Cambridge IGCSE Economics (0455)
Multiple Choice and Structured Questions
Section A: Multiple Choice Questions (30 marks)
Answer all questions.
Each question is followed by four possible answers. Choose the correct answer and write its
letter (A, B, C, or D) in the box provided.
1. What gives rise to the economic problem?
A) A lack of money
B) An uneven distribution of income
C) Capital equipment being greater than labour
D) Wants exceeding resources
2. Which of the following is an example of a free good?
A) Sunshine
B) A public library
C) A newspaper
D) State education
3. Which factor of production is described as a "natural resource"?
A) Capital
B) Enterprise
C) Labour
D) Land
4. What is the opportunity cost of a decision?
A) The total cost of the decision
B) The best alternative forgone
C) The money spent on the decision
D) The time taken to make the decision
5. A country produces 4,000 new capital goods in a year. If 1,000 of these replace worn-out
capital goods, what is the net investment?
A) 1,000
B) 3,000
C) 4,000
D) 5,000
6. Which of the following would cause a production possibility curve (PPC) to shift to the
right?
A) A decrease in the labour force
B) An increase in technology
C) A natural disaster
D) Worn-out capital goods not being replaced
7. What does a point inside a PPC represent?
A) Full employment of resources
B) Unemployment of resources
C) An unattainable level of production
D) A decrease in productive capacity
8. Which of the following is a characteristic of an economic good?
A) It has no opportunity cost
B) It takes no resources to produce
C) It is unlimited in supply
D) It requires resources to produce
9. What is the most mobile factor of production?
A) Land
B) Labour
C) Capital
D) Enterprise
10. If a country moves from producing 50 capital goods and 100 consumer goods to
producing 70 capital goods and 80 consumer goods, what is the opportunity cost?
A) 20 capital goods
B) 20 consumer goods
C) 30 capital goods
D) 30 consumer goods
Section A: Additional Multiple Choice Questions (20 marks)
11. What is the main cause of scarcity?
A) Poor government policies
B) Unlimited wants and limited resources
C) High taxes
D) Overproduction of goods
12. Which of the following is not a factor of production?
A) Money
B) Land
C) Labour
D) Enterprise
13. If a country’s PPC shifts outwards, what is the most likely cause?
A) A decrease in population
B) Improved technology
C) A natural disaster
D) Higher unemployment
14. What is the opportunity cost of a government spending more on healthcare?
A) Higher taxes
B) Less spending on education
C) More imports
D) Increased inflation
15. Which of the following is an example of capital goods?
A) A loaf of bread
B) A factory machine
C) A teacher’s salary
D) A forest
16. Why are free goods rare in economics?
A) Because most goods require resources to produce
B) Because governments tax all goods
C) Because consumers refuse free goods
D) Because they are always imported
17. What happens when a country operates inside its PPC?
A) It is using all resources efficiently
B) There is unemployment or inefficiency
C) It is producing beyond its capacity
D) The PPC shifts left
18. Which factor of production is geographically immobile in its traditional form?
A) Labour
B) Capital
C) Land
D) Enterprise
19. If a worker leaves a job as a plumber to become a teacher, what is the opportunity cost?
A) The teacher’s salary
B) The plumber’s lost earnings
C) The cost of teacher training
D) The tools the plumber sold
20. What is net investment?
A) Total spending on capital goods
B) Gross investment minus depreciation
C) Government spending on infrastructure
D) Foreign direct investment
21. Which of the following would increase labour mobility?
A) Higher housing prices
B) Better job information
C) Stricter immigration laws
D) Longer working hours
22. Why does a PPC typically curve outwards?
A) Because opportunity cost increases as more of one good is produced
B) Because resources are unlimited
C) Because consumers prefer curved graphs
D) Because governments interfere
23. Which of the following is a renewable resource?
A) Coal
B) Natural gas
C) Solar energy
D) Gold
24. What is the primary role of an entrepreneur?
A) To work in a factory
B) To take risks and make business decisions
C) To regulate the economy
D) To consume goods
25. If a country’s PPC shifts left, what could be the reason?
A) A rise in skilled labour
B) A natural disaster destroying factories
C) New technology
D) Increased investment
26. Which of the following is not a consumer good?
A) A car for personal use
B) A pizza
C) A dentist’s drill
D) A movie ticket
27. What is the opportunity cost of a student studying for exams instead of working part-
time?
A) The cost of textbooks
B) The wages lost from not working
C) The teacher’s salary
D) The school fees
28. Which of the following best defines economic growth?
A) A rightward shift of the PPC
B) A movement along the PPC
C) A decrease in population
D) Higher taxes
29. Why is human capital important?
A) It increases labour productivity
B) It reduces the need for machines
C) It makes land more fertile
D) It replaces entrepreneurs
30. What is the key economic problem faced by all societies?
A) How to reduce taxes
B) How to allocate scarce resources
C) How to increase free goods
D) How to eliminate competition
Question 1 (Data Response)
Study the following extract and answer the questions that follow.
"In recent years, the demand for electric vehicles (EVs) has increased significantly. This has led to
a rise in the production of lithium batteries, which are essential for EVs. However, mining lithium
has environmental consequences, including water pollution and habitat destruction.
Governments must decide whether to invest in renewable energy technologies or continue
relying on fossil fuels."
a) Define scarcity. (2)
b) Explain why lithium is considered an economic good. (4)
c) Analyse, using a PPC, the opportunity cost of increasing lithium production. (6)
d) Discuss whether governments should prioritise renewable energy over fossil fuels. (8)
Question 2 (Four-Part Question)
a) Define labour productivity. (2)
b) Explain two factors that could improve the quality of labour. (4)
c) Analyse how an increase in labour productivity affects a country’s PPC. (6)
d) Discuss whether an ageing population will increase or decrease the size of the labour force.
(8)
Question 3 (Case Study)
"A farmer has 10 hectares of land. He can use it to grow wheat or potatoes. The table below
shows the maximum possible output per hectare."
Crop Output (tonnes per hectare)
Wheat 5
Potatoe
8
s
a) Calculate the total output if the farmer grows only wheat. (2)
b) Explain the opportunity cost of growing potatoes instead of wheat. (4)
c) Draw and label a PPC for the farmer’s production choices. (6)
d) Discuss whether the farmer should diversify his crops. (8)
