What will happen to the firm’s revenue if the price rises by 20 %?

A It will fall by 20 %.
B It will fall to zero.
C It will remain unchanged.
D It will rise by 20 %.

9 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

© UCLES 2012 2281/13/O/N/12 [Turn over

 4

10 The market for a normal good is in equilibrium at point X. Consumers’ incomes rise and the
government gives a subsidy to the producers of the good.

In which area of the diagram will the new equilibrium be?

supply
A

price D X B

C demand

O
quantity

11 What work is in the primary sector?

A delivering milk
B designing gardens
C growing fruit trees
D selling agricultural fertiliser

12 What are the actions of a trade union intended to achieve in the long run?

A benefits to society
B harm to employers
C help for members
D reduced company profits

13 An individual has various financial assets.

What is the most easily available as cash?

A a current (checking) bank account

B government bonds
C share certificates in a public company
D time deposits in a savings bank

© UCLES 2012 2281/13/O/N/12

 5

14 Why do banknotes function as money?

A They are backed by gold.

B They are durable.
C They are generally acceptable.
D They have intrinsic value.

15 Which function is performed by both commercial banks and central banks?

A acting as bankers to the government

B advising the government on monetary policy
C dealing in foreign exchange
D fixing the main interest rate

16 The table shows the proportion of income saved for different age groups.

age 15 – 29 30 – 39 40 – 49 50 – 62 63+
% of income saved –34 % –4% 18 % 29 % –23 %

What can be concluded from this data?

A The 50 – 62 age group has the highest level of income.

B The 50 – 62 age group saves the highest proportion of its income.
C The older age groups earn more than the younger age groups.
D The youngest age group spends more than the oldest age group.

17 A firm opens new branches in four different cities. As a result, it can negotiate a better deal from
its foreign suppliers because it purchases larger quantities. However, it finds the distance
between branches causes organisational problems.

What describes the result for the firm?

A an external economy of scale and an external diseconomy of scale

B an external economy of scale and an internal diseconomy of scale
C an internal economy of scale and an external diseconomy of scale
D an internal economy of scale and an internal diseconomy of scale

© UCLES 2012 2281/13/O/N/12 [Turn over

 6

18 As a firm increases its weekly output from 10 units to 20 units, its average cost falls from $15 to
$10.

Which of its costs have risen?

A fixed costs and variable costs only

B fixed costs, variable costs and total costs

C total costs only
D variable costs and total costs only

19 Two private firms, an iron ore mining company and an iron and steel manufacturer, agree to
amalgamate.

How would this action be described?

A co-operative
B horizontal take-over
C partnership
D vertical merger

20 A group of hotels, owned and operated in France, needs its staff to be able to speak a number of
languages so it employs people from different countries. Different firms, providing tours from
other countries, send customers to the hotels in France. The hotel group has shares issued on
the stock exchange.

What type of company is the hotel group?

A a multi-national

B a partnership

C a private company

D a public company

21 The graphs show the average total cost (ATC) curves of four firms and how they change as
output increases.

Which firm has the highest fixed costs?

A B C D

ATC ATC
cost cost cost cost
$ $ $ ATC $
ATC
O output O output O output O output

© UCLES 2012 2281/13/O/N/12

 7

22 Machu Picchu is Peru’s most popular tourist destination. One train company, PeruRail, operates
a monopoly service up to the site.

Why might competition on the route increase the fares paid by passengers?

A Competitive firms have more influence on price than a monopoly.

B Competitive firms never make a loss.

C Less advantage may be taken of economics of scale.
D More profit may be available to spend on new technology to reduce costs of production.

23 Which government policy would best protect the environment?

A encouraging economic growth

B exploiting natural resources
C increasing tax on fuel
D removing controls on industry

24 In 2010, the Greek Government proposed the introduction of a restrictive fiscal policy to reduce
its budget deficit.

What does this mean the government was most likely to do?

A increase exports
B increase interest rates
C increase its spending
D increase taxes

25 Russia exports wheat. In 2010, because of a bad harvest, the Russian Government prevented
the export of wheat to keep enough supplies for domestic use.

What happened as a result of the government’s action?

A Prices were fixed by the wheat producers.

B The amount produced was determined by the government.
C The price of wheat abroad fell.
D There was a redistribution of domestic production.

26 A country has a proportional system of taxation.

A person pays $500 tax when earnings are $5000.

How much tax will be paid if earnings rise to $12 000?

A $120 B $500 C $1200 D $7500

© UCLES 2012 2281/13/O/N/12 [Turn over

 8

27 The graph shows government revenue and spending in a country, as a percentage of GDP,
between 2004 and 2011.

48
46
44 government spending

42
% of
40
GDP
38
36 government revenue
34
32
2004 2005 2006 2007 2008 2009 2010 2011
year

What can be concluded from the graph?

A The balance of payments position improved.

B The borrowing of the government increased.
C The economy went into recession (economic downturn).
D The government budget moved from deficit to surplus.

28 The government pays a subsidy for each worker employed by a firm in an area of high
unemployment.

When would this policy be most successful in reducing unemployment?

A when the firm is capital-intensive

B when the firm is labour-intensive, requiring mainly unskilled labour
C when the firm provides goods to the domestic market
D when the firm requires mainly specialist, skilled labour

29 What does not necessarily change with inflation?

A distribution of income
B employment income received as a salary
C revenue from exports
D the value of money

© UCLES 2012 2281/13/O/N/12

 9

30 What is GDP divided by to calculate Gross Domestic Product (GDP) per head?

A the adult population

B the non-dependent population
C the total population
D the working population

31 An increase in online banking by customers using home computers has reduced the level of
employment in the banking sector of developed countries.

What describes this kind of unemployment?

A frictional
B regional
C seasonal
D technological

32 An economy is experiencing rising prices.

Which government policy will help reduce aggregate expenditure?

A introducing compulsory savings for income earners

B investing more on building infrastructure

C issuing more banknotes and coins
D reducing indirect taxes

33 China has become South Africa’s largest trading partner. In 2009, 16 % of South Africa’s imports
came from China while 11 % of its exports went to China.

China is also investing in infrastructure designed to help increase production in South Africa.

What can be concluded from this information?

A China is investing more in South Africa than in other countries.

B China’s GDP will grow more slowly than South Africa’s GDP.
C GDP in South Africa is likely to rise.
D South Africa imported a greater number of goods and services from China than it exported to
China.

© UCLES 2012 2281/13/O/N/12 [Turn over

 10

34 What is usually true of workers approaching retirement when they are compared with new
entrants to the workforce?

A They will be more adaptable.

B They will be more experienced.
C They will be more mobile.
D They will be physically stronger.

35 In 2010, Nigeria had a birth rate of 36 and an infant mortality rate of 94.

What can be concluded from this information?

A Nigeria experienced a natural decrease in population.

B Nigeria’s population increased.
C 36 children were born per hundred of the population.

D 94 babies died before their first birthday out of every thousand babies born.

36 The Ivory Coast is sometimes referred to as a developing country.

What would be likely to support the opinion that a country is a developing country?

A a balance of trade surplus

B a high birth rate
C a highly mechanised farming sector
D a large population

37 The table shows the percentages of consumer spending on different items in four countries,
which have similar geographical conditions and climate.

Which country is likely to have the highest standard of living?

percentage of consumer spending on each item

country
food housing transport

A 20 30 30
B 40 25 15
C 50 20 10
D 45 20 15

© UCLES 2012 2281/13/O/N/12

 11

38 A Japanese car manufacturer decided to produce its cars in a factory in Europe.

What would not be a reason why they might have chosen to do this?

A cheaper wage costs in Europe

B the availability of raw materials
C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency

39 A country imports oil, which has risen in price and which is used for production and for
distribution. There has also been an increase in unemployment in the country. Businesses have
closed and total consumer demand has fallen.

What is likely to happen to the balance of trade and economic growth?

balance of trade economic growth

A improve likely to increase

B uncertain likely to decrease
C worsen likely to decrease
D worsen likely to increase

40 The table shows how the South African Rand’s exchange rates against the US Dollar and the
Euro changed during a year.

In which quarter was it cheapest for an importer in the US to pay for goods bought from South
Africa, and most expensive for an importer in Europe to do the same?

exchange rate exchange rate

quarter
(Rands to 1 Dollar) (Rands to 1 Euro)

A first R7.499 R9.692

B second R7.485 R9.710
C third R7.510 R9.684
D fourth R7.459 R9.702

© UCLES 2012 2281/13/O/N/12

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2012 2281/13/O/N/12

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2013
1 hour
Additional Materials: Multiple Choice Answer Sheet
*9195660245*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are forty 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.

This document consists of 12 printed pages.

IB13 11_2281_12/4RP
© UCLES 2013 [Turn over
 2

1 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

2 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.

3 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?

first factor second factor

A capital land
B enterprise labour
C labour capital
D land enterprise

© UCLES 2013 2281/12/O/N/13

 3

4 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.

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

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

A B C D
S
D S
S
price price price price S
D D D

O quantity O quantity O quantity O quantity

6 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.

7 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

© UCLES 2013 2281/12/O/N/13 [Turn over

 4

8 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

9 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

10 There is a sales tax (VAT) on a good which has a price elasticity of demand greater than 1 (>1).

Which of the following correctly matches a change in sales tax to the change in total expenditure
on the good?

total expenditure
sales tax
on the good

A decrease increases
B decrease remains the same
C increase increases
D increase remains the same

11 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

© UCLES 2013 2281/12/O/N/13

 5

12 A worker’s choice of occupation can be influenced by wage and non-wage factors.

What is a non-wage factor when choosing to work in a factory?

A bonuses paid for increases in productivity

B changes in hourly rates for items produced
C financial rewards for length of service
D opportunities for promotion and advancement

13 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

14 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.

© UCLES 2013 2281/12/O/N/13 [Turn over

 6

15 The table shows the change in real incomes for a number of occupations between 1978 and
2008.

change in real income

occupation
%

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.

16 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

17 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

© UCLES 2013 2281/12/O/N/13

 7

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

Which firm has only fixed costs?

A B C D

TC TC
TC
costs costs costs TC costs

O quantity O quantity O quantity O quantity

19 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

20 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.

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

© UCLES 2013 2281/12/O/N/13 [Turn over
 8

22 In a competitive industry, a firm’s aim is to become a monopoly supplier.

Which policy is it most likely to use to eliminate competition?

A adopt price reductions and advertising

B avoid diseconomies of scale
C maximise output and profit
D reduce financial barriers to entry

23 A country’s only income tax rate is 50 % on all incomes above $10 000 and its sales tax (VAT) is
20% on all spending.

What type of taxes are these?

income tax sales tax (VAT)

A progressive and direct regressive and indirect

B progressive and indirect regressive and direct
C proportional and direct proportional and indirect
D proportional and indirect proportional and direct

24 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

25 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.

26 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

© UCLES 2013 2281/12/O/N/13

 9

27 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

28 Government advisers have suggested the following policies to reduce youth unemployment.

Which would not increase public expenditure?

A a cut in the minimum wage paid to young people

B a rise in the school-leaving age
C a subsidy to employers to recruit young people
D national military service for all

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

© UCLES 2013 2281/12/O/N/13 [Turn over

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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 9.7

urban female labour force 2.8 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.

31 The table shows spending in the leisure sector of a country ($ billion).

($ billion)
1995 1999 2005

leisure spending 118 154 198

as a % of total consumption 27.0 27.5 28.0

What can be concluded from the table?

A Leisure spending, in billions of dollars, increased more between 1995–1999 than between
1999–2005.
B Leisure spending is growing in line with income growth.
C Leisure spending increased by an average of $10 billion a year between 1995–2005.
D Leisure spending is taking an increasing share of total consumption.

32 Consumer spending increased in 2010.

What other economic indicator is most likely to have increased as a result of the rise in consumer
spending?

A government budget deficit

B inflation
C terms of trade
D unemployment

© UCLES 2013 2281/12/O/N/13

 11

33 What is deflation?

A a falling general price level

B a falling wage level
C a rising output level
D a rising profit level

34 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.

35 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.

36 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

© UCLES 2013 2281/12/O/N/13 [Turn over

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37 The gap in incomes between rich and poor continues to widen in many countries.

Who would be in absolute poverty?

A those in the population without any formal employment income

B those on very low incomes compared with the rest of the population
C those who live without financial assistance from the government
D those with just the minimum level of resources needed to sustain life

38 A country’s foreign exchange rate appreciates significantly.

Which group in the country will directly benefit from this change?

A a government department which only buys locally made goods

B retailers who get all their supplies from foreign producers
C workers in local companies that compete with foreign firms in the local market
D workers in local companies that sell only in foreign countries

39 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

40 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

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2013 2281/12/O/N/13

 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2013
1 hour
Additional Materials: Multiple Choice Answer Sheet
*7514947626*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are forty 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.

This document consists of 12 printed pages.

IB13 11_2281_13/3RP
© UCLES 2013 [Turn over
 2

1 A generating station was built to supply electricity to a rural village in Africa.

What was the opportunity cost to the local economy?

A the charge the villagers had to pay for the electricity

B the cost of the building materials
C the school that was not built as a result
D the wages of the workers

2 An economy produces different types of goods using its limited resources. This can be illustrated
by a production possibility curve.

consumer
goods

O capital goods

What does point X on the production possibility curve show?

A All resources are used for the production of consumer goods.

B More resources are allocated to producing capital goods than consumer goods.
C Resources are allocated to produce a mixture of consumer and capital goods.
D Total resources are not being fully utilised for production of these goods.

3 In a region of high unemployment, a manufacturer applied for a loan from the government so that
the number of machines in an existing factory could be increased. It was hoped this would also
enable more workers to be employed.

Which factors of production does this decision involve?

A labour and capital only

B labour, capital and enterprise only

C land, labour and capital only
D land, labour, capital and enterprise

© UCLES 2013 2281/13/O/N/13

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4 Some resources in a market economy are switched from producing chocolate bars to producing
ice cream.

What could explain this?

A an increase in the demand for ice cream and a decrease in the demand for chocolate bars
B an increase in the profits from chocolate bars and a decrease in the profits from ice cream
C an increase in the subsidy given to chocolate bar producers and a decrease in the subsidy
given to ice cream producers
D an increase in the tax on ice cream and a decrease in the tax on chocolate bars

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

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

A B C D
S
D S
S
price price price price S
D D D

O quantity O quantity O quantity O quantity

6 Supermarkets sell petrol (gas) outside their stores. They reduce the price of petrol below other
suppliers to attract more customers to buy goods in the store when they buy more petrol.

If this were successful, how might it be shown on demand and supply diagrams?

demand and supply demand and supply

diagram for petrol diagram for the store’s goods

A shift of the demand curve to the left shift of the supply curve to the left
B shift of the demand curve to the right shift of the demand curve to the left
C shift of the supply curve to the left shift of the supply curve to the right
D shift of the supply curve to the right shift of the demand curve to the right

© UCLES 2013 2281/13/O/N/13 [Turn over

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7 Many people are life-long, devoted fans of the Los Angeles Lakers basketball team in the United
States. The team’s stadium can seat 19 000 spectators and tickets are always sold out.

What does this suggest about the price elasticity of demand and the price elasticity of supply of
tickets to watch the Lakers play?

price elasticity of demand price elasticity of supply

A highly elastic perfectly elastic

B highly elastic perfectly inelastic
C highly inelastic perfectly elastic
D highly inelastic perfectly inelastic

8 Which policy might a government adopt to reduce the external cost of urban traffic congestion?

A improving public transport

B reducing the tax on petrol
C subsidising car production
D taxing bus production

9 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

10 What is an example of market failure?

A a firm forced to close because of fierce competition

B a firm polluting rivers with waste chemicals
C a high price for an essential product
D a shortage of an agricultural crop

© UCLES 2013 2281/13/O/N/13

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11 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

12 A merchant travels abroad for a few days to buy samples of low-value goods from a range of
manufacturers.

Which property of money would be least necessary for this to take place smoothly?

A acceptability
B divisibility
C durability
D portability

13 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

14 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.

15 Some lawyers charge very high rates per hour for their services.

What best explains this?

A The lawyers are very skilled.

B The lawyers work long hours.
C The lawyers work part-time and need a high hourly rate.
D The law profession is a popular career.

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16 The table shows the average monthly wage in Bahraini Dinars (BHD) for different groups of
workers in Bahrain in 2011.

private sector public sector

average monthly wage (BHD) 291 952

Bahraini citizen monthly wage (BHD) 589 910
non-Bahraini citizen monthly wage (BHD) 214 1208

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

A Bahraini citizens are more productive than non-Bahraini citizens in the public sector.
B The demand for Bahraini citizens is greater in the private sector than the public sector.
C The public sector employs better educated workers than the private sector in Bahrain.
D There is a greater supply of non-Bahraini citizens in the public sector than the private sector.

17 When a firm produces 500 units its total variable cost is $1000. Its total fixed cost is $1500.

What is the average cost of 500 units?

A $2 B $3 C $5 D $2500

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

Which firm has only fixed costs?

A B C D

TC TC
TC
costs costs costs TC costs

O quantity O quantity O quantity O quantity

19 39 of the 42 largest Chinese firms are described as state-owned enterprises.

What form of organisation will these enterprises have?

A co-operative
B partnership
C public company
D public corporation

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20 What is an external economy of scale for a firm?

A agreeing to produce large quantities exclusively for a major retailer

B bulk buying of raw materials
C obtaining discount rates from suppliers
D sharing research from other firms

21 A butcher has achieved backward vertical integration.

What could have happened?

A The butcher bought a cattle farm.

B The butcher employed more workers.
C The butcher merged with another butcher.
D The butcher sold cheese and eggs as well as meat.

22 In 2011, the UK-based Rio Tinto, the world’s second largest mining company, decided to bid for
Australian Coal and Allied Industries, another mining company.

Which economic concepts could be involved in this decision?

A amalgamation and external economies

B international finance and forward vertical integration
C monopoly power and horizontal integration
D multinational company and a more competitive market

23 What might a government do if it wishes to increase the rate of economic growth in an economy?

A agree a major contract for increased spending by the ministry of defence

B increase the interest rates when house buyers take out a loan
C increase the rate of income tax for average income earners
D raise the sales tax (GST or VAT) on children’s clothes and books

24 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

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25 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.

26 To raise economic growth, a government reduces the rate of interest, lowers the exchange rate,
cuts sales tax and increases the national minimum wage.

Which change is a fiscal policy measure?

A the cut in sales tax

B the increase in the national minimum wage
C the lowering of the country’s exchange rate
D the reduction in the rate of interest

27 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

28 Government advisers have suggested the following policies to reduce youth unemployment.

Which would not increase public expenditure?

A a cut in the minimum wage paid to young people

B a rise in the school-leaving age
C a subsidy to employers to recruit young people
D national military service for all

© UCLES 2013 2281/13/O/N/13

 9

29 An economy is said to have a high economic growth rate.

What is most likely to be found when this occurs?

A a decrease in inflation and a budget deficit

B a decrease in the exchange rate and a fall in savings
C an increase in GDP and low unemployment
D an increase in inflation and a reduction in investment

30 The diagram shows percentage employment in different sectors in two countries.

country X country Y
70 70

60 60

50 50

percentage 40 percentage 40
employed employed
30 30

20 20

10 10

0 0
primary secondary services primary secondary services

Which statement is correct when comparing country X and country Y?

A Country X produces more primary output than country Y.

B Country X employs more workers in secondary industry than country Y.
C Country Y produces more secondary output than country X.
D Country Y is more developed than country X.

31 Low income countries make up 34% of the total world population but account for just 2.4% of the
value of total world exports.

What is the likely reason for this low figure?

A High income countries have no demand for low income countries’ exports.
B Low income countries export relatively cheap primary products.
C Low income countries’ terms of trade are very high.
D Modern technology has made low income countries self-sufficient.

© UCLES 2013 2281/13/O/N/13 [Turn over

 10

32 Which cause of inflation is most likely to result in an increase in unemployment?

A an increase in consumer expenditure

B an increase in exports
C an increase in the costs of production
D an increase in the money supply

33 What is a result rather than a cause of inflation?

A a fall in purchasing power of those on fixed incomes

B easier credit facilities to purchase consumer goods
C increases in costs of oil supplies worldwide
D increases in international competitiveness

34 Official statistics in 2010 showed South Africa had a very high unemployment rate at around
25%, yet wages were still double those in Brazil.

What might be a reason for South Africa’s high wages in a time of unemployment compared with
Brazil?

A a skilled workforce in Brazil

B high levels of savings in South Africa
C increased use of labour-intensive production in Brazil
D strong trade unions in South Africa

35 The government of a developing country allows a multinational mining company to mine minerals
in order to improve the standard of living of the local people.

Which action by the multinational company will not lead to an improvement in the standard of
living of the local people?

A building roads to assist transport

B exporting mineral ore
C providing skills training
D returning profits overseas

© UCLES 2013 2281/13/O/N/13

 11

36 Which changes usually result when a country develops and is able to provide free health care
and good living conditions?

worker
birth rate death rate
productivity

A falls falls rises

B falls rises falls
C rises falls falls
D rises rises rises

37 What is not likely to be used to measure the difference in the standard of living between
countries?

A Gross Domestic Product per head

B Human Development Index
C the rate of poverty
D the rate of interest

38 How does a tariff differ from a quota?

A A tariff is on exports, a quota is on imports.

B A tariff is on the quantity of an import, a quota is on the price of an import.
C A tariff raises government revenue, a quota raises no government revenue.
D A tariff raises the price at which imports sell, a quota does not.

39 In February 2010, the Vietnamese Central Bank devalued the country’s currency.

What effect would this devaluation have on the price of Vietnamese exports and imports?

price of Vietnamese price of Vietnamese

exports imports

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2013 2281/13/O/N/13 [Turn over

 12

40 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

Copyright Acknowledgements:

Question 16 © Labour Market Regulatory Authority, Bahrain.

Question 31 © Data & Statistics; The World Bank.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2013 2281/13/O/N/13

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2014
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*0601744075*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB14 11_2281_12/RP
© UCLES 2014 [Turn over
 2

1 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.

2 Which statement about the factors of production is correct?

A Capital includes man-made machines that do not keep their original value.
B Enterprise is a natural factor of production that cannot be taught.
C Labour is an immobile factor that does not change its skill level.
D Land is only agricultural fields that cannot be improved by human effort.

3 The diagram shows two production possibility curves for an economy.

manufactured
products

O Y X
agricultural products

What could have caused the change in the economy’s production possibility curve from XX
to YY?

A a decrease in the price level

B a large number of industrial disputes
C a major earthquake
D an increase in unemployment

© UCLES 2014 2281/12/O/N/14

 3

4 What is most likely to influence the price elasticity of demand for a food?

A a change in consumer tastes

B the number of close substitutes
C the rate of inflation
D whether the food can be stored easily

5 What is meant by the equilibrium quantity in the market for a product?

A the average quantity produced over the year

B the average quantity sold over the year
C the quantity at which profit occurs
D the quantity at which the demand and supply curves intersect

6 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

7 The diagram shows the market for refined oil with equilibrium of X.

What will be the new equilibrium when a major oil refinery shuts down for repair work?

S2
D2
S1
D1
A
B S3
D3
X
price
C
D

O
quantity

© UCLES 2014 2281/12/O/N/14 [Turn over

 4

8 A group of workers in a firm joins a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

9 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

10 When might rapid inflation together with low interest rates be a source of concern for a
consumer?

A when a consumer lives on a pension linked to the consumer price index

B when a consumer needs to use savings for regular expenditure
C when a consumer pays a fixed rent for their accommodation
D when a consumer wishes to buy a good on credit

11 Asda, a supermarket chain, noticed a regular, sharp decrease in sales in the third week of the
month as people ran out of cash before their next wage payment. The supermarket offered their
biggest price reductions at that time.

Why might this policy increase total revenue?

A because consumers’ demand curve shifts to the left in the third week of the month
B because consumers’ demand curve shifts to the right in the third week of the month
C because the price elasticity of demand for Asda’s products decreases in the third week of the
month
D because the price elasticity of demand for Asda’s products increases in the third week of the
month

© UCLES 2014 2281/12/O/N/14

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12 A large tyre manufacturer expands by taking over a rubber plantation.

Of what is this an example?

A backward vertical integration

B diversifying integration
C forward vertical integration
D horizontal integration

13 What may exist in perfect competition but not in monopoly?

A barriers to entry
B economies of scale
C many sellers
D product differentiation

14 The diagram shows the cost and revenue curves of a firm which starts to make a profit only after
producing 100 units of output.

2
costs and
revenue
$ 500

0 100
output

What are the correct labels for line 1 and line 2?

line 1 line 2

A average cost average revenue

B total cost total revenue
C total revenue total cost
D variable cost price

© UCLES 2014 2281/12/O/N/14 [Turn over

 6

15 The table shows output and total costs of production of a firm with three workers.

output total costs ($)

week 1 5 1500
week 2 6 1600
week 3 7 1700
week 4 8 1800

How did output per worker and average cost of the product change over the period?

output per worker average cost

A decrease no change
B increase decrease
C increase no change
D no change increase

16 A government aims to keep domestic prices stable in a fully employed economy.

Which policy should it use?

A increase expenditure on defence

B increase indirect taxes
C increase the rate of interest
D increase the wages of government workers

17 What describes a regressive tax?

A It is paid by a higher proportion of high income earners.

B It is paid by a higher proportion of low income earners.
C It takes a higher proportion from high incomes.
D It takes a higher proportion from low incomes.

18 In 2011 the Egyptian Government increased the top rate of income tax.

What is likely to have been the main aim 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

© UCLES 2014 2281/12/O/N/14

 7

19 The table shows the tax paid at different levels of income.

income amount of tax

($) ($)

6000 600
7000 700
8000 900
9000 1100

Which describes this tax?

A progressive at all levels of income

B proportional at all levels of income
C proportional at lower incomes, progressive at higher incomes
D proportional at lower incomes, regressive at higher incomes

20 What must be a consequence of deflation in a country?

A a decrease in its exports

B a decrease in its saving
C an increase in its employment
D an increase in the real value of its money

21 World population increased from 5.26 billion in 1990 to just over 7.00 billion in 2012. It is
predicted to rise to 8.00 billion by 2025.

What is most likely to explain this?

A an increase in migration from developing to developed countries

B an increase in the birth rate in developing countries
C an increase in the death rate in developed countries
D an increase in the death rate in developing countries

© UCLES 2014 2281/12/O/N/14 [Turn over

 8

22 The table shows the rate of unemployment and the annual rates of change of gross domestic
product (GDP) and consumer prices for four countries in 2012.

Which country was experiencing the worst economic recession?

unemployment consumer
GDP
rate prices
(% change)
(%) (% change)

A Greece 22.5 –7.1 +0.2

B Hungary 10.9 –0.8 +5.5
C Italy 10.8 –2.1 +3.2
D Spain 24.8 –1.6 +2.0

23 The table shows the percentage change (%) in employment over a period for a country with three
economic sectors.

(%) change in
economic sector
employment

agriculture –6
manufacturing +2
services +4

What could be concluded from this information?

A Agricultural output fell.

B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

24 What is most likely to be found in a developed country?

A a small amount of income spent on leisure and entertainment

B a small average family size
C a small number of old people
D a small number of professional people

© UCLES 2014 2281/12/O/N/14

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25 What will increase the level of economic development in a country?

A a higher infant mortality rate

B a higher inflation rate
C a higher interest rate
D a higher literacy rate

26 Developing countries have, relatively, far more poor people than developed countries.

What is the reason for this?

A Developing countries have much higher fertility rates.

B It is not possible for migrants from developing countries to work in developed countries.
C The natural increase in population is lower in developing countries.
D There is an ageing population in all developing countries.

27 The table shows statistics for four countries in southern Africa.

From the information given, which country has the lowest standard of living?

average annual population density real GDP

life
growth rate of per square per capita
expectancy
population (%) kilometre (US$)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

28 When the US$ exchange rate falls it will usually

A help to reduce a US trade deficit.

B increase the foreign price of US exports.
C reduce the price of US imports.
D reduce US inflation.

© UCLES 2014 2281/12/O/N/14 [Turn over

 10

29 Which change will increase the demand for imports?

A Consumer credit becomes more expensive.

B Income tax rates increase.
C The exchange rate appreciates.
D The government increases tariffs.

30 In recent years, the US has experienced a deficit on its overall current account of the balance of
payments.

What could have led to an increase in the size of the deficit?

A increased competitiveness of goods made in the US

B increased earnings by US investors in foreign companies
C increased numbers of overseas visitors to the US
D increased spending on US military bases abroad

© UCLES 2014 2281/12/O/N/14

 11

BLANK PAGE

© UCLES 2014 2281/12/O/N/14

 12

BLANK PAGE

Copyright Acknowledgements:

Q22 © Economist Intelligence Unit; The Economist; 11 August 2012.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2014 2281/12/O/N/14

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2014
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*4392988103*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB14 11_2281_13/RP
© UCLES 2014 [Turn over
 2

1 Which resource is an example of capital used in the fishing industry?

A a fishing boat
B fish
C owners of firms in the industry
D skilled workers in the industry

2 In the diagram, what does the production possibility line PQ illustrate?

product Y

O product X Q

A constant opportunity cost

B decreasing opportunity cost
C diseconomies of scale
D economies of scale

3 In recent years more golf courses, which use large quantities of water, have opened in China.

What may be the opportunity cost of this?

A cost of water
B loss of farmland
C sales of golf equipment
D wages of golf course staff

4 As the demand for new houses increases, the demand for plumbers and electricians also
increases.

What does this statement illustrate?

A The demand for plumbers and electricians is complementary (joint) demand.

B The productivity of plumbers and electricians increases continually.
C There is no limit to the number of plumbers and electricians employed.
D The supply of plumbers and electricians is totally elastic.

© UCLES 2014 2281/13/O/N/14

 3

5 What is found in a mixed economy but not in a free market economy?

A equilibrium prices
B income tax
C small firms
D the profit motive

6 A bridge is built over a river which enables journey times to be reduced.

The table shows costs and benefits from building the bridge.

$000

private benefit 12
private cost 10
external benefit 8
external cost 5

Which calculation represents social benefit?

A $12 000 – $10 000 = $2000

B $8000 – $5000 = $3000
C $12 000 + $5000 = $17 000
D $8000 + $12 000 = $20 000

7 When personal computers (PCs) were first sold in the 1970s, prices were much higher than they
are today.

What is the most likely explanation?

A Both quality and performance of PCs have improved.

B Demand has increased due to advertising.
C Improvements in technology have led to lower supply costs.
D Production requires more spending on research.

8 A group of workers in a firm joins a trade union.

What would the union be expected to do?

A arrange for labour-saving technology to be introduced

B discuss safety issues in the workplace with the employer
C ensure job security by promoting the firm’s products through advertising
D negotiate new contracts with major buyers of the firm’s products

© UCLES 2014 2281/13/O/N/14 [Turn over

 4

9 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

10 In 2008, economic conditions in the UK were uncertain and the rate of inflation increased. It was
reported that consumers had increased their purchases of rare stamps which continued to rise in
value.

What is not a reason for such purchases?

A to avoid risk
B to diversify their investments
C to overcome the effects of inflation
D to switch from spending to borrowing

11 The construction industry in Dubai relies on many migrant workers from India.

Which combination of changes in the economies of Dubai and India would be most likely to
increase the wages of construction workers in Dubai?

Dubai economy Indian economy

A decrease in economic activity decrease in economic activity

B decrease in economic activity increase in economic activity
C increase in economic activity decrease in economic activity
D increase in economic activity increase in economic activity

12 What is correct for a private monopoly but is not correct for a firm in perfect competition?

A It aims to maximise its profits.

B It can make losses.
C It can restrict the level of competition.
D It is run by an entrepreneur.

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13 What must occur if a firm experiences economies of scale?

A average costs decrease

B profits decrease
C the number of workers increases
D total advertising costs decrease

14 The diagram shows the cost and revenue curves of a firm which starts to make a profit only after
producing 100 units of output.

2
costs and
revenue
$ 500

0 100
output

What are the correct labels for line 1 and line 2?

line 1 line 2

A average cost average revenue

B total cost total revenue
C total revenue total cost
D variable cost price

© UCLES 2014 2281/13/O/N/14 [Turn over

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15 The table shows output and total costs of production of a firm with three workers.

output total costs ($)

week 1 5 1500
week 2 6 1600
week 3 7 1700
week 4 8 1800

How did output per worker and average cost of the product change over the period?

output per worker average cost

A decrease no change
B increase decrease
C increase no change
D no change increase

16 A government policy results in an increase in government spending and a fall in the market price
of a good.

What is the government policy?

A the application of an indirect tax to a luxury good

B the introduction of a subsidy to wheat farmers
C the privatisation of health services
D the setting of a minimum price for milk

17 What describes a regressive tax?

A It is paid by a higher proportion of high income earners.

B It is paid by a higher proportion of low income earners.
C It takes a higher proportion from high incomes.
D It takes a higher proportion from low incomes.

© UCLES 2014 2281/13/O/N/14

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18 In trying to achieve one of its aims a government may make it difficult to achieve another aim.

What is an example of this conflict?

A Achieving a more even distribution of income may prevent a rise in the average standard of
living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving steady prices may prevent a current account surplus on the balance of payments.

19 The table shows the tax paid at different levels of income.

income amount of tax

($) ($)

6000 600
7000 700
8000 900
9000 1100

Which describes this tax?

A progressive at all levels of income

B proportional at all levels of income
C proportional at lower incomes, progressive at higher incomes
D proportional at lower incomes, regressive at higher incomes

20 Which combination of changes could cause a fall in the purchasing power of workers in a
country?

% change in % change in
wages rates the price level

A –2 –4
B 0 –2
C 4 4
D 4 6

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21 What will increase when there is a period of deflation during which the general price level
continues to fall?

A confidence of investors
B consumer demand
C unemployment
D wage rates

22 The information below relates to selected countries in 2012.

consumer prices unemployment rate

(annual % change) (%)

India +10.0 9.8

Sweden +1.4 8.8
Switzerland –0.4 2.9
Venezuela +22.8 7.4

What can be concluded from this information?

A Inflation is a possible cause of unemployment.

B Inflation is the only cause of unemployment.
C Low unemployment is linked to high inflation.
D There is a uniform link between the rate of inflation and unemployment.

23 The table shows the percentage change (%) in employment over a period for a country with three
economic sectors.

(%) change in
economic sector
employment

agriculture –6
manufacturing +2
services +4

What could be concluded from this information?

A Agricultural output fell.

B The country became more developed.
C The working population stayed constant.
D Total employment remained the same.

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24 As a country develops, what is most likely to happen?

A There will be an increase in productivity.

B There will be an increase in the birth rate.
C There will be an increase in the death rate.
D There will be reduced occupational mobility.

25 The diagrams show the approximate age distributions of four economies.

Which diagram resembles the age distribution of a developed economy?

A B C D
90 90 90 90

age age age age

(years) (years) (years) (years)

0 0 0 0
population population population population

26 As a country develops, its provision of medical care for babies and old people improves.

Why might this cause a problem in raising living standards?

A Gross Domestic Product will fall.

B The dependency ratio will become higher.
C The number of workers will fall.
D The size of families in the short run will be smaller.

27 The table shows statistics for four countries in southern Africa.

From the information given, which country has the lowest standard of living?

average annual population density real GDP

life
growth rate of per square per capita
expectancy
population (%) kilometre (US$)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

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28 Which change would be most likely to cause an increase in the demand for the Turkish Lira?

A increased investments by Turkish firms in Italy

B increased profits sent to France by French companies in Turkey
C increased purchases of German chemicals by Turkish firms
D increased speculation that the value of the Turkish Lira will rise in the future

29 Which change will increase the quantity of a country’s exports?

A Foreign governments raise tariff rates.

B The country’s exchange rate depreciates.
C The level of world income falls.
D Transport costs become more expensive.

30 In September 2011 the Brazilian Government increased its tariff on imported Chinese cars.

Which change might have increased the number of cars Brazil imported from China in October
2011?

A a decrease in the quality of cars produced in Brazil

B a decrease in the sales tax on cars produced in Brazil
C an increase in the costs of producing cars in China
D an increase in the value of China’s currency

© UCLES 2014 2281/13/O/N/14

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© UCLES 2014 2281/13/O/N/14

 12

BLANK PAGE

Copyright Acknowledgements:

Q22 © Economist Intelligence Unit; The Economist; 11 August 2012.

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2014 2281/13/O/N/14

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2015
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*8617713263*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB15 11_2281_12/FP
© UCLES 2015 [Turn over
 2

1 In a rural community of Southern Africa, women were responsible for planting and weeding crops
by hand, while men used to control production and receive profits.

Which combination of factors of production was in operation?

men women

A capital land
B enterprise labour
C labour capital
D land enterprise

2 The government of a prosperous country announced that it would offer free food to its citizens for
a year.

What would be the effect of this measure?

A Agricultural resources would become unlimited.

B Human wants would become finite.
C More resources would be devoted to food production.
D The basic economic problem would be solved.

3 The diagram shows a production possibility curve for an economy that can produce rice or
electronic equipment. The economy is at point Q. A recession causes unemployment in the
electronics industries.

At which point will the economy be in the diagram?

C
B
Q
A D
rice

O
electronic
equipment

© UCLES 2015 2281/12/O/N/15

 3

4 A person works at home making table cloths. He works for 6 hours each day and makes 15 table
cloths an hour. He sells them for $10 each.

He then decides to work for only 4 hours each day.

What can be concluded from the above information?

A The lost profit would be $300.

B The lost revenue would be $60.
C The daily opportunity cost would be 30 table cloths.
D The daily opportunity cost would be $50.

5 What is meant by an equilibrium price?

A a government price that ensures fairness for all

B a price that has no pressure to rise or fall
C a price that maximises the profits of the producers
D a price that maximises the satisfaction of the consumers

6 In August 2013, a lengthy strike in north-east India, where the finest and most expensive
Darjeeling tea is grown, shut down the tea industry at harvest time.

What is the likely outcome of such a situation on a demand and supply diagram for Darjeeling
tea?

A The price will rise because demand will switch to other teas.
B The price will rise because the strike will cause a movement down the supply curve.
C The price will rise because the supply curve will move to the left.
D The price will rise because there will be a fall in demand for the remaining Darjeeling tea.

© UCLES 2015 2281/12/O/N/15 [Turn over

 4

7 Air travel and rail travel are substitute forms of transport. The diagram shows the effect of new
technology on the market for air travel.

S1
S2

price per P1
ticket
P2

D
O Q1 Q2

quantity of airline tickets

What would be the most likely effect on the market for rail transport?

A a decrease in demand for rail transport

B an increase in the price of rail tickets
C an increase in supply of rail transport
D an increase in the total income of rail companies

8 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 ignoring external cost

B inequality of income
C lack of information
D price discrimination

9 How do high direct taxes affect spending and how do high interest rates affect saving by wage-
earners?

spending saving

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2015 2281/12/O/N/15

 5

10 A national trade union wishes to increase the wages of its members without reducing the
numbers employed.

Which factor would help the union to do this?

A The demand for the industry’s product is high.

B The industry consists of a small number of well-organised employers.
C The union workers have low-level skills.
D The workers’ wages are the largest cost of the industry.

11 The wage rate of a worker is reduced.

Which combination of characteristics of the job is most likely to cause the worker to stay in the
job?

additional unsocial
job security
bonuses hours

A high high many

B high high none
C low low many
D low low none

12 What characteristics are found in a monopoly?

A freedom of entry to the market and a single seller

B freedom of entry to the market and many sellers
C many buyers and a single seller
D many buyers and many sellers

13 What must be falling if a firm is experiencing economies of scale?

A average costs
B external costs
C fixed costs
D total costs

© UCLES 2015 2281/12/O/N/15 [Turn over

 6

14 A company supplying water spent $470 million creating a network of pipes to distribute water
more efficiently. It employed local workers and boosted the local economy. It also provided better
facilities for the tourist industry.

What cannot be concluded from the above?

A The company increased its profits.

B There was a decrease in regional unemployment.
C There were fixed costs of $470 million.
D There were positive externalities.

15 The table shows the information that managers of a company have from a week of business
activity.

number of employees 100

average wage $900
value of output $100 000
rent $10 000
raw materials $20 000

Assuming there are no other costs, what is the value of the fixed costs?

A $300 B $10 000 C $20 000 D $30 000

16 What is most likely to be the responsibility of a government?

A the building of a food processing plant

B the building of a housing estate
C the building of a large shopping centre
D the building of a major rail link

17 Which statement about the meaning of government economic aims is correct?

A Economic growth means that a country’s real output must rise over time.
B Full employment means that no one must be unemployed.
C Price stability means that the price of all goods and services must remain unchanged.
D Redistribution of income means that everyone must have equal incomes.

© UCLES 2015 2281/12/O/N/15

 7

18 A government wishes to close the gap between the earnings of the rich and the poor.

What should it do to achieve this aim?

A increase progressive taxation

B increase the rate of interest
C increase the rate of sales tax
D increase the supply of money

19 A government decided to increase its spending on building schools and hospitals.

Which aim of government policy is most likely to be achieved by this increase?

A a balance of payments surplus

B a stronger exchange rate
C economic growth
D price stability

20 The forecast for Germany’s GDP growth in 2013 was 1.5%.

What might cause economic growth?

A an increase in imports
B an increase in interest rates
C an increase in productivity
D an increase in unemployment

21 The proportion of workers employed varies between different industries and between developing
and developed economies.

Which combination in the table is likely to have the highest percentage of workers employed?

developing developed

A agriculture manufacturing
B agriculture services
C construction manufacturing
D construction services

© UCLES 2015 2281/12/O/N/15 [Turn over

 8

22 In 2009, a country had an inflation rate of 2%. The table shows the inflation rate in the following
years.

inflation rate
year
(%)

2010 2
2011 1
2012 0
2013 –1

In which year did deflation start?

A 2010 B 2011 C 2012 D 2013

23 Which item does the Human Development Index (HDI) of a country include, in addition to real
GDP per head and life expectancy at birth?

A expenditure on law and order

B literacy rate among adults
C number of doctors
D retirement age

24 Why might real GDP per head not be a good indicator of the standard of living in developing
countries?

A It does not account for inflation.

B It does not account for population changes.
C It does not include primary production.
D It does not include unpaid work on farms.

25 The richest 60% of the population in a developed economy received an increase in income.

Which row is correct as a result of this increase?

absolute poverty relative poverty

A increased increased
B increased remained constant
C remained constant increased
D remained constant remained constant

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26 According to the United Nations, the share of world population living in developing countries will
increase from 83% in 2003 to 88% in 2050.

What is likely to be the major cause of this predicted change?

A Climate change will lead to lower food output and starvation.

B Improved education for girls will lead to a small decline in birth rates.
C Increasing numbers of people will migrate to developed countries.
D Modern medicine and sanitation will lead to a rapid decline in death rates.

27 The diagram shows China’s trade with Brazil for 1999 and 2003 in billions of dollars.

0 1 2 3 4 5

Exports 1999
2003
Imports

With reference to the diagram, what happened to China’s trade balance with Brazil between 1999
and 2003?

A It experienced a falling surplus.

B It experienced a rising deficit.
C It moved from deficit to surplus.
D It moved from surplus to deficit.

28 A country imposes tariffs and quotas on imported goods.

What will citizens of that country experience?

A higher prices
B higher welfare
C higher unemployment
D wider consumer choice

29 What is most likely to encourage international specialisation?

A similarities in climate in different countries

B the ability to produce products more cheaply than other countries
C the discovery of oil in a country that had no oil before
D very high international transport costs

© UCLES 2015 2281/12/O/N/15 [Turn over

 10

30 Turkey’s agricultural sector employs 48% of the country’s workforce, compared with 17% in the
United States (US) and 3.9% in France.

What could be concluded from this?

A France is likely to import more agricultural produce than the US.

B The workers in France are not as productive as those in Turkey.
C Total agricultural production is likely to be higher in Turkey than in the US.
D Turkey is likely to be less developed than France.

© UCLES 2015 2281/12/O/N/15

 11

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© UCLES 2015 2281/12/O/N/15

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2015 2281/12/O/N/15

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2015
45 minutes
Additional Materials: Multiple Choice Answer Sheet
*2371617459*

Soft clean eraser

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB15 11_2281_13/FP
© UCLES 2015 [Turn over
 2

1 Governments often try to influence the supply of factors of production in their economies.

Which factor’s supply is a government least likely to be able to increase?

A capital
B enterprise
C labour
D land

2 There has been increased concern about the way large firms exploit the environment.

What is the main reason for this concern?

A Large firms are unprofitable because of diseconomies of scale.

B Large firms combine together to fix prices.
C The exploitation of resources is expensive.
D Unlimited wants will use up the finite resources.

3 The diagram shows a production possibility curve for an economy that can produce agricultural
products or financial services. It is currently at point Q.

A crop disease decreases agricultural production but the financial services sector increases
output as a result of an increase in demand.

To which point is the economy likely to move?

A
Q
agricultural B
products
C D

O
financial
services

4 A person works at home making small cakes. She can make 30 cakes an hour and works for four
hours a day. The total cost of the ingredients is $50 and she sells the cakes for $2 each.

What is the opportunity cost if she takes a working day for a holiday?

A $50
B $240
C 30 cakes
D 120 cakes

© UCLES 2015 2281/13/O/N/15

 3

5 Former planned economies in Eastern Europe have changed to market economies.

What is most likely to be observed in these economies?

A greater government controls over labour mobility

B increased production of capital goods rather than consumer goods
C less choice for consumers
D widespread privatisation of manufacturing and services

6 What is an example of a public good?

A a theatre performance
B an injection to prevent influenza
C road signs and road markings
D the collection of rubbish by a local authority

7 Air travel and rail travel are substitute forms of transport. The diagram shows the effect of new
technology on the market for air travel.

S1

S2

price per P1
ticket
P2

D
O Q1 Q2

quantity of airline tickets

What would be the most likely effect on the market for rail transport?

A a decrease in demand for rail transport

B an increase in the price of rail tickets
C an increase in supply of rail transport
D an increase in the total income of rail companies

© UCLES 2015 2281/13/O/N/15 [Turn over

 4

8 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 ignoring external cost

B inequality of income
C lack of information
D price discrimination

9 Which statement is correct when comparing low-income earners with high-income earners?

A High-income earners are likely to save a higher proportion of any additional income received.
B High-income earners spend proportionately more of their income.
C Low-income earners are likely to spend a lower proportion of any additional income received.
D Low-income earners save proportionately more of their income.

10 In the United States (US) in 2011, 7.6 million public sector workers (36% of public sector workers)
were members of trade unions, but only 7.1 million private sector workers (8% of private sector
workers) belonged to a trade union.

What can be concluded from this information?

A 28% of all workers belonged to a trade union in the US in 2011.

B Collective bargaining was more a feature of the private sector than the public sector in the
US in 2011.
C More people worked in the private sector than in the public sector in the US in 2011.
D The working population in the US in 2011 was 14.7 million.

11 Car assembly workers usually earn more income than agricultural workers.

What might explain this?

A Car assembly has safer working conditions.

B Car assembly involves more regular hours.
C Car assembly is usually in smaller firms.
D Car assembly produces a higher-value product.

© UCLES 2015 2281/13/O/N/15

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12 In some countries, former nationalised utilities, such as electricity, have been replaced by several
public limited companies.

Which change has occurred in the electricity market?

A All profits are reinvested into the business by public limited companies.
B Governments decide which company consumers must use.
C Market prices are fixed by governments.
D Public limited companies pay dividends to shareholders.

13 There has been a move away from labour-intensive to capital-intensive production in developed
economies.

Which type of activity remains labour-intensive?

A assembling cars
B designing clothes
C farming cereals
D manufacturing steel

14 In 2007, a huge industrial mining company attempted to buy another industrial mining company.
The attempt failed.

In 2010, the same mining company made an offer to buy a company that sells potash, which is
used to improve agricultural soils.

How may the mining company’s attempts to buy these other companies be described?

2007 2010

A diversification horizontal integration

B horizontal integration diversification
C specialisation vertical integration
D vertical integration specialisation

© UCLES 2015 2281/13/O/N/15 [Turn over

 6

15 The table shows the information that managers of a company have from a week of business
activity.

number of employees 100

average wage $900
value of output $100 000
rent $10 000
raw materials $20 000

Assuming there are no other costs, what is the value of the fixed costs?

A $300 B $10 000 C $20 000 D $30 000

16 Governments use monetary policy such as increasing the rate of interest.

What is a result of increasing the rate of interest?

A It creates disincentives for wage earners.

B It discourages investment by entrepreneurs.
C It increases disposable income of consumers.
D It reduces government transfer payments.

17 Which statement about the meaning of government economic aims is correct?

A Economic growth means that a country’s real output must rise over time.
B Full employment means that no one must be unemployed.
C Price stability means that the price of all goods and services must remain unchanged.
D Redistribution of income means that everyone must have equal incomes.

18 In 2013, a government wanted to keep inflation low and also to decrease unemployment. It
decided to subsidise consumers wishing to purchase a house so that houses would become
more affordable to them. At the time, there was a shortage of houses.

What is most likely to have happened to inflation, housebuilding and unemployment?

inflation housebuilding unemployment

A fall no change fall

B fall rise rise
C rise no change rise
D rise rise fall

© UCLES 2015 2281/13/O/N/15

 7

19 A government decided to increase its spending on building schools and hospitals.

Which aim of government policy is most likely to be achieved by this increase?

A a balance of payments surplus

B a stronger exchange rate
C economic growth
D price stability

20 A consumer price index (CPI) consists of four items. The table shows the percentage price
change for each item over a period of a year and the weight of each item.

Which price change will affect the level of the CPI most?

% price change
item weight
over 1 year

A food +5 0.30
B housing +6 0.20
C recreation +3 0.40
D transport +4 0.10

21 GDP per head is regarded as a poor measure of living standards because it omits

A environmental changes.
B exports.
C the income of the poor.
D the profits of private businesses.

22 A large economy experiences a high rate of GDP growth.

What is least likely to be a result of this growth?

A Everybody in the economy will benefit.

B Some people in the economy will benefit more than others.
C Some people in other economies will benefit.
D There will be economic growth in other economies.

© UCLES 2015 2281/13/O/N/15 [Turn over

 8

23 In 2008, a country had an inflation rate of 4%. The table shows the inflation rate in the following
years.

inflation rate
year
%

2009 4
2010 2
2011 –2
2012 –1

In which year did deflation start?

A 2009 B 2010 C 2011 D 2012

24 In developed countries, an ageing population has caused changes in the population structure.

What is the result of this change?

A an increase in the dependency ratio

B employment conditions have improved
C medical treatment is available to all
D welfare services have improved

25 Assuming no other changes, the population is most likely to increase if there is a reduction in

A the birth rate.

B the death rate.
C the fertility rate.
D the inoculation rate.

© UCLES 2015 2281/13/O/N/15

 9

26 The diagram shows population data for Japan for 1950, 2005 and 2050.

age age age

100 100 men 100 women

men women
80 80 80
men women
60 60 60

40 40 40

20 20 20

0 0 0
1.2 0.8 0.4 0 0 0.4 0.8 1.2 1.2 0.8 0.4 0 0 0.4 0.8 1.2 0.8 0.4 0 0 0.4 0.8
Japanese population, Japanese population, Japanese population,
millions millions millions
1950 2005 2050 (forecast)

What can be concluded from the diagram?

A Men outnumber women in each year.

B People are living longer over the period.
C The population has grown continuously.
D The workforce has grown continuously.

27 The diagram shows China’s trade with Brazil for 1999 and 2003 in billions of dollars.

0 1 2 3 4 5

Exports 1999
2003
Imports

With reference to the diagram, what happened to China’s trade balance with Brazil between 1999
and 2003?

A It experienced a falling surplus.

B It experienced a rising deficit.
C It moved from deficit to surplus.
D It moved from surplus to deficit.

© UCLES 2015 2281/13/O/N/15 [Turn over

 10

28 In August 2013, the Indian rupee reached a new low against the US dollar compared with the
previous month.

What does this mean?

A India’s balance of trade would worsen.

B Indian goods became cheaper in the US.
C Investors would wish to buy Indian rupees.
D More Indian students would study in the US.

29 What is most likely to encourage international specialisation?

A similarities in climate in different countries

B the ability to produce products more cheaply than other countries
C the discovery of oil in a country that had no oil before
D very high international transport costs

30 Turkey’s agricultural sector employs 48% of the country’s workforce, compared with 17% in the
United States (US) and 3.9% in France.

What could be concluded from this?

A France is likely to import more agricultural produce than the US.

B The workers in France are not as productive as those in Turkey.
C Total agricultural production is likely to be higher in Turkey than in the US.
D Turkey is likely to be less developed than France.

© UCLES 2015 2281/13/O/N/15

 11

BLANK PAGE

© UCLES 2015 2281/13/O/N/15

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2015 2281/13/O/N/15

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2016
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*8153278276*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB16 11_2281_12/FP
© UCLES 2016 [Turn over
 2

1 Each factor of production earns an income.

What correctly identifies the income for labour and capital?

labour capital

A profit interest
B rent profit
C wages profit
D wages interest

2 What could be the opportunity cost of a nuclear power station?

A the running costs of the power station

B a coal-fired power station

C the current value of the power station
D the cost of building the power station

3 The diagram shows a production possibility curve for maize and cotton.

maize P Q

R S

O cotton

Bad weather causes a poor harvest for both crops.

Which movement could be used to represent this change?

A P to R B Q to R C S to Q D S to R

4 The market for a good was in equilibrium. A change occurred which resulted in a new equilibrium
with a higher price for the good and a lower quantity traded.

What change would have caused this?

A the demand curve moved to the left

B the demand curve moved to the right
C the supply curve moved to the left
D the supply curve moved to the right

© UCLES 2016 2281/12/O/N/16

 3

5 A demand curve shows the relationship between the quantity demanded and

A a change in income
B consumer tastes
C the supply of the product
D the price of the product

6 A government subsidises the production of pineapples.

This is likely to

A increase the price of pineapples

B raise the costs of supplying pineapples
C raise revenue for the government
D cause the supply of pineapples to increase at every price

7 What indicates the existence of external costs in an economy?

A An international trade deficit has caused the country to be in debt.

B National companies have borrowed from foreign investors.
C Private costs of production are less than social costs.
D Private costs of production are more than social benefits.

8 What might be a disadvantage to a trade union when arguing for an increase in its members’ pay?

A an increase in imports of a cheaper, similar product

B the closure of a local training college resulting in fewer potential workers
C the development of a new and profitable brand of the company’s product
D the development of new techniques that increase productivity

9 What shows the correct examples of income and wealth?

income wealth

A dividends from shares wages

B rent from a house overtime payments
C overtime payments wages
D wages house

© UCLES 2016 2281/12/O/N/16 [Turn over

 4

10 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.

Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large
house.

Which is most likely to be correct?

A Nazmin spends a smaller proportion of her income than Meer.

B Nazmin saves most of her income.
C Nazmin would find it easier than Meer to borrow money.
D Nazmin has a lower disposable income than Meer.

11 The table shows how household spending changes with income.

income spending
($ per month) ($ per month)

4000 4150
4300 4375
4600 4650
4900 4900
5200 4975
5500 5275

What is the first level of income shown at which savings are positive?

A $4000 B $4600 C $4900 D $5200

12 A survey of managers in the USA revealed that most businessmen feel that a company’s
responsibility is ‘to serve the interests of owners, employees, customers and the public’.

The idea of profit maximisation, in contrast, implies that a company’s main responsibility should
be to the

A customers
B employees
C owners
D public

© UCLES 2016 2281/12/O/N/16

 5

13 Some agricultural co-operatives have changed from labour-intensive to capital-intensive methods

of production.

What might be a cause of this change?

A Average productivity of agricultural workers has increased.

B Farming equipment has become more efficient.
C People are eating less food for health reasons.
D Some agricultural land has been sold for housing.

14 A firm has fixed costs of $200 for its daily output. The table shows its daily total variable costs.

output (units) 1 2 3 4

total variable costs ($) 300 400 700 800

What can be concluded about the firm’s average total cost?

A it falls continuously
B it is highest at output 4 units
C it is lowest at output 4 units
D it rises continuously

15 The table shows the growth rate of output (%) in four sectors of an economy.

construction energy manufacturing services

sector % sector % sector % sector %

first quarter of 2014 0.9 0.1 –0.7 –3.4

second quarter of 2014 0.5 1.6 –0.5 0.5

Which two sectors showed an increase in the growth rate in the first half of 2014?

A construction and energy

B construction and manufacturing
C services and construction
D services and manufacturing

© UCLES 2016 2281/12/O/N/16 [Turn over

 6

16 A government decides to sell the monopoly supply of gas to households to a private firm.

How could the government protect the interests of households after selling a large company to
the private sector?

A by excluding all competition from foreign companies

B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas

17 In 2015, 70 000 extra people lost their jobs but total employment rose by 75 000. What could
explain this?

A Some people may have emigrated.

B Some people may have gone back to education.
C Some people may have re-entered the labour force.
D Some people may have retired early.

18 The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries.

From this information, which country had the highest percentage of direct taxation as a
percentage of GDP?

tax on tax on goods

income tax tax on
business and services
% dividends %
profits % %

A 12 14 2 5
B 14 15 2 14
C 17 13 5 10
D 18 10 1 10

© UCLES 2016 2281/12/O/N/16

 7

19 A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X
is the original equilibrium position.

The effect is illustrated in the diagram.

S3 S1
20 S2

X
15
price
($ per kilo) 10 D1

0
4 8 12 16 20 24
quantity supplied
(000 kilos)

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

equilibrium price quantity supplied

($ per kilo) (000 kilos)

A 10 16
B 13 20
C 15 16
D 20 8

20 What is involved in the construction of a Retail Price Index?

A a base year
B incomes
C price elasticity of products
D quantity supplied

21 Why is nominal Gross Domestic Product not a good measure to compare the standard of living in
a country between two years?

A It does not account for inflation.

B It does not allow for savings.
C It does not include government expenditure.
D It only compares export prices with import prices.

© UCLES 2016 2281/12/O/N/16 [Turn over

 8

22 In 2010 there was an increase in net emigration from Ireland.

What is most likely to have caused this increase?

A a decrease in job security abroad

B a decrease in wage rates abroad
C an increase in Ireland’s real GDP
D an increase in unemployment in Ireland

23 Some goods take a greater percentage of a typical household’s total spending than others.

How is this accounted for in the construction of a Retail Price Index?

A by deducting the goods and services

B by giving a weight to the goods
C by taking an average of price fluctuations during a year
D by using the price elasticity of demand for the goods

24 Which outcome is least likely to be found with greater economic development?

A A greater percentage of the population are highly educated.

B A greater percentage of the population are homeowners.
C A greater percentage of the population are old.
D A greater percentage of the population are very poor.

25 A government introduces state benefits for the unemployed and increases the top rate of income
tax to pay for the benefits.

What effect will these changes have on poverty and the tax system?

poverty tax system

A increase make it more progressive

B increase make it more regressive
C reduce make it more progressive
D reduce make it more regressive

© UCLES 2016 2281/12/O/N/16

 9

26 The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.

1995 2035
other Asia
6%
developing developing
world world
27% 50%

other US
Latin
China US Asia
America 4% 15%
11% 22% 14% W.
Africa 3% China Europe
Middle East 17% 12%
W. Europe
3% 17% E. Europe
E. Europe 19%
Japan Africa
27%
7% 8%
Latin
America
6% developed
developed world
world
Middle Japan 50%
73%
East 4%
5%

If the chart proves to be correct, what will have happened by 2035?

A Africa and the Middle East will have responsibility for the same amount of carbon emissions
in 2035 as in 1995.
B Between 1995 and 2035, the Middle East will have increased its industrialisation by as much
as Latin America.
C By 2035 the combined percentage of carbon emissions caused by Africa and Latin America
will have doubled.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.

27 What encourages international specialisation?

A a foreign exchange shortage

B diseconomies of scale
C free trade
D quotas

© UCLES 2016 2281/12/O/N/16 [Turn over

 10

28 A Japanese car manufacturer decided to produce its cars in a factory in Europe.

What would not be a reason why they might have chosen to do this?

A cheaper wage costs in Europe

B the availability of raw materials
C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency

29 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production

B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

30 The table shows components of Japan’s current account balance in trillion Yen for 2011 and
2012.

balance of balance of balance of

balance of goods
year services current transfers income
¥ trillion
¥ trillion ¥ trillion ¥ trillion

2011 –1.61 –1.76 –1.11 14.04

2012 –5.23 –2.33 –1.02 13.55

Which balance improved between 2011 and 2012?

A balance of current transfers

B balance of goods
C balance of income
D balance of services

© UCLES 2016 2281/12/O/N/16

 11

BLANK PAGE

© UCLES 2016 2281/12/O/N/16

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 2281/12/O/N/16

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2016
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3134898997*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 11 printed pages and 1 blank page.

IB16 11_2281_13/RP
© UCLES 2016 [Turn over
 2

1 What is not a factor of production?

A a $20 banknote
B an office
C a photocopier
D a secretary

2 What could be the opportunity cost of a nuclear power station?

A the running costs of the power station

B a coal-fired power station

C the current value of the power station
D the cost of building the power station

3 In 2014 private companies began to drill in areas of the country to exploit natural gas supplies
that were known to exist.

R
V
manufactured
goods S
T
U

O gas supplies

How might this decision be represented on the diagram which shows a production possibility
curve for the country?

A by a movement from R to S
B by a movement from R to V
C by a movement from S to T
D by a movement from U to V

© UCLES 2016 2281/13/O/N/16

 3

4 The market for a good was in equilibrium. A change occurred which resulted in a new equilibrium
with a higher price for the good and a lower quantity traded.

What change would have caused this?

A the demand curve moved to the left

B the demand curve moved to the right
C the supply curve moved to the left
D the supply curve moved to the right

5 The demand for cocoa beans is price-inelastic.

What is most likely to decrease as a result of an increase in demand for cocoa beans?

A price of cocoa bean products

B production of cocoa beans
C profits of cocoa bean producers
D unemployment among cocoa bean farmers

6 A government subsidises the production of pineapples.

This is likely to

A increase the price of pineapples.

B raise the costs of supplying pineapples.
C raise revenue for the government.
D cause the supply of pineapples to increase at every price.

© UCLES 2016 2281/13/O/N/16 [Turn over

 4

7 The use of cars in many cities creates negative externalities. The diagram shows the free market
equilibrium X1 and the socially efficient market equilibrium X2.

S2

S1
costs P2 X2
/ benefits
P1 X1

D
O
quantity

Using the diagram, which statement is correct?

A Socially efficient supply is S and the market price P is too high.

B Socially efficient supply is S and the market price P is too low.
C Socially efficient supply is S1 and the market price P is too high.
D Socially efficient supply is S1 and the market price P is too low.

8 What could increase the ability of a trade union to gain a pay rise for its members in a coat
factory?

A a decrease in the demand for coats

B a decrease in the number of people willing to work in the coat industry
C a decrease in the productivity of workers making coats
D a decrease in the sale of coat exports

9 What does net income mean?

A income after allowing for price changes

B income after paying regular household bills
C income less tax and government deductions
D income plus overtime payments

© UCLES 2016 2281/13/O/N/16

 5

10 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.

Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large
house.

Which is most likely to be correct?

A Nazmin spends a smaller proportion of her income than Meer.

B Nazmin saves most of her income.
C Nazmin would find it easier than Meer to borrow money.
D Nazmin has a lower disposable income than Meer.

11 The table shows how household spending changes with income.

income spending
($ per month) ($ per month)

2600 2625
2900 2925
3200 3190
3500 3275
3800 3500
4100 3725

What is the first level of income shown at which savings are positive?

A $2600 B $2900 C $3200 D $3500

12 A survey of managers in the USA revealed that most businessmen feel that a company’s
responsibility is ‘to serve the interests of owners, employees, customers and the public’.

The idea of profit maximisation, in contrast, implies that a company’s main responsibility should
be to the

A customers.
B employees.
C owners.
D public.

© UCLES 2016 2281/13/O/N/16 [Turn over

 6

13 Why is a firm in perfect competition a price taker?

A It has no information about market price.

B Its output is too small to have any effect on market equilibrium.
C There are few barriers to entry.
D There are only a few firms in the industry.

14 A firm produced 200 cars a week and employed 50 workers. A fall in demand caused the firm to
reduce its output to 160 cars a week and its labour force to 32.

What was the percentage change in the firm’s productivity?

A It fell by 20%.
B It fell by 25%.
C It increased by 20%.
D It increased by 25%.

15 A firm has fixed costs of $100 for its daily output. The table shows its daily total variable costs.

output (units) 1 2 3 4
total variable costs ($) 200 360 500 720

What can be concluded about the firm’s average total cost?

A It falls continuously.
B It is highest at output 4 units.
C It is lowest at output 3 units.
D It rises continuously.

16 A government decides to sell the monopoly supply of gas to households to a private firm.

How could the government protect the interests of households after selling a large company to
the private sector?

A by excluding all competition from foreign companies

B by imposing a tax on excess profits
C by introducing a quota system for imports of gas
D by removing price controls on gas

© UCLES 2016 2281/13/O/N/16

 7

17 A government decides to increase the rate of income tax and spend the extra revenue on
providing training colleges.

How might this be described?

A as fiscal and monetary policy

B as fiscal and supply-side policy
C as fiscal, monetary and supply-side policy
D as monetary and supply-side policy

18 A government taxes farmers $12 per kilo when they supply food on the open market where X is
the original equilibrium position.

The effect is illustrated in the diagram below.

50
S4 S3 S1
S2
40
X
price 30
($ per kilo)
20
D1
10

0
10 20 30 40 50 60
quantity supplied
(000 kilos)

What will be the new equilibrium price and quantity supplied as a result of the tax?

equilibrium price quantity supplied

($ per kilo) (000 kilos)

A 20 40
B 25 50
C 35 30
D 40 20

© UCLES 2016 2281/13/O/N/16 [Turn over

 8

19 The table shows taxes as percentages of Gross Domestic Product (GDP) for four countries.

From this information, which country had the lowest percentage of direct taxation as a percentage
of GDP?

tax on
income tax tax on tax on goods
business
% dividends % and services %
profits %

A 12 14 2 4
B 14 15 2 13
C 17 8 5 9
D 17 13 5 9

20 A newspaper reports that there has been an economic slump in an economy.

What would an economist expect the immediate effect to be?

A Production will decrease.

B Saving will decrease.
C Taxation will decrease.
D The population will decrease.

21 How is the pattern of employment likely to change when a country becomes more developed?

A from regular employment to seasonal employment

B from rural employment to urban employment
C from skilled employment to manual employment
D from tertiary employment to primary employment

22 In 2010 there was an increase in net emigration from Ireland.

What is most likely to have caused this increase?

A a decrease in job security abroad

B a decrease in wage rates abroad
C an increase in Ireland’s real GDP
D an increase in unemployment in Ireland

© UCLES 2016 2281/13/O/N/16

 9

23 The table shows some economic indicators.

Which increase in the first indicator is most likely to lead to an increase in the second indicator?

first indicator second indicator

A budget surplus consumer saving

B consumer spending unemployment
C inflation trade surplus
D productivity living standards

24 What would be most likely to cause the population to decrease if other things remain constant?

A a decrease in the birth rate

B a decrease in the death rate
C an increase in net immigration
D an increase in the fertility rate

25 Developed countries have a high and increasing proportion of their population over the age of 65.

Which economic consequence will be most likely to result from this kind of population change?

A Government transfer payments will increase.

B More facilities will be needed to retrain workers.
C There will be a rise in the economic growth rate.
D The total savings in the economy will increase.

© UCLES 2016 2281/13/O/N/16 [Turn over

 10

26 The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.

1995 2035
other Asia
6%
developing developing
world world
27% 50%

other US
Latin
China US Asia
America 4% 15%
11% 22% 14% W.
Africa 3% China Europe
Middle East 17% 12%
W. Europe
3% 17% E. Europe
E. Europe 19%
Japan Africa
27%
7% 8%
Latin
America
developed 6% developed
world world
73% Middle Japan 50%
East 4%
5%

If the chart proves to be correct, what would have happened by 2035?

A Africa will emit the least carbon.

B China will cause about a third of the emissions of all developing areas shown.
C Developed areas will have reduced their absolute amount of carbon emissions.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.

27 What encourages international specialisation?

A a foreign exchange shortage

B diseconomies of scale
C free trade
D quotas

28 A Japanese car manufacturer decided to produce its cars in a factory in Europe.

What would not be a reason why they might have chosen to do this?

A cheaper wage costs in Europe

B the availability of raw materials
C to gain external economies from skilled labour in Europe
D to increase Japanese self-sufficiency

© UCLES 2016 2281/13/O/N/16

 11

29 A government removed the quota on goods imported into the country.

What is the most likely result of this?

A a decrease in demand for domestic production

B a decrease in domestic unemployment
C a decrease in exports
D a decrease in the balance of trade deficit

30 In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar to 1.43
Singapore dollars = 1 US dollar.

How would this affect the import prices and export prices for Singapore?

prices paid by Singapore prices paid to Singapore

for imports for exports

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2016 2281/13/O/N/16

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 2281/13/O/N/16

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2017
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*5553565654*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB17 11_2281_12/FP
© UCLES 2017 [Turn over
 2

1 Economists refer to factors of production.

Which is not a factor of production?

A the fields of a farm

B the machinery in a factory
C the shares of a company
D the staff in an office

2 A government allowed a building company to construct new houses which destroyed an area
designated as an area of natural beauty.

Which concepts can be applied to this statement?

A budget surplus; public sector

B external cost; opportunity cost
C government subsidy; mixed economy
D private enterprise; budget deficit

3 The diagram shows a production possibility curve. The country is using all its resources to
produce both manufactured goods and services.

K
manufacturing
M
L
N

O services

What movement would represent an improvement of technology in manufacturing?

A K to N B L to K C N to K D N to M

4 What is the government most likely to produce in a mixed economy?

A all of the services and none of the goods

B amounts of goods and services equal to those of the private sector
C no goods and services
D some of the goods and services

© UCLES 2017 2281/12/O/N/17

 3

5 Which of the effects of economic development is an external cost?

A higher employment
B higher fixed costs
C increased production
D increased traffic congestion

6 The table illustrates the demand and supply for coffee in a market in Africa.

price per kg quantity demanded quantity supplied

($) (kg) (kg)

10 50 10
20 40 20
30 30 30
40 20 40
50 10 50

When the price rises from $20 to $30 per kg, what is the price elasticity of demand for coffee?

A 0.2 B 0.5 C 2.0 D 5.0

7 It was reported that the supply of oil would be affected by the discovery of new oil fields and
demand would be affected by rapid global economic growth.

If point X is the initial equilibrium point, which point could represent the new equilibrium?

price
S2

B S1
A
S3
X
C
D

D3
D2 D1

O
quantity

© UCLES 2017 2281/12/O/N/17 [Turn over

 4

8 What is likely to decrease the level of saving in an economy?

A an increase in the general level of income

B an increase in the number of cheap offers in shops
C a redistribution of income from poor to rich households
D a rise in the rate of interest

9 Which change will make a manufacturing company replace machines with labour to maintain the
most efficient combination of factors of production?

A The price of the product manufactured has increased.

B The productivity of labour has increased.
C The productivity of machinery has increased.
D The wages of labour have increased.

10 Although there are higher paid jobs in offices many workers stay in low-paid jobs on farms.

What might explain this in developing economies?

A Agricultural workers lack the necessary education and skills.

B Governments plan to increase indirect taxes on services.
C Manual workers are being replaced by machines.
D Workers on farms have high labour mobility.

© UCLES 2017 2281/12/O/N/17

 5

11 The diagram shows two curves. One is the demand for labour, the other is the supply of labour. A
government fixes a minimum wage (MW) that must be paid by employers.

wage

W
MW

O labour employed

What will be the effect of this minimum wage?

A fewer workers will be employed

B no change in the market equilibrium
C no worker will be paid wage W
D supply of labour will exceed demand

12 Which is an internal diseconomy of scale?

A a lack of communication in a firm

B a reduction of cost by buying in bulk
C a shortage of skilled labour in an area
D traffic congestion in a particular area

13 What distinguishes a multinational company from other types of company?

A It exports its products.

B It imports its raw materials.
C It produces outside its country of origin.
D It promotes its products in trade fairs abroad.

14 A major computer company announced that its profits had fallen below the level predicted.

What might have caused this?

A increased advertising costs that greatly improved sales

B low prices that made the company’s product competitive
C new technology that reduced costs
D reduced sales and low prices

© UCLES 2017 2281/12/O/N/17 [Turn over

 6

15 The table shows the variable costs of a firm. It can sell the units for $5 each. Its fixed costs are
$10.

quantity produced (units) 10 11 12 13

variable cost ($) 20 30 40 50

How many units will the firm produce to maximise profits?

A 10 B 11 C 12 D 13

16 What, when increased, will help a government to reduce the rate of inflation?

A budget deficit
B consumer spending
C income tax
D pensions

17 The government introduces a new tax. It adds $1 to the price of every $10 good and $2 to the
price of every $20 good.

What can be concluded about the nature of this tax?

it is a it is a it is a
direct tax specific tax progressive tax

A no no no
B no no yes
C yes yes no
D yes yes yes

© UCLES 2017 2281/12/O/N/17

 7

18 The graph shows the percentage of income paid in taxation.

Which line represents a proportional tax?

A
% income B
paid in
taxation C

O income

19 A worker earns $40 000 a year and pays 20% income tax.

He spends $5000 on electrical goods and $10 000 on a car, and pays 20% sales tax on each.

How much indirect tax does he pay?

A $3000 B $5000 C $8000 D $11 000

20 Why is the Human Development Index (HDI) often considered to be better than Gross Domestic
Product (GDP) per head as a measure of living standards?

A GDP per head excludes economic growth.

B GDP per head ignores population growth.
C HDI includes more than the production of goods and services.
D HDI is calculated by the national government.

21 A finance minister reported that the economy was experiencing inflation and economic growth.

What would be evidence that both of these had occurred?

A increased exports and increased output

B increased imports and increased income tax
C increased interest rates and increased net migration
D increased prices and increased employment

© UCLES 2017 2281/12/O/N/17 [Turn over

 8

22 The diagrams show percentage employment in different sectors in two countries.

country X country Y
percentage 70 percentage 70
employed employed
60 60

50 50

40 40

30 30

20 20

10 10

0 0
primary secondary services primary secondary services

Which statement is correct when comparing country X and country Y?

A Country X employs more workers in secondary industry than country Y.

B Country X produces more primary output than country Y.
C Country Y is more developed than country X.
D Country Y produces more secondary output than country X.

23 What would be a cause of cost-push inflationary pressure in an industry which supplies mobile
(cell) phones?

A an increase in advertising expenses for mobile phones

B an increase in export duties on mobile phones
C an increase in income taxes on wages of employees
D an increase in world demand for mobile phones

24 What is most likely to cause an increase in the population growth of a developing country?

A a decrease in immigration
B a decrease in the birth rate
C a decrease in the death rate
D a decrease in the standard of living

© UCLES 2017 2281/12/O/N/17

 9

25 The charts show the population structure of a country in 1960 and 2015.

1960 2015
male age female male age female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions

What decreased between 1960 and 2015?

A average age
B number of people below 15
C number of people over 60
D total population

26 At the start of the year a developing country had a population of 1 000 000, its birth rate was 16.0
per thousand per annum and its death rate was 8.0 per thousand per annum. At the end of the
year the population was 1 005 000.

What could explain this change in the population?

A The birth rate rose.

B The death rate fell.
C There were 3000 emigrants.
D There were 5000 immigrants.

© UCLES 2017 2281/12/O/N/17 [Turn over

 10

27 What is a benefit of tariffs?

A increased choice
B increased government revenue
C more competition
D more trade

28 Which name is given to the external value of a currency in terms of another currency?

A the balance of trade

B the exchange rate
C the relative inflation rate
D the supply of money

29 It was reported in 2011 that the United States (US) needed to achieve a lower current account
deficit.

What would help this in the short run?

A a protectionist policy
B a strong exchange rate
C increased private sector spending
D investment in the US by multinational firms

30 The table shows the number of units of foreign currency that the UK pound (UK£) could buy in
August 2012 and August 2013.

rate per UK£ rate per UK£

currency
August 2012 August 2013

Argentine peso 7.16 8.35

South African rand 12.86 14.97
euro 1.27 1.14

What can be concluded from the table about the change in currency values between 2012 and
2013?

A The Argentine peso appreciated against the UK pound.

B The Argentine peso depreciated against the euro.
C The euro depreciated against the UK pound.
D The South African rand appreciated against the euro.

© UCLES 2017 2281/12/O/N/17

 11

BLANK PAGE

© UCLES 2017 2281/12/O/N/17

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 2281/12/O/N/17

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2017
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3874337402*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB17 11_2281_13/FP
© UCLES 2017 [Turn over
 2

1 What does an economist mean by the factor of production called capital?

A goods that can be used to produce other goods

B money used to start a business
C resources that cannot be replaced
D the profits of a company

2 A government decides to spend more on defence and cannot spend money on a new airport.

Which concepts can be applied to the above statement?

A budget surplus; external cost

B factor of production; private monopoly
C public sector; opportunity cost
D trade surplus; budget deficit

3 The diagram shows a production possibility curve diagram. A country’s initial position is X.

services
R

X
T

O manufacturing

Better manufacturing processes are introduced and the country improves its tourist facilities.

What would represent this?

A S to T B T to R C X to R D X to T

4 What might be an external cost of drinking alcohol?

A the cost of a bottle of wine

B the risk of illness from drinking alcohol
C the risk of street violence
D the tax paid to the government

© UCLES 2017 2281/13/O/N/17

 3

5 What is a benefit of the market system?

A Competition ensures choice for consumers.

B Prices equal supply costs.
C Unemployment is kept to a minimum.
D Wage differentials are small.

6 The table illustrates the demand and supply for coffee in a market in Africa.

price per kg quantity demanded quantity supplied

($) (kg) (kg)

10 50 10
20 40 20
30 30 30
40 20 40
50 10 50

When the price rises from $20 to $30 per kg, what is the price elasticity of demand for coffee?

A 0.2 B 0.5 C 2.0 D 5.0

7 In recent years the price of crude oil on the world market has fallen dramatically. One cause has
been the increase in oil obtained by the new extraction process of fracking.

How is this shown on a demand and supply diagram of the market for crude oil?

A a shift in the demand curve to the left

B a shift in the demand curve to the right
C a shift in the supply curve to the left
D a shift in the supply curve to the right

8 What is the best example of specialisation?

A a diversified engineering company

B a general repairs handyman
C a self-sufficient, non-trading country
D an old person’s helper and care assistant

© UCLES 2017 2281/13/O/N/17 [Turn over

 4

9 Which workers are most likely to gain the highest increase in wages from a pay rise of 2%?

A airline pilots
B farm workers
C nurses
D shop assistants

10 A female accountant in a private firm earns $80 per hour; a male Professor of Finance in a
government university earns $40 per hour. Each works the same number of hours.

What could explain the difference in earnings?

A It is difficult to measure the output per hour in each profession.

B Pay in the private sector is profit-related but is not in the public sector.
C Qualifications of accountants are lower than those of Professors of Finance.
D Women are generally given preference over men in professional jobs.

11 Each of the four sets of descriptions in the table refers to a person applying for a job.

Which person is likely to receive higher pay?

A skilled experienced younger worker

B skilled inexperienced older worker
C unskilled experienced older worker
D unskilled inexperienced younger worker

12 Which is an internal diseconomy of scale?

A a lack of communication in a firm

B a reduction of cost by buying in bulk
C a shortage of skilled labour in an area
D traffic congestion in a particular area

© UCLES 2017 2281/13/O/N/17

 5

13 Private multinational clothing companies operate in developing countries to reduce their average
costs of production.

Which feature of developing countries attracts them for this purpose?

A In developing countries, clothing workers receive low wages.

B In developing countries, foreign managers are allowed to pay no income tax.
C In developing countries, multinationals are allowed to take profits out of the country.
D In developing countries, there is a large market for fashion clothing.

14 A major computer company announced that its profits had fallen below the level predicted.

What might have caused this?

A increased advertising costs that greatly improved sales

B low prices that made the company’s product competitive
C new technology that reduced costs
D reduced sales and low prices

15 An entrepreneur buys a workshop for $10 000 to make picture frames. In the first year he spent
$40 000 on materials and employed two workers. He paid the workers for each frame produced
with a total cost of $30 000. He bought a vehicle to deliver the frames for $10 000.

What were his total variable costs?

A $40 000 B $70 000 C $80 000 D $100 000

16 What, when increased, will help a government to reduce the rate of inflation?

A budget deficit
B consumer spending
C income tax
D pensions

17 Which policy is most likely to increase the level of economic activity?

A increasing the exchange rate

B increasing the rate of interest
C reducing government spending
D reducing the general tax level

© UCLES 2017 2281/13/O/N/17 [Turn over

 6

18 The graph shows the percentage of income paid in taxation.

Which line represents a proportional tax?

A
% income B
paid in
taxation C

O income

19 A government collects the following revenue in a year.

$m
customs duties 100
taxes on goods 200
taxes on income 400
taxes on services 300

What is the amount of indirect tax revenue?

A $200 m B $400 m C $500 m D $600 m

20 Why is the Human Development Index (HDI) often considered to be better than Gross Domestic
Product (GDP) per head as a measure of living standards?

A GDP per head excludes economic growth.

B GDP per head ignores population growth.
C HDI includes more than the production of goods and services.
D HDI is calculated by the national government.

21 What may cause an immediate increase in the working population?

A a higher birth rate

B a higher death rate
C a higher fertility rate
D a higher rate of net immigration

© UCLES 2017 2281/13/O/N/17

 7

22 The diagrams show percentage employment in different sectors in two countries.

country X country Y
percentage 70 percentage 70
employed employed
60 60

50 50

40 40

30 30

20 20

10 10

0 0
primary secondary services primary secondary services

Which statement is correct when comparing country X and country Y?

A Country X employs more workers in secondary industry than country Y.

B Country X produces more primary output than country Y.
C Country Y is more developed than country X.
D Country Y produces more secondary output than country X.

23 What is likely to fall when the rate of unemployment falls?

A business confidence
B consumer spending
C government revenue
D government welfare payments

24 The birth rate and death rate in a country are the same.

What is likely to happen if there is a decrease in the birth rate, while the death rate and migration
remain the same?

A population structure will remain the same

B population will decrease
C the standard of living will decrease
D the working population will increase

© UCLES 2017 2281/13/O/N/17 [Turn over

 8

25 The charts show the population structure of a country in 1960 and 2015.

1960 2015
male age female male age female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions

What decreased between 1960 and 2015?

A average age
B number of people below 15
C number of people over 60
D total population

© UCLES 2017 2281/13/O/N/17

 9

26 The table shows the Consumer Prices Index (CPI) for selected cities for August 2015 relative to
New York, USA at 100.

city CPI

Geneva, Switzerland 137

Oslo, Norway 105
Sydney, Australia 89
Singapore 88
Istanbul, Turkey 48
Johannesburg, South Africa 48
Lima, Peru 44

What can be concluded from the table?

A Geneva had the highest average price level.

B Living standards were highest in Lima.
C Singapore was more expensive than Oslo.
D The annual rate of inflation was the same in Istanbul and Johannesburg.

27 What is a benefit of tariffs?

A increased choice
B increased government revenue
C more competition
D more trade

28 What is an increase in the value of an exchange rate of a currency in a floating system called?

A appreciation

B depreciation
C devaluation
D revaluation

© UCLES 2017 2281/13/O/N/17 [Turn over

 10

29 A developing economy has a surplus on its trade in goods of $75 billion and a deficit on its trade
in services of $25 billion, while its current account is in overall balance.

Which values for net income (primary income) and net transfers (secondary income) result in the
current account being in balance?

net income net transfers

A deficit of $20 billion surplus of $120 billion

B deficit of $30 billion deficit of $70 billion
C surplus of $35 billion surplus of $15 billion
D surplus of $40 billion deficit of $90 billion

30 What policy would encourage greater international specialisation?

A the promotion of industrial diversification

B the protection of new businesses
C the reduction of tariffs
D the subsidising of service industries

© UCLES 2017 2281/13/O/N/17

 11

BLANK PAGE

© UCLES 2017 2281/13/O/N/17

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 2281/13/O/N/17

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2018
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3432016562*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB18 11_2281_12/FP
© UCLES 2018 [Turn over
 2

1 Which factor of production is not represented in the list shown?

bananas a factory goats a risk taking investor

A capital
B enterprise
C labour
D land

2 What do economies aim to achieve in tackling the economic problem of scarcity?

A equal balance between public and private sectors

B equal reward for equal effort
C increased competition in the use of resources
D optimum allocation of finite resources

3 The diagram shows a country’s production possibility curve (PPC).

capital goods

Z
X

O
consumer goods

Which statement is correct?

A A movement from X to Y shows a decrease in efficiency in the economy.

B A movement from X to Z shows a discovery of new resources in the economy.
C A movement from Y to Z shows resources are being diverted from capital goods to consumer
goods.
D A movement from Z to Y shows an increase in efficiency in the economy.

© UCLES 2018 2281/12/O/N/18

 3

4 China, the world’s second largest economy, is becoming more like a market economy.

Which policy would contribute directly to such a change?

A abolishing state control completely

B encouraging consumers to spend more and save less
C reducing exports and encouraging more imports
D transferring wealth from the state sector to the private sector

5 The diagram shows the market for a firm making clothing with an initial equilibrium of X.

What will be the new equilibrium if there is a successful advertising campaign by a rival firm and
an increase in workers’ wages?

S2
price
S1
S3
B

A C
X

D
D3
D1
D2
O quantity

6 Coal production in the UK has declined in recent years. One reason given for this is that the
social cost of coal production is too high.

What best describes the social cost of coal production?

A all the benefits of coal production minus all the costs of coal production
B the cost of the environmental damage caused by coal production
C the cost to the government of subsidising the coal industry
D the private costs of coal production plus the external costs of coal production

© UCLES 2018 2281/12/O/N/18 [Turn over

 4

7 The table shows the demand and supply for spices in a market in Africa.

price quantity quantity

per kg (US$) demanded (kg) supplied (kg)

10 50 10
20 40 20
30 30 30
40 20 40

When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED)
for spices?

A 0.25 B 0.5 C 1.0 D 2.0

8 A central bank acts as a lender of last resort especially in times of financial crisis.

What is the purpose of this function?

A to cover credit card debts of consumers

B to provide liquidity to the banking system
C to remove failing banks from the financial system
D to safeguard the profits of the banking system

9 What will cause the level of savings in an economy to rise?

A a fall in investment
B a fall in real wages
C a rise in income taxes
D a rise in interest rates

10 What could affect the size of the labour force in an economy?

A the existence of a trade union

B the government’s immigration policy
C the quality of university graduates
D the ratio of male to female employees

© UCLES 2018 2281/12/O/N/18

 5

11 Petrol (fuel) retailers in a country have noticed a sharp increase in sales in August when many
people take their holidays.

Why might this take place?

A Consumers’ demand curve for petrol shifts to the left in August.

B Consumers’ demand curve for petrol shifts to the right in August.
C Oil refineries increase their output in August.
D Travel companies increase their hotel prices in August.

12 What is correct for firms in perfect competition?

A They achieve economies of scale.

B They are price takers.
C They make use of non-price competition.
D They produce differentiated products.

13 A film production company purchases a group of cinemas.

Of what is this an example?

A backward vertical integration

B conglomerate merger
C forward vertical integration
D horizontal integration

14 The table shows a firm’s average revenue and average cost at different levels of output.

When all output is sold, which level of output gives maximum profit?

output average average

(units) revenue (US$) cost (US$)

A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18

© UCLES 2018 2281/12/O/N/18 [Turn over

 6

15 Which statement about total fixed cost is correct?

A It falls as output increases.

B It is calculated by adding total cost and total variable cost.
C It is calculated by dividing total cost by output.
D It must be paid even if output is zero.

16 A government aims to reduce unemployment through a supply-side policy measure.

Which measure would it use?

A It would increase government spending.

B It would increase tariffs on imported goods and services.
C It would introduce retraining schemes.
D It would reduce the rate of interest.

17 When is a government said to balance its budget?

A when all goods and services are taxed equally

B when economic growth is the same in all regions of the economy
C when its total income equals its total expenditure
D when total exports equal total imports

18 The table shows the amount of tax paid as income rises in four countries, A–D.

Which country has a progressive tax?

amount of tax (US$) paid on income of:

10 000 20 000 30 000 40 000 50 000

A 2 000 4 000 6 000 8 000 10 000

B 2 000 6 000 12 000 18 000 25 000
C 4 000 4 500 5 000 5 500 6 000
D 4 000 7 000 9 000 10 000 12 000

© UCLES 2018 2281/12/O/N/18

 7

19 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?

first aim second aim

A full employment price stability

B high economic growth full employment
C price stability stable balance of payments
D stable balance of payments more even distribution of income

20 Economic growth is usually measured by the annual change in

A consumer spending.
B gross domestic product.
C the output of the manufacturing and construction industries.
D the retail price index (RPI).

21 Four groups who are affected by changing economic conditions are creditors, debtors, exporters
and importers.

Which pair is most likely to be disadvantaged by a high rate of inflation?

A creditors and exporters

B creditors and importers
C debtors and exporters
D debtors and importers

© UCLES 2018 2281/12/O/N/18 [Turn over

 8

22 The diagram shows the rate of unemployment and the periods of recession in a country between
1978 and 2012.

12

unemployment 10
rate %
8
key
6 recession years

0
1980 1990 2000 2010

What can be concluded from the diagram?

A Each recession lasted for more than two years.

B Recessions occurred at regular intervals.
C The unemployment rate peaked in a recession period.
D The unemployment rate rose during recession periods.

23 A country experienced its usual August increase in the rate of unemployment. Unfortunately this
was followed by the loss of jobs resulting from the regular downturn in global economic activity.

Which types of unemployment occurred?

first type of second type of

unemployment unemployment
(August) (global downturn)

A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional

24 What will lead to an ageing population if other factors remain unchanged?

A a fall in the birth rate

B a rise in the death rate
C an increase in the age of retirement
D an increase in the state pension

© UCLES 2018 2281/12/O/N/18

 9

25 Which change is most likely to be expected when an economy is developing?

A birth rates increase rapidly

B poverty rates fall
C unemployment levels rise
D the primary sector overtakes the secondary sector

26 Developing countries are sometimes given aid by charities and foreign governments.

Which aid programme would be least likely to lead to long-term economic growth?

A the building of an irrigation system

B the construction of a new airport
C the distribution of gifts of food
D the training of technical staff

27 It is estimated that in 2016 the Olympic Games in Rio, Brazil attracted over 600 000 foreign
visitors.

What is likely to have been the result of this number of visitors?

A a depreciation of Brazil’s currency

B a fall in Brazil’s rate of inflation
C an increase in the Brazilian government’s budget deficit
D a reduction in Brazil’s deficit on the current account of its balance of payments

28 What is most likely to happen if South Korea builds a factory in Switzerland that becomes
profitable?

A South Korea’s imports of goods will decrease.

B South Korea’s investment income will increase.
C Switzerland’s trade balance in goods will worsen.
D Switzerland’s trade balance in services will improve.

© UCLES 2018 2281/12/O/N/18 [Turn over

 10

29 A country has experienced a devaluation of its currency.

What are the likely results of the devaluation?

imports exports

A price decreases value decreases

B price decreases value increases
C price increases quantity decreases
D price increases quantity increases

30 The table shows the tariffs imposed on imported tropical fruit in the European Union (EU)
according to the degree of processing.

EU tariffs
(% rate)

fresh tropical fruit 8.0

canned tropical fruit 11.3
bottled tropical fruit drinks 23.6

What might be the reason for this pattern of tariffs?

A to encourage imports of processed products into the EU

B to encourage tropical countries’ exports
C to help manufacturing industries in the EU
D to help tropical countries develop manufacturing industries

© UCLES 2018 2281/12/O/N/18

 11

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© UCLES 2018 2281/12/O/N/18

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 2281/12/O/N/18

 Cambridge International Examinations
Cambridge Ordinary Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2018
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*2512345505*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB18 11_2281_13/FP
© UCLES 2018 [Turn over
 2

1 Which example of a factor of production in the fishing industry is correct?

factor example

A capital charges on loan for fishing boat

B enterprise salaries of fish warehouse managers
C labour profits of fish shop owners
D land fish in the sea

2 Hospital services are provided by the government and paid for through taxation. People cannot
always get the treatment they require because of long waiting lists.

Of what is this an example?

A external cost
B market system
C perfectly inelastic supply
D scarcity

3 The diagram shows a production possibility curve (PPC) for an economy.

output of R
W Z

Y
X

O
output of S

Which change on the diagram could represent an increase in unemployment?

A W to X B W to Y C Y to X D Y to Z

4 Who determines what goods and services are produced in a market economy?

A consumers
B employees
C government
D trade unions

© UCLES 2018 2281/13/O/N/18

 3

5 The diagram shows the demand for and the supply of air travel.

price of S
air tickets
$

D2

D1
O
number of
passengers

What could cause a shift of the demand curve from D1 to D2?

A an increase in airline costs

B an increase in airport taxes
C an increase in incomes
D an increase in worldwide terrorism

6 In 2015, the world price of oil fell rapidly due to changes in the conditions of demand and supply.
One change was the use of a new method of extraction called fracking.

Which event would not have contributed to the fall in prices?

A China’s growth slowed leading to lower oil imports.

B Saudi Arabia increased the volume of its oil supplies.
C UK protest groups prevented the introduction of fracking projects.
D USA became more self-sufficient in oil due to fracking and reduced imports.

7 The table shows the demand and supply for spices in a market in Africa.

price quantity quantity

per kg (US$) demanded (kg) supplied (kg)

10 50 10
20 40 20
30 30 30
40 20 40

When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED)
for spices?

A 0.25 B 0.5 C 1.0 D 2.0

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 4

8 What is a function of a country’s stock exchange?

A to act as lender of last resort to commercial banks

B to provide a market for the purchase and sale of shares
C to provide short-term loans for investment
D to set interest rates within the country

9 What might cause an increase in the earnings of a doctor in a government health service?

A an increasing number of doctors graduate from university each year

B an increasing number of people need health care
C the government spends less on the nation’s health services
D the population becomes more aware of healthy eating

10 What would put a trade union in a strong bargaining position to negotiate higher wages for its
members in a particular firm?

A The demand for the product produced by the workers has an inelastic demand.
B The economy is experiencing high unemployment.
C The proportion of the firm’s workers in the union is low.
D Wage costs are a high proportion of total costs for firms in the industry.

11 What is most likely to encourage the immediate purchase of an expensive item such as a new
car?

A anticipating a fall in the rate of inflation

B expecting interest rates to fall
C making it easier to obtain a loan
D needing to plan for unexpected emergencies

12 The table shows characteristics of a market.

What are the characteristics of a perfectly competitive market?

number number role

product
of buyers of sellers of firm

A identical many many price taker

B identical one many price maker
C similar many many price taker
D unique few few price maker

© UCLES 2018 2281/13/O/N/18

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13 A computer chip manufacturer expands by taking over a computer chip designer.

Of what is this an example?

A backward vertical integration

B diversifying integration
C forward vertical integration
D horizontal integration

14 The table shows a firm’s average revenue and average cost at different levels of output.

When all output is sold, which level of output gives maximum profit?

output average average

(units) revenue (US$) cost (US$)

A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18

15 Which statement about total fixed cost is correct?

A It falls as output increases.

B It is calculated by adding total cost and total variable cost.
C It is calculated by dividing total cost by output.
D It must be paid even if output is zero.

16 What is most likely to be an example of a progressive tax?

A customs duties on imported goods

B excise duties on cigarettes
C income tax
D sales tax

17 When is a government said to balance its budget?

A when all goods and services are taxed equally

B when economic growth is the same in all regions of the economy
C when its total income equals its total expenditure
D when total exports equal total imports

© UCLES 2018 2281/13/O/N/18 [Turn over

 6

18 A government aims to boost production and increase sales of steel by subsidising private
producers. A subsidy equal to W – Z per tonne is paid.

According to the diagram, what would be the value of sales of steel after the subsidy?

price supply of steel

(per tonne W supply after subsidy
of steel)
Z
P
P1

demand for steel

O Q Q1
quantity
(tonnes of steel)

A OP × OQ B OP1 × OQ1 C WZ × OQ D WZ × OQ1

19 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?

first aim second aim

A full employment price stability

B high economic growth full employment
C price stability stable balance of payments
D stable balance of payments more even distribution of income

20 When is a recession said to occur?

A Economic growth in the economy falls for at least two consecutive quarters.
B Gross domestic product (GDP) falls for at least two consecutive quarters.
C The current account of the balance of payment is in deficit for at least two consecutive
quarters.
D The government experiences a budget deficit for at least two consecutive quarters.

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 7

21 Which country is suffering from the worst deflation?

annual change in indicator

real GDP
unemployment
inflation per capita
rate
% (US$)
%
%
A –5 +3 –3
B –2 –2 –2
C +2 –3 +1
D +12 +10 +3

22 The diagram shows the rate of unemployment and the periods of recession in a country between
1978 and 2012.

12

unemployment 10
rate %
8
key
6 recession years

0
1980 1990 2000 2010

What can be concluded from the diagram?

A Each recession lasted for more than two years.

B Recessions occurred at regular intervals.
C The unemployment rate peaked in a recession period.
D The unemployment rate rose during recession periods.

© UCLES 2018 2281/13/O/N/18 [Turn over

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23 A country experienced its usual August increase in the rate of unemployment. Unfortunately this
was followed by the loss of jobs resulting from the regular downturn in global economic activity.

Which types of unemployment occurred?

first type of second type of

unemployment unemployment
(August) (global downturn)

A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional

24 What is the most likely effect of raising the retirement age in a country?

A government spending increases

B net immigration increases
C spending on pensions increases
D working population increases

25 What describes absolute and relative poverty?

absolute poverty relative poverty

A when there are low birth rates, high death when there are high birth rates, low death
rates, and high levels of migration rates, and low levels of migration
B when a person does not have enough when a person earns less than
money for food, shelter, and clothes others in the same society
C when everyone has an when half the population has an
income below US$1.90 a day income of US$1.90 a day
D when necessities cannot be afforded when luxuries cannot be afforded

26 Developing countries are sometimes given aid by charities and foreign governments.

Which aid programme would be least likely to lead to long-term economic growth?

A the building of an irrigation system

B the construction of a new airport
C the distribution of gifts of food
D the training of technical staff

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27 A government imposes a limit of 2 million on the number of smartphones imported into the
country.

Which term is given to this limitation?

A ban
B embargo
C quota
D tariff

28 What is most likely to happen if South Korea builds a factory in Switzerland that becomes
profitable?

A South Korea’s imports of goods will decrease.

B South Korea’s investment income will increase.
C Switzerland’s trade balance in goods will worsen.
D Switzerland’s trade balance in services will improve.

29 In July 2015, Australia’s balance of trade with the rest of the world was –2809 billion Australian
dollars. In January 2016 it was –3294 billion Australian dollars.

What describes Australia’s balance of trade over this period?

balance of trade trend

A deficit improving
B deficit worsening
C surplus improving
D surplus worsening

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30 The table shows the tariffs imposed on imported tropical fruit in the European Union (EU)
according to the degree of processing.

EU tariffs
(% rate)

fresh tropical fruit 8.0

canned tropical fruit 11.3
bottled tropical fruit drinks 23.6

What might be the reason for this pattern of tariffs?

A to encourage imports of processed products into the EU

B to encourage tropical countries’ exports
C to help manufacturing industries in the EU
D to help tropical countries develop manufacturing industries

© UCLES 2018 2281/13/O/N/18

 11

BLANK PAGE

© UCLES 2018 2281/13/O/N/18

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 2281/13/O/N/18

 Cambridge Assessment International Education
Cambridge Ordinary Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2019
45 minutes
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*6331859278*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

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.

This document consists of 10 printed pages and 2 blank pages.

IB19 11_2281_12/FP
© UCLES 2019 [Turn over
 2

1 Which statement about factors of production is correct?

A Capital is the amount of money borrowed from a bank.

B Labour is output made by an employee.
C Land includes commercially grown rice crops.
D Profit is the reward for enterprise.

2 The diagram shows two production possibility curves.

output of 100
capital goods

X Y
50

0
0 50 80 90
output of
consumer goods

Which statement about the movement from point X to point Y is correct?

A Demand for consumer goods has risen.

B The opportunity cost for producing consumer goods has risen.
C There has been an increase in productivity in consumer goods production.
D There has been an inward shift in the production possibility curve.

© UCLES 2019 2281/12/O/N/19

 3

3 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 a cricket match

B watching the annual town parade
C visiting relatives
D losing his Saturday free time

4 Which pair of economic institutions can be found in a market economy?

A local government and charities

B monopolies and commercial banks
C nationalised industries and partnerships
D stock exchange and public corporations

5 What suggests that there is market failure?

A high producer profits

B high retail prices
C lack of competition
D low levels of investment

6 What can cause the supply curve for a product to shift to the right?

A an increase in demand for the product

B an increase in government subsidies to producers
C an increase in indirect taxes on the product
D an increase in the costs of production

© UCLES 2019 2281/12/O/N/19 [Turn over

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7 A railway company increases ticket prices by 10% for travel between 06:00 and 09:00, causing a
reduction in demand by 2%. After 09:00 it reduces ticket prices by 5%, resulting in a 7% increase
in demand.

What is the price elasticity of demand in response to these price changes?

between 06:00
after 09:00
and 09:00

A elastic elastic
B elastic inelastic
C inelastic elastic
D inelastic inelastic

8 What is a disadvantage of being a specialist skilled worker?

A Career opportunities are abundant.

B Earnings are related to the level of skill.
C It may be difficult to find work locally.
D Labour supply is elastic and plentiful.

9 What is not normally a function of the central bank of a country?

A acting as lender of last resort

B issuing notes and coins
C operating the government’s monetary policy
D setting the government’s budget

© UCLES 2019 2281/12/O/N/19

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10 The table shows how three people (X, Y and Z) spend their income.

person X person Y person Z

food, clothing and housing 35% 50% 20%

entertainment and leisure 25% 20% 40%
luxury goods 40% 30% 40%

For these three people, what is the most likely order of income, from highest income to lowest
income?

A X → Y→ Z

B Y→Z→X

C Z→X→Y

D Z→Y→X

11 A musician has a choice of playing for an orchestra in either Germany or England.

Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?

Incomes and cost of living in Germany compared with those in England

pre-tax (gross) income after-tax (net) income cost of living

A higher higher higher

B higher lower lower
C lower higher higher
D lower higher lower

12 Which type of business organisation is necessarily in the public sector of the economy?

A multinational company
B public limited company
C public corporation
D sole trader

© UCLES 2019 2281/12/O/N/19 [Turn over

 6

13 Which combination of characteristics correctly describes a monopoly?

barriers to entry economies of scale

A high possible
B high impossible
C low possible
D low impossible

14 The table shows the sales of cold drinks made by a company in the UK in 2016 and 2017.
Demand for cold drinks is influenced by changes in the temperature. In 2016 the sales followed
the usual seasonal pattern.

sales 2016 sales 2017

month
(thousand cans) (thousand cans)

April 300 290

May 400 350
June 550 270
July 570 490
August 620 590

In which month of 2017 was the usual pattern disturbed?

A May
B June
C July
D August

© UCLES 2019 2281/12/O/N/19

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15 A firm producing bicycles has the following costs at different levels of output.

total fixed costs total variable costs

output
($) ($)

10 300 800
20 300 1500
30 300 3300

What happens to the average total cost over this range of output?

A It falls continuously.
B It falls then rises.
C It rises continuously.
D It rises then falls.

16 Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive
when comparing high-income and low-income purchasers?

A High-income purchasers pay a higher percentage of their income in tax.

B High-income purchasers pay a lower percentage of their income in tax.
C Low-income purchasers pay a lower percentage of their income in tax.
D Low-income purchasers and high-income purchasers pay the same percentage of their
income in tax.

17 The government has an important role in mixed economies.

Which function would it not perform?

A distributing dividends from profits of state-owned enterprises

B employing workers to collect taxes
C investing in transport infrastructure projects
D producing goods in public corporations

18 Which combination of policy measures would be effective in reducing the effects of a recession?

A a reduction in interest rates and a reduction in income tax

B a reduction in interest rates and an increase in income tax
C an increase in interest rates and a reduction in income tax
D an increase in interest rates and an increase in income tax

© UCLES 2019 2281/12/O/N/19 [Turn over

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19 How would government spending on education be classified?

fiscal monetary supply-side

policy policy policy

A no no yes
B no yes no
C yes no yes
D yes yes no

20 Which increase is most likely to cause a rise in the output of an economy?

A hyperinflation
B income taxes
C interest rates
D investment

21 Why was the Human Development Index (HDI) introduced as a measure of the standard of
living?

A Education and healthcare are important contributors to the standard of living.

B GDP per head only measures development.
C Inequality can only be measured by HDI.
D Literacy rates are not an effective measure of the standard of living.

22 During periods of high unemployment across the entire labour force, the highest unemployment
rate in an economy is often in the 16–19 year-old age group.

Which statement explains why 16–19 year-olds may find it difficult to find a job?

A The incentive to earn an income is lower for that age group.

B Their wages are lower than those of adults.
C They lack both work experience and the necessary skills.
D They prefer leisure activities to long working hours.

© UCLES 2019 2281/12/O/N/19

 9

23 Venezuela, a leading world oil producer, has experienced hyperinflation of over 400% per annum
in recent years.

How does hyperinflation affect an economy?

prices effect

A fluctuate up and down consumers are uncertain about future price levels
B fluctuate up and down consumers can anticipate future price levels
C rise very rapidly value of fixed assets remains stable
D rise very rapidly money has limited worth as a medium of exchange

24 What is most likely to increase as a country becomes more developed?

A average household income

B average size of family
C infant mortality rate
D the proportion of income spent on food

25 In Botswana, better healthcare has meant that birth rates have been falling faster than death
rates. Also the number of children born, on average, to each woman has declined from 6.4 to 3.2.

What may be concluded from this information?

A Government spending on education will need to increase.

B Medical improvements have resulted in falling infant mortality rates.
C There will be a decline in income for each person working.
D There will, in the long run, be an increase in the working population.

26 The table shows the percentage share of GDP held by the richest 20% and poorest 20% of the
population in each country.

Which country had the greatest extremes of income and poverty?

country richest 20% poorest 20%

A Ghana 41.7% 8.4%

B Nigeria 55.7% 4.4%
C Senegal 48.2% 6.4%
D South Africa 64.8% 2.9%

© UCLES 2019 2281/12/O/N/19 [Turn over

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27 What would cause a favourable change in the Kenyan trade in services (invisible) account?

A A Kenyan company wins a contract to transport exports from Uganda.

B A Kenyan tea company increases its exports.
C A Kenyan trade delegation promoting coffee sales visits India.
D A Zambian company increases its exports to Kenya.

28 What is a disadvantage of trade protection of manufactured goods?

A It can lead to retaliation from trading partners.

B It encourages infant industries to grow.
C It increases demand for domestic manufactured goods.
D It reduces outflows of currencies to pay for imports.

29 What would cause a rise in the deficit on the current account of the balance of payments?

A a fall in foreign direct investment into the country

B a fall in interest earned on overseas investment by the country
C a fall in the value of imported manufactured goods into the country
D a rise in the revenue earned from tourism in the country

30 What would reduce the volume of international trade in the world economy?

A a German bank making a loan to a Nigerian company

B a Japanese car manufacturer establishing a factory in the Czech Republic
C the Canadian government introducing quotas on Malaysian electronics products
D the Swedish government granting aid to Somalia

© UCLES 2019 2281/12/O/N/19

 11

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© UCLES 2019 2281/12/O/N/19

 12

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 2281/12/O/N/19

 Cambridge O Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2020
45 minutes

You must answer on the multiple choice answer sheet.

*7665702730*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
 Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_2281_12/FP
© UCLES 2020 [Turn over
 2

1 What causes economic agents to make choices?

A limited needs and wants

B the existence of finite resources
C the existence of free goods
D the market mechanism

2 Which combination of a factor of production and its factor income is not correct?

factor of
factor income
production

A capital interest
B enterprise profit
C labour dividends
D land rent

3 The diagram shows a production possibility curve (PPC) for a country. The country moved from
position X to position Y on the PPC.

capital
goods
X

O consumer goods

What is the most likely reason for this change?

A Firms have decided to increase investment in technology.

B New economic resources have been discovered in the country.
C The government has brought about an increase in living standards.
D The government has encouraged long-term economic growth.

© UCLES 2020 2281/12/O/N/20

 3

4 What is an example of a macroeconomic aim?

A to create and maintain full employment

B to improve efficiency in the manufacturing sector of the economy
C to provide consumers with greater information when buying goods and services
D to encourage greater occupational mobility of labour

5 Why might a market economy fail to achieve the best use of scarce resources?

A Consumers may lack information about which good to buy.

B Demerit goods are underconsumed.
C Public goods are overconsumed.
D Most resources are owned by the government.

6 The diagram shows the global market for copper with an equilibrium point of X.

Which point represents the new equilibrium after the copper producers’ costs increase and there
is rapid global economic growth?

price S2
S1
A S3

D X B

C
D2 D1 D3

O quantity

© UCLES 2020 2281/12/O/N/20 [Turn over

 4

7 The diagram shows the supply curve for a good.

price
($)
S
12
10

0 100 140
quantity
(units)

What is the price elasticity of supply when the price rises from $10 to $12?

A 0.5 B 0.75 C 1.4 D 2.0

8 Which task is not a function of a trade union?

A agreeing the minimum number to be employed on a particular job

B deciding on the level of a national minimum wage
C negotiating working hours and conditions of work
D providing legal advice on unfair dismissal

9 What does not have an effect on wages in a free market economy?

A danger levels in the workplace

B government regulations
C the number of people willing and able to work
D the years of training required

© UCLES 2020 2281/12/O/N/20

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10 The table shows how household spending changes with income.

income spending
($ per month) ($ per month)

3000 3150
3300 3375
3600 3500
3900 3825
4200 4050
4500 4275

What is the lowest level of income at which savings are positive?

A $3000 B $3600 C $3900 D $4200

11 What can a central bank increase in order to reduce consumer borrowing?

A commercial bank deposits

B government spending
C the exchange rate
D the rate of interest

12 The table shows the output and total costs of a small firm.

output total costs

(units) ($)

0 50 000
1 000 100 000
5 000 400 000
10 000 600 000

What is the average fixed cost of producing 10 000 units?

A $5 B $6 C $55 D $60

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13 A firm has fixed costs of $1000. The table shows the variable cost at different levels of output.

output (units) 1 2 3 4
variable cost ($) 100 190 270 350

If the goods are sold for $500 each, how much profit will be made from the sale of 4 units?

A $650 B $1000 C $1650 D $2000

14 Firm X supplies bricks and decides to merge with firm Y that also supplies bricks.

Which form of merger has taken place?

A backward vertical
B conglomerate
C forward vertical
D horizontal

15 Who owns a public sector organisation?

A individuals
B shareholders
C specialist managers
D the government

16 What are two aims that a government normally pursues when managing the performance of the
whole economy?

A to encourage an increase in production and to prevent high inflation

B to ensure no one is unemployed and to reduce exports
C to give everyone equal incomes and to increase government revenue
D to protect the environment and to reduce interest rates

17 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

© UCLES 2020 2281/12/O/N/20

 7

18 The table shows the tax that an individual would pay at different levels of disposable income.

disposable
10 000 20 000 30 000 40 000
income ($)
tax ($) 0 2000 4000 6000

Which type of tax is shown in the table?

A corporation tax
B indirect tax
C progressive tax
D regressive tax

19 The government wants to reduce the consumption of cigarettes.

Which policy would be most likely to do this?

A increasing a subsidy on cigarettes

B increasing income tax
C increasing interest rates
D increasing the indirect tax on cigarettes

20 Which group should not be included in the measurement of unemployment?

A redundant unskilled workers seeking alternative work

B seasonal agricultural workers in out-of-season periods
C students over 18 years continuing with full-time education
D those who have left school and cannot get a job

© UCLES 2020 2281/12/O/N/20 [Turn over

 8

21 The table shows the rates of unemployment and real GDP growth for an economy in 2014 and
2018.

2014 2018
rate of
3 10
unemployment (%)
rate of real GDP
4 –2
growth (%)

Which combination of policy measures would be most effective in returning the economy to the
2014 level of economic activity?

A a decrease in direct taxes and an increase in the rate of interest

B a decrease in government expenditure and an increase in the rate of interest
C an increase in direct taxes and a decrease in the rate of interest
D an increase in government expenditure and a decrease in the rate of interest

22 An economy is experiencing rising prices.

Which government policy will help reduce consumer expenditure?

A introducing compulsory saving for income earners

B investing more in building infrastructure
C issuing more banknotes and coins
D reducing indirect taxes

23 Some goods take a greater percentage of a typical household’s total spending than others.

How is this accounted for in the construction of a consumer prices index?

A by deducting the goods

B by giving a weight to the goods
C by taking an average of price fluctuations during a year
D by using the price elasticity of demand for the goods

© UCLES 2020 2281/12/O/N/20

 9

24 In countries with absolute poverty, low incomes can start a process that keeps incomes low.

What are the stages of this process?

A low incomes  low consumption  low prices  low output  low incomes

B low incomes  low government spending  high taxation  low employment  low
incomes

C low incomes  low investment  high profits  low dividends  low incomes

D low incomes  low saving  low investment  low productivity  low incomes

25 Which factor in the world’s low-income countries limits their economic development?

A balance of payments surpluses

B high saving ratios
C large inflows of foreign investment
D rapid population growth

26 The table shows the percentage employment in the primary, secondary and service sectors in
four countries.

Which country is likely to be the most developed?

percentage employment
primary secondary service
country
sector sector sector

A 10 35 55
B 20 60 20
C 35 35 30
D 40 40 20

27 What causes the birth rate to fall in a country?

A Fewer women work.

B Infant mortality rates rise.
C Medical supplies and healthcare improve.
D The optimum population increases.

© UCLES 2020 2281/12/O/N/20 [Turn over

 10

28 A country wishes to increase a current account surplus on the balance of payments.

Which action would it take?

A abolish an import quota

B increase import tariffs
C remove export subsidies
D tax export producers

29 The table shows a country’s exports and imports.

$m

exports of goods 200

imports of goods 190
exports of services 35
imports of services 38

What was the country’s balance of trade in goods and services?

A a deficit of $7 million
B a deficit of $13 million
C a surplus of $7 million
D a surplus of $13 million

30 The diagram shows the value of a country’s exports and imports of goods over five years.

30
$m 25
key
20
exports of goods
15
imports of goods
10

0
1 2 3 4 5

year

Between which two years did the country have an increase in the value of imports and an
improvement in its balance of trade in goods?

A 1 and 2 B 2 and 3 C 3 and 4 D 4 and 5

© UCLES 2020 2281/12/O/N/20

 11

BLANK PAGE

© UCLES 2020 2281/12/O/N/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 2281/12/O/N/20

 Cambridge O Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2020
45 minutes

You must answer on the multiple choice answer sheet.

*6411205223*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
 Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_2281_13/FP
© UCLES 2020 [Turn over
 2

1 Why do consumers have to make choices when spending their income?

A Advertising encourages consumer spending.

B Consumers have unlimited incomes.
C Consumer wants cannot all be satisfied with their income.
D Not all products will be attractive to consumers.

2 What is the key role of an entrepreneur?

A inventor
B risk taker
C shareholder
D worker

3 The diagram shows the production possibility curve (PPC) of an economy producing at point X.

capital 100
goods
X
70

0
0 180 240
consumer
goods

What would be the opportunity cost of moving from point X to produce only consumer goods?

A 60 units of consumer goods

B 70 units of capital goods
C 100 units of capital goods
D 180 units of consumer goods

© UCLES 2020 2281/13/O/N/20

 3

4 Economics is divided into two: microeconomics and macroeconomics.

statement 1 When the price of oil falls there is an expansion in demand.

statement 2 The Organization of the Petroleum Exporting Countries (OPEC) can

influence the price of oil.

Which combination correctly describes these two statements?

statement 1 statement 2

A macroeconomic statement macroeconomic statement

B macroeconomic statement microeconomic statement
C microeconomic statement macroeconomic statement
D microeconomic statement microeconomic statement

5 What is a disadvantage of a market economic system?

A Entrepreneurs lack incentives to produce what consumers want.

B Government intervention will reduce the efficiency of firms.
C Market dominance by firms can lead to higher prices.
D There is underproduction of demerit goods.

6 The diagram shows the demand curve for coffee in the US.

price

P1

P2
demand for coffee

O Q1 Q2 quantity

Why did the quantity demanded move from Q1 to Q2?

A Coffee became cheaper.

B Incomes rose in the US.
C There was a successful advertising campaign by coffee retailers.
D The price of substitutes for coffee rose.

© UCLES 2020 2281/13/O/N/20 [Turn over

 4

7 In an African country with large areas of tropical desert the price elasticity of demand for salt is
highly inelastic. This will result in greater consumer expenditure on salt when price changes from
P1 to P2.

Which diagram illustrates this situation?

A B

price price
of salt of salt

P2 P2
P1 P1
D

D
O quantity O quantity

C D

price price
of salt of salt

P2 P2
P1 D P1

D
O quantity O quantity

8 In which occupation would wages tend to increase?

A in those where a worker is paid weekly

B in those where a worker needs less training
C in those where there is an excess demand for labour
D in those where work becomes less dangerous

9 Which row shows a characteristic of money and a function of money?

characteristic function

A acceptability medium of exchange

B cash measure of value
C divisibility portability
D store of value bank deposit

© UCLES 2020 2281/13/O/N/20

 5

10 The table shows how household spending changes with income.

income spending
($ per month) ($ per month)

3000 3150
3300 3375
3600 3500
3900 3825
4200 4050
4500 4275

What is the lowest level of income at which savings are positive?

A $3000 B $3600 C $3900 D $4200

11 What can a central bank increase in order to reduce consumer borrowing?

A commercial bank deposits

B government spending
C the exchange rate
D the rate of interest

12 The table shows the total cost of firm X at each level of output.

output total cost

0 3
1 5
2 6
3 9

At which level of output does total variable cost exceed total fixed cost?

A 0 B 1 C 2 D 3

13 A firm has fixed costs of $1000. The table shows the variable cost at different levels of output.

output (units) 1 2 3 4
variable cost ($) 100 190 270 350

If the goods are sold for $500 each, how much profit will be made from the sale of 4 units?

A $650 B $1000 C $1650 D $2000

© UCLES 2020 2281/13/O/N/20 [Turn over

 6

14 Which combination is usually found in a monopoly?

A many buyers and many sellers

B many buyers and single seller
C single buyer and many sellers
D single buyer and single seller

15 What is usually considered to be an advantage to a firm of using division of labour?

A high labour turnover

B increased mechanisation
C movement of labour between tasks
D need for quality control

16 What are two aims that a government normally pursues when managing the performance of the
whole economy?

A to encourage an increase in production and to prevent high inflation

B to ensure no one is unemployed and to reduce exports
C to give everyone equal incomes and to increase government revenue
D to protect the environment and to reduce interest rates

17 What is most likely to be the responsibility of a central government?

A the provision of immigration officials at an airport

B the provision of security cameras in a shopping centre
C the provision of security staff at a bank
D the provision of ticket inspectors on a train

18 A government decreased the tax on all goods produced in its country.

What is the most likely consequence of this?

A a decrease in exports
B an increase in imports
C an increase in production
D a worsening of the balance of trade in goods

© UCLES 2020 2281/13/O/N/20

 7

19 Which government policy measure would cause an increase in a country’s supply of labour?

A increasing unemployment benefits

B lowering interest rates
C raising income tax
D raising the age of retirement

20 Due to a rise in the number of retired people, there has been increased demand for some
government expenditure.

Which type of government expenditure is most likely to be directly affected?

A defence
B health services
C re-training grants
D street lighting

21 The diagrams show Italy’s unemployment rate and GDP per head.

Italy’s unemployment rate Italy’s GDP per head

13 39 000
% $
38 000
11
37 000
9 36 000
35 000
7
34 000
5 33 000
2000 2005 2010 2015 2000 2005 2010 2015
year year

When do Italy’s unemployment rate and GDP per head rise at the same time?

A 2000–2001
B 2007–2008
C 2009–2010
D 2014–2015

© UCLES 2020 2281/13/O/N/20 [Turn over

 8

22 An economy is experiencing rising prices.

Which government policy will help reduce consumer expenditure?

A introducing compulsory saving for income earners

B investing more in building infrastructure
C issuing more banknotes and coins
D reducing indirect taxes

23 Some goods take a greater percentage of a typical household’s total spending than others.

How is this accounted for in the construction of a consumer prices index?

A by deducting the goods

B by giving a weight to the goods
C by taking an average of price fluctuations during a year
D by using the price elasticity of demand for the goods

24 One of the indicators of living standards is the Human Development Index (HDI).

What is not taken into consideration when calculating the HDI?

A education
B income per head
C level of savings
D life expectancy

25 Which factor in the world’s low-income countries limits their economic development?

A balance of payments surpluses

B high saving ratios
C large inflows of foreign investment
D rapid population growth

© UCLES 2020 2281/13/O/N/20

 9

26 The table shows the percentage employment in the primary, secondary and service sectors in
four countries.

Which country is likely to be the most developed?

percentage employment
primary secondary service
country
sector sector sector

A 10 35 55
B 20 60 20
C 35 35 30
D 40 40 20

27 What would not be included in the current account of the balance of payments?

A dividends earned from a firm in another country

B imports of TVs from another country
C purchase of a house in another country
D rents paid to owners of land in another country

28 What is most likely to discourage international specialisation and trade for an economy?

A decreasing labour supply

B decreasing transport costs
C increasing oil prices
D increasing trade barriers

29 Many low-income countries rely on multinational companies (MNCs) to provide economic

development.

What is a disadvantage of this for the low-income country?

A Local firms close because MNCs are more efficient.

B New production techniques are introduced.
C The balance of payments may improve.
D The MNCs have to pay taxes on their profits.

© UCLES 2020 2281/13/O/N/20 [Turn over

 10

30 The diagram shows the value of a country’s exports and imports of goods over five years.

30
$m 25
key
20
exports of goods
15
imports of goods
10

5
0
1 2 3 4 5

year

Between which two years did the country have an increase in the value of imports and an
improvement in its balance of trade in goods?

A 1 and 2 B 2 and 3 C 3 and 4 D 4 and 5

© UCLES 2020 2281/13/O/N/20

 11

BLANK PAGE

© UCLES 2020 2281/13/O/N/20

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 2281/13/O/N/20

 Cambridge O Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2021
45 minutes

You must answer on the multiple choice answer sheet.

*0521980067*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_2281_12/RP
© UCLES 2021 [Turn over
 2

1 To help reduce the price of oil, new supplies are needed. However, objectors oppose exploration
of new sites because of the environmental damage it may cause.

Why is this statement an example of the basic economic problem?

A Oil is a limited resource.

B Oil is expensive.
C The exploration involves demand and supply.
D There are external costs involved in production.

2 What is an opportunity cost for a consumer spending money on a holiday?

A the potential interest earned if the holiday money had been saved
B the price paid for an air ticket to the holiday destination
C the rubbish created during the holiday which affects the local community
D the satisfaction that the consumer gains from the holiday

3 Helium is a gas that is limited in supply because it takes thousands of years to form. The US
government holds 35% of the world’s supply of helium and has been selling its stocks. Helium is
essential in medical scanners. It is also used for party balloons, which is a wasteful alternative
use of a valuable good.

Which two concepts apply to this statement?

A demand and supply, government subsidy

B excess demand, resource allocation
C opportunity cost, private monopoly
D public sector, factors of production

4 Which combination of characteristics describes a public good?

A excludable and non-rival in consumption

B excludable and rival in consumption
C non-excludable and non-rival in consumption
D non-excludable and rival in consumption

5 What is an advantage of a market economy?

A Equilibrium market price clears the market.

B Producers and consumers have the same aims.
C The government has no need to intervene in markets.
D The lowest price possible is always charged.

© UCLES 2021 2281/12/O/N/21

 3

6 What is a macroeconomic aim of a government?

A balance of payments stability

B deflation
C income inequality
D unemployment

7 An economy relies on potash to make fertiliser. A new deposit of potash is discovered.

Which diagram shows this change in the market for potash?

A B
S1 S1
price price

D2 D1
D1 D2
O quantity O quantity

C D
S2 S1
price price
S1 S2

D1 D1

O quantity O quantity

© UCLES 2021 2281/12/O/N/21 [Turn over

 4

8 The table shows the quantity demanded at different prices.

quantity
price $
demanded

6 3
5 4
4 5
3 7
2 9

For which fall in price is the demand price-inelastic?

A from $6 to $5
B from $5 to $4
C from $4 to $3
D from $3 to $2

9 Which government policy will increase productivity?

A decreasing the number of training programmes

B encouraging labour-intensive production
C promoting good industrial relations
D reducing private sector investment

© UCLES 2021 2281/12/O/N/21

 5

10 The diagrams show the wage rates of cleaners (OWc) and nurses (OWn).

cleaners nurses
wage S wage S
rate rate
Wn
M M
Wc

D D
O employment O employment

What is the result if a national minimum wage of OM is introduced?

wage rate of wage rate of

cleaners nurses

A fall rise
B no change fall
C rise fall
D rise no change

11 Which result of increased specialisation in a firm is an advantage for the firm, but a disadvantage
for some of the workers in the firm?

A greater mechanisation
B higher labour productivity
C higher skill levels
D longer training times

© UCLES 2021 2281/12/O/N/21 [Turn over

 6

12 The diagram shows the imposition of a subsidy on a product supplied by a firm.

S1
price
S2
G H
F J

E K

D
O L M
quantity

Which area represents the total revenue of the firm including the subsidy?

A EGHK B OEKM C OFJL D OGHM

13 The diagram shows the total cost curve for a firm.

costs TC

O
quantity

What can be concluded about the firm?

A It has no fixed costs.

B It has no variable costs.
C Its average fixed cost increases.
D Its average variable cost is constant.

© UCLES 2021 2281/12/O/N/21

 7

14 The table shows the average total cost of a firm over a range of output.

output average total

(units) cost ($)

1 10
2 8
3 6
4 5
5 7
6 9

What happens after 4 units are produced?

A The firm experiences management problems.

B The firm gains the benefits of merging with another firm.
C The firm pays lower interest rates to banks.
D The firm receives significant discounts from bulk buying.

15 Two car manufacturers agree to merge.

Which outcome would be a disadvantage for customers?

A increased capital for research and development

B lower average costs through economies of scale
C reduced range of vehicles produced
D use of a wider range of marketing information

16 An economy recorded a second month of deflation.

What does this mean?

A It was facing a recession.

B Price levels were falling.
C Total demand was rising.
D Unemployment was falling.

© UCLES 2021 2281/12/O/N/21 [Turn over

 8

17 What is a cause of demand-pull inflation?

A a surplus of skilled labour

B higher government expenditure
C higher tax rates
D lower net exports

18 What is the consequence of economic growth for individuals and for the economy?

individuals the economy

A increase in absolute poverty increase in inflation

B increase in average incomes increase in government tax revenue
C increase in the variety of goods and services reduction in exports
D increase in unemployment reduction in the standard of living

19 The table shows a government’s receipts from taxation.

$m

air passenger duty 10

tax on firms’ profits 100
import duty 75
income tax 200
inheritance tax 50
sales tax (VAT) 300

What is the total amount of revenue raised by indirect taxes?

A $300 m B $350 m C $385 m D $435 m

20 Which supply-side policy measure would help to match the skills of workers to job vacancies?

A encouraging the modernisation of factories

B offering retraining to unemployed workers
C reducing taxes to provide incentives to work
D replacing government enterprises with private enterprises

© UCLES 2021 2281/12/O/N/21

 9

21 How is the rate of inflation measured?

A by calculating the change in the price of goods and services from one year to the next
B by calculating the real value of all output of goods and services in an economy
C by calculating the total number of people willing and able to work but cannot find work
D by calculating the total value of exports minus the total value of imports

Due to an issue with Question 22, the question has been removed from the question paper.

23 Which combination of policy measures is most likely to increase the level of employment?

A decrease general taxation and decrease the rate of interest

B decrease general taxation and increase the rate of interest
C increase general taxation and decrease the rate of interest
D increase general taxation and increase the rate of interest

24 Poverty in households may be defined in relative terms.

What indicates relative poverty?

A falling below society’s expected standard of living

B income level required to meet basic needs
C lack of access to clean water
D living on less than $2 a day

25 What is the effect on an economy of net emigration of people aged 20–40?

A a more mobile labour force

B an ageing population
C higher government tax revenue
D rising house prices

© UCLES 2021 2281/12/O/N/21 [Turn over

 10

26 The table shows statistics for four countries, A–D.

Which country has the lowest standard of living?

average annual
growth rate of population density life expectancy real GDP per head
population (per square kilometre) (years) ($)
(%)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

27 A country specialises in the production of steel, toys and textiles.

What is a disadvantage of specialisation for the country’s workers?

A They cannot afford to buy products from other countries.

B They could become structurally unemployed if global demand changes.
C They have to learn a variety of skills.
D They have too much choice which wastes their time.

28 The diagram shows China’s trade with Brazil for two years.

China’s exports key

year 1
China’s imports year 2

0 1 2 3 4 5
$ billion

What happened to China’s trade balance with Brazil between year 1 and year 2?

A It experienced a falling surplus.

B It experienced a rising deficit.
C It moved from deficit to surplus.
D It moved from surplus to deficit.

© UCLES 2021 2281/12/O/N/21

 11

29 The US imposed tariffs on cars and motorcycles from Germany.

What is the effect of these tariffs?

A decrease in inflation in the US

B decrease in trade between the US and Germany
C increase in profits of car and motorcycle producers from Germany
D increase in standards of living in the US and in Germany

30 What is an immediate effect for a country of a fall in its foreign exchange rate?

A a fall in the money supply

B an increase in purchasing power
C cheaper imports
D more competitive exports

© UCLES 2021 2281/12/O/N/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 2281/12/O/N/21

 Cambridge O Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2021
45 minutes

You must answer on the multiple choice answer sheet.

*3486669544*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 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 multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_2281_13/RP
© UCLES 2021 [Turn over
 2

1 To help reduce the price of oil, new supplies are needed. However, objectors oppose exploration
of new sites because of the environmental damage it may cause.

Why is this statement an example of the basic economic problem?

A Oil is a limited resource.

B Oil is expensive.
C The exploration involves demand and supply.
D There are external costs involved in production.

2 Which diagram shows an opportunity cost by movement from point X to point Y?

A B

capital capital
goods Y goods Y
X
X

O consumer O consumer
goods goods

C D
Y Y
capital capital
goods X goods X

O consumer O consumer
goods goods

3 Helium is a gas that is limited in supply because it takes thousands of years to form. The US
government holds 35% of the world’s supply of helium and has been selling its stocks. Helium is
essential in medical scanners. It is also used for party balloons, which is a wasteful alternative
use of a valuable good.

Which two concepts apply to this statement?

A demand and supply, government subsidy

B excess demand, resource allocation
C opportunity cost, private monopoly
D public sector, factors of production

© UCLES 2021 2281/13/O/N/21

 3

4 What is an example of a public good?

A healthcare
B street lights
C unemployment benefits
D vaccinations

5 Why does a government provide certain goods and services in a mixed economic system?

A The government always provides goods more cheaply than private firms.
B The government considers only private costs and benefits.
C The government provides goods to prevent the development of monopolies.
D The government provides public goods because private firms cannot charge for them.

6 What is a microeconomic decision?

A a central bank reducing interest rates

B a gas firm reducing its prices
C a government increasing income tax
D a government increasing the national minimum wage

7 The diagram shows a shift in the supply curve for New Zealand’s airlines from S1 to S2.

S1
price S2

O quantity

What is the cause of this shift?

A a decrease in the costs of New Zealand’s airlines

B a decrease in the number of people wanting to fly to New Zealand
C an increase in the price of train and bus travel in New Zealand
D an increase in the tax on air travel in New Zealand

© UCLES 2021 2281/13/O/N/21 [Turn over

 4

8 The diagram shows the demand curve for rice.

2.5
price
$ per kilo
2.0

1.5

1.0
D
0
0 10 20 2730 40
quantity
(kilos)

What is the price elasticity of demand (PED) for rice as price increases from $1.0 to $1.5 per kilo?

A 0
B 1
C less than 1
D greater than 1

9 The table shows the output of cakes from four bakeries, A–D.

Which bakery has the highest labour productivity?

labour output
(hours per day) (cakes per day)

A 10 40
B 40 640
C 50 750
D 100 500

10 What is an advantage of labour-intensive production and what is an advantage of

capital-intensive production?

labour-intensive capital-intensive

A each item can be individually made average costs of production are low
B keeps unemployment down fixed costs are high
C workers have pride in the product machinery may break down
D workers have to work hard there is a ready market for the product

© UCLES 2021 2281/13/O/N/21

 5

11 The market equilibrium wage rate is $10 per hour.

What explains why the wage rate actually paid is $12 per hour?

A Employers are competing for labour.

B The government sets a minimum wage of $12 per hour.
C There is a surplus of skilled labour.
D Workers have received unpaid training.

12 A firm imports 20 high quality bicycles into the US at a cost of $3000 each. It sells them all,
making a profit of $1000 per bicycle.

What is the firm’s average revenue?

A $1000 B $2000 C $3000 D $4000

13 The diagram shows total cost (TC), total fixed cost (TFC) and total variable cost (TVC).

W
costs
X

O
output

Which costs are shown by W, X and Y?

W X Y

A TC TFC TVC
B TC TVC TFC
C TFC TC TVC
D TVC TC TFC

© UCLES 2021 2281/13/O/N/21 [Turn over

 6

14 The table shows output and total cost of a firm with four production methods, A–D.

Which method causes diseconomies of scale as the firm expands production from 1000 to 3000
units?

output (units)
1000 2000 3000
total cost ($)

A 8 000 10 000 12 000

B 8 000 14 000 27 000
C 10 000 16 000 21 000
D 10 000 20 000 30 000

15 A clothing manufacturer expands by taking over a clothing retailer.

Which type of merger is this?

A backward vertical
B conglomerate
C forward vertical
D horizontal

16 Which economic situation exists when there are two consecutive quarters (six months) of
negative economic growth?

A budget surplus
B current account deficit
C inflation
D recession

17 Why might measures to reduce unemployment also make inflation rise?

A They encourage cheap imports.

B They increase demand.
C They reduce firms’ costs.
D They require wages to fall.

© UCLES 2021 2281/13/O/N/21

 7

18 Which change affecting an economy’s labour market promotes economic growth?

A increasing trade union strike action

B lowering the age of retirement
C reducing training of workers
D removing immigration controls

19 The table shows a government’s receipts from taxation.

$m

air passenger duty 10

tax on firms’ profits 100
import duty 75
income tax 200
inheritance tax 50
sales tax (VAT) 300

What is the total amount of revenue raised by indirect taxes?

A $300 m B $350 m C $385 m D $435 m

20 Which statement relating to supply-side policies is correct?

A They aim to increase aggregate demand.

B They aim to increase the long-run capacity of the economy.
C They aim to reduce cyclical unemployment.
D They aim to work in the short term.

21 What is always indicated by an increase in the Consumer Prices Index (CPI)?

A an increase in consumer spending in an economy

B an increase in living standards
C an increase in the average cost of living
D an increase in the purchasing power of money

© UCLES 2021 2281/13/O/N/21 [Turn over

 8

Due to an issue with Question 22, the question has been removed from the question paper.

23 Which combination of policy measures is most likely to increase the level of employment?

A decrease general taxation and decrease the rate of interest

B decrease general taxation and increase the rate of interest
C increase general taxation and decrease the rate of interest
D increase general taxation and increase the rate of interest

24 What could reduce poverty?

A greater economic growth

B less spending on education
C more regressive taxation
D privatisation of hospitals

25 The table shows information about four countries, A–D.

Which country is most likely to have a falling population?

access to a cost of bringing

healthy diet up children

A falling falling
B falling rising
C rising falling
D rising rising

© UCLES 2021 2281/13/O/N/21

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26 The table shows statistics for four countries, A–D.

Which country has the lowest standard of living?

average annual
growth rate of population density life expectancy real GDP per head
population (per square kilometre) (years) ($)
(%)

A 1.9 19 46 190
B 2.7 2 58 1700
C 3.7 45 59 210
D 4.2 89 44 190

27 Malaysia and Indonesia specialise in the production of palm oil.

What is a disadvantage of specialisation?

A concentration of labour in the activity in which it is most productive

B creation of jobs to meet world demand
C reliance on trade with other countries for other goods
D rising palm oil prices

28 The diagram shows China’s trade with Brazil for two years.

China’s exports key

year 1
China’s imports year 2

0 1 2 3 4 5
$ billion

What happened to China’s trade balance with Brazil between year 1 and year 2?

A It experienced a falling surplus.

B It experienced a rising deficit.
C It moved from deficit to surplus.
D It moved from surplus to deficit.

© UCLES 2021 2281/13/O/N/21 [Turn over

 10

29 What is a reason for trade protection?

A to reduce a deficit on the current account of the balance of payments

B to reduce a surplus on the current account of the balance of payments
C to reduce economic growth
D to reduce inflation

30 What is an immediate effect for a country of a fall in its foreign exchange rate?

A a fall in the money supply

B an increase in purchasing power
C cheaper imports
D more competitive exports

© UCLES 2021 2281/13/O/N/21

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© UCLES 2021 2281/13/O/N/21

 12

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 2281/13/O/N/21

 Cambridge O Level

ECONOMICS 2281/12
Paper 1 Multiple Choice October/November 2022
45 minutes

You must answer on the multiple choice answer sheet.

*9140754546*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• 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 multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_2281_12/RP
© UCLES 2022 [Turn over
 2

1 The Chinese government is concerned about the level of poverty and the need for more
resources in low-income regions of the country. As a result, it is increasing its expenditure in
those regions and reducing it in high-income regions.

Which economic concept does this government policy illustrate?

A diseconomies of scale
B market forces
C opportunity cost
D specialisation

2 An airline needs people and equipment. These can be divided into factors of production.

What is allocated to its correct factor of production?

people or equipment factor of production

A aircraft capital
B airline owners labour
C computer network land
D pilots enterprise

3 The diagram shows a production possibility curve (PPC) and a number of output combinations for
tea and coffee.

output
of tea W
(tonnes)

U X

V Y

Z
O
output of coffee
(tonnes)

Which combinations of tea and coffee could the economy currently produce?

A U, V, W, X B U, V, X, Y C U, V, X, Z D V, X, Y, Z

© UCLES 2022 2281/12/O/N/22

 3

4 What is a disadvantage of a market economy?

A Consumer choice is ignored.

B Consumers may lack information.
C Government subsidies encourage efficiency.
D There is no incentive to work.

5 Workers are awarded a pay rise but do not increase their productivity. Workers do not buy the
product that they produce.

How would this change be shown on a demand and supply diagram for the product?

A The demand curve will shift to the left.

B The demand curve will shift to the right.
C The supply curve will shift to the left.
D The supply curve will shift to the right.

6 The diagrams show changes in market conditions.

Which diagram shows a shortage at price P?

A B

S S1
price price S2
P
P

D1 D2 D
O Q1 Q2 O Q1 Q2
quantity quantity

C D

S1 S1
price price S2
S2
P P

D D1 D2
O Q O Q1 Q2
quantity quantity

© UCLES 2022 2281/12/O/N/22 [Turn over

 4

7 What is the definition of price elasticity of demand?

A the responsiveness of quantity demanded of a product to a change in income of consumers

B the responsiveness of quantity demanded of a product to a change in the price of a
complementary product
C the responsiveness of quantity demanded of a product to a change in the price of that
product
D the responsiveness of quantity demanded of a product to a change in the price of a
substitute product

8 To reduce traffic congestion, a government decides to build a new road. There is a toll charge on
the new road.

What is the main purpose of this government intervention?

A to address the problem of market failure

B to discourage people from using public transport
C to ensure the supply of transport through the free market
D to obtain revenue from the levy of a toll

9 Which organisations can directly fund the growth of firms?

central commercial
governments
banks banks

A no yes no
B no yes yes
C yes no no
D yes no yes

10 Which advantage do coins have that makes them more suitable than paper banknotes to act as
money?

A They are more divisible.

B They are more durable.
C They are more portable.
D They are more recognisable.

© UCLES 2022 2281/12/O/N/22

 5

11 Which statement about different income groups is correct?

A High-income groups do not need to borrow money.

B High-income groups save less money than low-income groups.
C Low-income groups find it easier to borrow than high-income groups.
D Low-income groups save a smaller percentage of their income than high-income groups.

12 A musician has a choice of playing for an orchestra in either Germany or England.

Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?

incomes and cost of living in Germany compared with those in England

pre-tax (gross) income after-tax (net) income cost of living

A higher higher higher

B higher lower lower
C lower higher higher
D lower higher lower

13 The central bank of a country decreases interest rates to help the economy out of a recession.

How is this decrease in interest rates most likely to affect the levels of saving in and borrowing
from the country’s commercial banks?

saving borrowing

A decreases decreases
B decreases increases
C increases increases
D increases decreases

14 Which effect of increased specialisation by firms and workers is most likely to cause problems for
an economy?

A better product quality

B greater interdependence
C higher productivity
D improved resource allocation

© UCLES 2022 2281/12/O/N/22 [Turn over

 6

15 Which statement is correct when comparing small firms with large firms?

A Small firms are more able to adapt to changes in market conditions.

B Small firms are more able to reduce competition through barriers to entry.
C Small firms benefit from lower cost per unit from economies of scale.
D Small firms have higher total fixed costs and lower average fixed costs.

16 Which pair is included in a government’s budget?

A consumption and factor income

B exports and imports
C investments and savings
D public expenditure and tax revenue

17 The table shows the rate of income tax paid at different income levels.

level of income rate of income tax

$ %

30 000 20
40 000 30
50 000 40

What describes this type of tax?

A indirect
B progressive
C proportional
D regressive

18 A central bank reduces interest rates.

What would not be a consequence of this action?

A a benefit for borrowers receiving loans

B a fall in the international value of the currency
C a reduction in inflation
D an increase in GDP

© UCLES 2022 2281/12/O/N/22

 7

19 The diagram shows a country’s economic growth rate over a 5-year period.

6
economic 5
growth rate
% 4
3
2
1
0
year 1 year 2 year 3 year 4 year 5
–1
–2

What can be concluded from the diagram?

A Output fell throughout the period.

B Output was at its highest in year 1.
C Output was at its highest in year 5.
D Output was at its lowest in year 4.

20 An individual decides to employ a professional decorator rather than buying the materials and
decorating her house herself.

Why would this decision cause GDP to rise?

A The activity would be recorded as income for the decorator.

B The individual would have more leisure time.
C The professional decorator can purchase materials at a discount.
D The professional decorator would work less efficiently than the individual.

21 What is the definition of the unemployment rate?

A the benefits and allowances paid by the government to people without a job
B the number of people without a job but seeking a job as a percentage of the labour force
C the rate of change in the number of people who have not worked over the last year
D the total number of people not working when the data was calculated

© UCLES 2022 2281/12/O/N/22 [Turn over

 8

22 What is most likely to cause inflation?

A a reduction in exports
B a reduction in government spending
C an increase in the rate of interest
D an increase in trade union power

23 The table shows changes in economic growth and inflation.

Which changes are likely to be the result of rising unemployment?

economic
inflation
growth

A falling falling
B falling rising
C rising falling
D rising rising

24 The table shows the percentage changes in earnings and consumer prices for four countries in
one year.

Which country is likely to have experienced the greatest increase in real income during the year?

country earnings consumer prices

A France +6.5 +3.5

B Germany +4.0 +4.0
C Japan +4.0 –1.0
D UK +6.5 –2.0

25 What is included in the Human Development Index (HDI)?

environmental
life expectancy years of schooling
sustainability

A no no yes
B no yes no
C no yes yes
D yes yes yes

© UCLES 2022 2281/12/O/N/22

 9

26 A fall in the level of absolute poverty can be best achieved by reducing

A government unemployment benefits.

B income tax.
C the number of homeless people.
D the rate of inflation.

27 The table shows some details from a country’s balance of payments. The country has no
secondary income (current transfers).

item $ million

exports of goods 280

imports of goods 350
exports of services 110
imports of services 60
net primary income – 40

What is the country’s balance on its current account?

A a deficit of $60 million

B a deficit of $160 million
C a surplus of $20 million
D a surplus of $760 million

28 Vietnamese companies buy insurance from companies in the US.

How will this transaction be recorded in the Vietnamese balance of payments?

section credit / debit

A trade in goods credit

B trade in services credit
C trade in services debit
D current transfers debit

29 What is a restriction on the quantity of imports called?

A dumping
B quota
C subsidy
D tariff

© UCLES 2022 2281/12/O/N/22 [Turn over

 10

30 Which combination of factors would attract a multinational company (MNC) producing

smartphones to operate in a low-income country?

A high economic growth rate and supply of cheap labour

B low corporation tax and competitive local market
C limited supply of skilled workers and cheap land
D strict employment laws and high import duties

© UCLES 2022 2281/12/O/N/22

 11

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© UCLES 2022 2281/12/O/N/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 2281/12/O/N/22

 Cambridge O Level

ECONOMICS 2281/13
Paper 1 Multiple Choice October/November 2022
45 minutes

You must answer on the multiple choice answer sheet.

*5344079369*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• 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 multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_2281_13/FP
© UCLES 2022 [Turn over
 2

1 The Chinese government is concerned about the level of poverty and the need for more
resources in low-income regions of the country. As a result, it is increasing its expenditure in
those regions and reducing it in high-income regions.

Which economic concept does this government policy illustrate?

A diseconomies of scale
B market forces
C opportunity cost
D specialisation

2 An airline needs people and equipment. These can be divided into factors of production.

What is allocated to its correct factor of production?

people or equipment factor of production

A aircraft capital
B airline owners labour
C computer network land
D pilots enterprise

© UCLES 2022 2281/13/O/N/22

 3

3 The diagram shows production possibility curves (PPC) for an economy that produces two goods,
sweet potatoes and onions. Initially the economy is operating on PPC1.

sweet
potatoes

PPC2
PPC1

O onions

Which combination of changes could shift PPC1 to PPC2?

change 1 change 2
A a fuller use of existing a reduction in the price
resources in onion farms of sweet potatoes
B a reduction in the price a larger population
of onions in the country
C an increase in the price of an increased consumer
sweet potatoes preference for onions
D an increase in the training a greater use of technology
of onion farmers on onion farms

4 A government decides to move towards a market economy by selling state-owned enterprises.

What is a possible motive for this?

A to create greater income equality

B to extend government control of the economy
C to increase efficiency of production
D to take account of external costs

© UCLES 2022 2281/13/O/N/22 [Turn over

 4

5 The diagrams show the demand curves for the only two buyers in a market.

price price

O quantity O quantity

What will be the shape of the market demand curve for the good?

A B

price price

O quantity O quantity

C D

price price

O quantity O quantity

© UCLES 2022 2281/13/O/N/22

 5

6 The shoppers in a country become worried about a sudden and dangerous rise in air pollution
and so buy more food in case they have to stay at home. As the air pollution spreads,
supermarket staff fall ill and the supermarkets struggle to keep their shelves full of food.

X was the initial equilibrium in the market for food in supermarkets.

What will be the new equilibrium as a result of the above situation?

S3 S1 S2
price A
of food

D X B

D3 D1 D2
O
quantity of food

7 Which factor can influence the price elasticity of supply of a product?

A the degree of necessity of the product

B the level of spare capacity in the industry
C the price of substitutes
D the proportion of income spent on the product

8 What is a possible consequence of market failure?

A Consumers have complete information about goods.

B Disequilibrium continues in the market.
C Merit goods are under-supplied.
D Some goods are no longer demanded.

9 Which organisations can directly fund the growth of firms?

central commercial
governments
banks banks

A no yes no
B no yes yes
C yes no no
D yes no yes

© UCLES 2022 2281/13/O/N/22 [Turn over

 6

10 Which advantage do coins have that makes them more suitable than paper banknotes to act as
money?

A They are more divisible.

B They are more durable.
C They are more portable.
D They are more recognisable.

11 Which statement about different income groups is correct?

A High-income groups do not need to borrow money.

B High-income groups save less money than low-income groups.
C Low-income groups find it easier to borrow than high-income groups.
D Low-income groups save a smaller percentage of their income than high-income groups.

12 A musician has a choice of playing for an orchestra in either Germany or England.

Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?

incomes and cost of living in Germany compared with those in England

pre-tax (gross) income after-tax (net) income cost of living

A higher higher higher

B higher lower lower
C lower higher higher
D lower higher lower

13 A trade union states that its members have experienced a loss in real income over the past five
years.

What must have happened for this to be true?

A Income tax rates have increased.

B Prices have risen.
C Savings have fallen.
D Wages adjusted for inflation have fallen.

© UCLES 2022 2281/13/O/N/22

 7

14 A firm provides a personal service to its customers. It prefers to remain labour-intensive rather
than changing to more capital-intensive production.

Which aspect of remaining labour-intensive would support this choice?

A Customer satisfaction is higher.

B Production costs are higher.
C Production is less flexible.
D Quality of customer service is worse.

15 Why might one profitable oil-drilling firm wish to take over another profitable oil-drilling firm?

A to bring its suppliers into the same firm

B to get closer to its customers to increase sales
C to reduce its costs per unit of output
D to reduce the amount of corporation tax it paid

16 A government decides to boost the economy through the use of a budget deficit.

Which target should it adopt to achieve this aim?

A Direct taxation should exceed indirect taxation.

B Export earnings should exceed import expenditure.
C Government savings should exceed government investment.
D Government spending should exceed government revenue.

17 A government decides to use a fiscal policy measure.

What is an example of this?

A increasing the exchange rate

B reducing the power of trade unions
C reducing the rate of corporation tax
D setting a low interest rate

18 What would the government reduce to decrease inflation?

A income tax
B its foreign exchange rate
C the money supply
D the rate of interest

© UCLES 2022 2281/13/O/N/22 [Turn over

 8

19 A country wishes to encourage economic growth.

Which policy measure is most likely to achieve this aim?

A increasing interest rates

B increasing spending on education
C reducing the maximum permitted hours of work
D reducing spending on infrastructure

20 How does a country usually measure its Gross Domestic Product?

A by calculating the total value of all goods and services produced within the economy
B by measuring the average prices of a basket of goods and services throughout the country
C by subtracting government expenditure from government revenue
D by surveying the number of people who are out of work but willing and able to work

21 What is the most likely consequence of increased unemployment?

A higher output
B higher government budget deficit
C higher self-esteem
D higher inflation

22 Why is deflation undesirable for an economy?

A It reduces business confidence.

B It reduces export competitiveness.
C It reduces purchasing power.
D It reduces real incomes.

23 Why does a government provide public goods?

A Public goods are always used by everyone.

B Public goods are not profitable for private firms.
C Public goods can only be provided by monopolies.
D Public goods create large external costs.

© UCLES 2022 2281/13/O/N/22

 9

24 The table shows the percentage changes in earnings and consumer prices for four countries in
one year.

Which country is likely to have experienced the greatest increase in real income during the year?

country earnings consumer prices

A France +6.5 +3.5

B Germany +4.0 +4.0
C Japan +4.0 –1.0
D UK +6.5 –2.0

25 Which combination of government actions is most likely to raise the living standards of lower
income groups in an economy?

spending on personal tax-free

indirect tax
healthcare allowance

A increase increase decrease

B increase decrease increase
C reduce increase decrease
D reduce increase increase

26 What is the usual effect of net immigration for a high-income country?

A an increase in the size of the labour force

B a rise in the average age of the population
C lower economic growth
D reduced demand for housing

© UCLES 2022 2281/13/O/N/22 [Turn over

 10

27 The table shows some details from a country’s balance of payments. The country has no
secondary income (current transfers).

item $ million

exports of goods 280

imports of goods 350
exports of services 110
imports of services 60
net primary income – 40

What is the country’s balance on its current account?

A a deficit of $60 million

B a deficit of $160 million
C a surplus of $20 million
D a surplus of $760 million

28 Vietnamese companies buy insurance from companies in the US.

How will this transaction be recorded in the Vietnamese balance of payments?

section credit / debit

A trade in goods credit

B trade in services credit
C trade in services debit
D current transfers debit

29 Country X produces cars and also imports cars.

Which group is least likely to benefit from the introduction of an import tariff on cars?

A consumers of cars in country X

B producers of cars in country X
C the government of country X
D workers making cars in country X

© UCLES 2022 2281/13/O/N/22

 11

30 What may be a cost to its home country when a multinational company (MNC) expands abroad?

A Increased competition from the MNC may force firms in the host country to close.
B Many jobs created by the MNC may be low-skilled.
C The MNC’s profits from the host country may be sent to its home country.
D The MNC may cause job losses in its home country by moving production abroad.

© UCLES 2022 2281/13/O/N/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 2281/13/O/N/22