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
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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

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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

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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

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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

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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.

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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

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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

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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.

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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

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