Cambridge IGCSE Economics Paper 1

What is a free good?

• free samples of a new product

• health services provided by the state

• second-hand clothing

• sunlight

A firm is deciding whether to produce good X or good Y for the next five years. The predicted revenue for good X is $20 000 per year and for good Y is $18 000 per year. What is the opportunity cost of producing good X?

• $100 000

• $90 000

• $18 000

• $20 000

The diagram shows a production possibility curve (PPC) for an economy. What is the reason for the economy moving from point M to point N?

• decreased unemployment in industries producing good X

• improvement in technology used to produce good X

• increased productivity of workers producing good X

• increased resource allocation to the production of good X

What is not held constant when drawing a demand curve for a good or service?

• consumers’ incomes

• tastes and preferences

• the price of substitutes

• the price of the good or service

The diagram shows a shift in the supply curve for New Zealand’s airlines from S1 to S2. What is the most likely cause of this shift?

• a decrease in the costs of New Zealand’s airlines

• a decrease in the number of people wanting to fly to New Zealand

• an increase in the price of train and bus travel in New Zealand

• an increase in the tax on air travel in New Zealand

What could cause the price of tea to increase?

• decrease in the demand for tea

• decrease in the price of a substitute good

• increase in the price of a substitute good

• increase in the supply of tea

A firm changes the price of its product and finds that its revenue increases. Which combination of price change and price elasticity of demand would have caused this?

• A

• B

• C

• D

What could not occur in a market economic system?

• a monopolist supplying specialist goods to the market

• excessive pollution created by power stations

• governments setting minimum wages to relieve poverty

• private ownership of firms making defence equipment

What is a correct definition of a demerit good?

• a good which generates external benefits

• a good with higher private costs than social costs

• a good which is more harmful to consumers than they realise

• a good which provides no costs to third parties

Within the same firm, one employee is paid a higher wage than another employee. Which reason for the difference in their wage could be considered discrimination?

• They are of different ages.

• They have different levels of education.

• They have different levels of productivity.

• They have different levels of work experience.