CIE Econs IGCSE Microeconomics 1

A business person employs two people to make sandwiches to sell in a cafe.

As well as labour, which factors of production are involved in this activity?

• capital, enterprise and land

• capital and land only

• capital and enterprise only

• enterprise and land only

Why is choice an important part of the basic economic problem?

• Choice is necessary to achieve an equilibrium price.

• Limited resources have many uses.

• Manufacturers produce a large variety of foods.

• The market leads to an unequal distribution of goods.

A power plant is built to provide electricity to a rural area in Botswana.

What is the opportunity cost to the local economy of building the plant?

• the wages of the power plant workers

• the cost of the building materials

• the price of electricity

• the school which was not built as a result

The diagram shows a production possibility curve for an economy that can provide financial services or agricultural products.

The economy is at point X. Bad weather destroys part of the agricultural produce.

At which point will the economy be in the diagram?

• A

• B

• C

• D

In a mixed economy, output is produced by

• private enterprise and individuals.

• the market alone.

• the state alone.

• the state and private enterprise.

The diagram shows a shift in the demand curve for table-tennis balls.

What is the most likely cause for this shift in the demand curve?

• a fall in the price of the equipment for substitute games

• an increase in the membership of table-tennis clubs

• a rise in membership fees of table-tennis clubs

• the building of more sports clubs providing table-tennis

Air travel and rail travel are substitute forms of transport. The diagram shows the effect of new technology on the market for air travel.

What would be the most likely effect on the market for rail transport?

• a decrease in demand for rail transport

• an increase in the price of rail tickets

• an increase in supply of rail transport

• an increase in the total income of rail companies

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?

• ignoring external cost

• inequality of income

• lack of information

• price discrimination

A country’s central bank raised the rate of interest from 1% to 4% per year.

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

• A

• B

• C

• D

When will a trade union be less likely to be able to achieve a rise in wages for its members?

• during a recession

• in an economic boom

• when productivity is rising

• where there is a limited supply of labour