Cambridge IGCSE TM
ECONOMICS 0455/21
Paper 1 Multiple Choice May/June 2025
You must answer on the answer sheet
You will need: Multiple choice answer sheet.
INSTRUCTIONS
There are twenty 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 or tape.
Do not write on any bar codes.
You may use a calculator.
INFORMATION
The total mark for this paper is 40.
Each correct answer will score one mark.
Any rough working should be done on this question paper
1. A firm produces two types of battery. It supplies car batteries to firms
that make electric cars and laptop batteries to firms that make
computers. What is an example of the basic economic question ‘what to
produce’?
A How many car batteries and how many laptop batteries should be
manufactured?
B How many workers and how many machines should be used to
produce each type of battery?
C What proportion of batteries should be produced for export and what
proportion for domestic consumers?
D What proportion of recycled materials should be used in the
manufacture of the batteries?
2. What is a free good?
A a good for which demand is less than supply
B a good produced using few resources
C a good that has no opportunity cost
D a good that is provided by the state
3. Which factor of production is rewarded with rent?
A capital
B enterprise
C labour
D land
4. A firm reduces the price of its product from $100 to $90. The quantity
demanded increases from 1000 to 1500. What is the price elasticity of
demand (PED)?
A –0.1
B –0.2
C –0.5
D –5.0
5. The diagram shows the market for a good. The equilibrium is at point X.
The government fixes a maximum price for the good at P 2.
What will happen in the market as a result?
A The market equilibrium will remain the same.
B The quantity demanded will fall to Q3.
C There will be excess demand.
D There will be excess supply.
6. Which function does a central bank provide that a commercial bank does
not provide?
A acting as the government’s bank
B dealing with foreign exchange
C providing loans to the public
D providing savings accounts for the public
7. The table shows unemployment and inflation statistics for the United
States (US), Japan and Sweden for year 1 and year 2.
Which conclusion can be made from the table?
A In year 1, the same number of people were unemployed in Sweden and
Japan.
B In year 2, the cost of living increased in the US.
C The number of unemployed people increased in all three countries.
D Unemployment and inflation moved in the same direction in Sweden.
8. What is least likely to be found in a high-income country?
A a low GDP per head and a high level of car ownership
B a low level of labour skills and a high level of employment
C a low rate of adult literacy and a high level of absolute poverty
D a low rate of population growth and a high life expectancy
9. How might the concept of price elasticity of demand (PED) be useful for
a government?
A to determine the effect on employment of a change in income tax
B to determine the effect on government revenue of a rise in the rate of
interest
C to determine the effect of providing a public good
D to determine the result of imposing a tariff on imports
10. Which function do central banks and commercial banks have in
common?
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
11. What benefit is likely to result from the extension of specialisation
within manufacturing?
A For a consumer, there are more individually made goods available.
B For a consumer, there could be a lower cost of living.
C For an employee, job satisfaction will increase.
D For an employee, the nature of work is more varied.
12. Why might a government encourage a monopoly?
A It can compete against foreign firms.
B It can have high average costs.
C It can make excessive profits.
D It can prevent innovation.
13. The managers 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 replacing one of its managers
C the interest it pays on borrowed money
D the minimum wage it must pay its workers
14. The diagram shows percentage changes in house prices in an
economically developed country.
What might have caused these changes in prices?
A increase in government subsidies to house builders
B an increase in income
C an increase in the supply of houses
D an increase in unemployment
15.What is the cause of scarcity in an economy?
A high employment levels
B high investment levels
C unlimited resources
D unlimited wants
16. What does a point on a production possibility curve for an economy
represent?
A economic growth is falling
B inefficient use of resources available
C maximum output possible with current technology
D total demand for goods and services
17.What is most likely to increase enterprise as a factor of production in an
economy?
A a decrease in government spending on education
B a decrease in regulation on firms
C an increase in emigration
D an increase in taxation on firms
18. What is the correct formula to calculate price elasticity of supply?
A the percentage change in price divided by the change in quantity
supplied
B the percentage change in price divided by the percentage change in
quantity supplied
C the percentage change in quantity supplied divided by the change in
price
D the percentage change in quantity supplied divided by the percentage
change in price
19. What is the most likely cause of a product having a price elasticity of
demand greater than one?
A The product has a close substitute.
B The product is a habit-forming good.
C The product is a necessity.
D The product requires only a small proportion of consumer income.
20.What would bring about a movement upwards along the supply curve
for rice?
A a decrease in the productivity of farmworkers
B a decrease in the profitability of rice production
C an increase in consumers’ incomes
D an increase in farmworkers’ wages
