| Subject Code | 0525 |
| Subject Title | O Level Economics |
| Session | March 2020 Paper 1 |
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Cameroon GCE O Level Economics Paper 1 Solution - March 2023
1. The formula, Value of visible exports - value of visible imports is used to calculate:
Explanation: Balance of trade refers to the difference between the value of visible exports and visible imports.
2. When the government spends 17 billion FCFA and receives 17 million FCFA from taxes it is called:
Explanation: A balanced budget occurs when government expenditures are equal to revenues.
3. Which of the following is an indicator of economic development?
Explanation: Economic development is characterized by improved living standards, including access to health care.
4. Rent is a reward to:
Explanation: Rent is the payment for the use of land or other natural resources.
5. The exchange of goods among Cameroon, Nigeria, and China is:
Explanation: Foreign trade involves the exchange of goods and services across national borders.
6. Given the demand function Qd = 120 - 2P and the supply function Qs = 4P, where P represents price, the equilibrium price is:
Explanation: Equilibrium occurs where Qd = Qs. Solve 120 - 2P = 4P to find P = 60.
7. An industry whose raw material is more bulky than the final product is called:
Explanation: Weight-losing industries process raw materials into a lighter final product, e.g., sugar or steel production.
8. What is the cash ratio of this bank?
Explanation: The cash ratio is calculated as (cash/total liabilities), i.e., 50/1000 = 1: 5.
9. When a car firm merges with a cement factory, it is an example of:
Explanation: A conglomerate merger occurs between firms in different industries, as in this example.
10. According to the Malthusian theory of population, food production grows at:
Explanation: Malthus proposed that food production increases arithmetically (2, 3, 4, 5, etc.).
11. Study table 2 below and answer this question:
Table 2
Output (kg): 0 | 1 | 2 | 3
Total Costs (000 FCFA): 70 | 110 | 140 | 160
Calculate the Total Fixed Costs when 2 kg are produced.
Explanation: Total Fixed Costs (TFC) remain constant and are equal to Total Costs (TC) when output is zero, which is 70,000 FCFA.
12. Incomes are likely more evenly distributed in a:
Explanation: A mixed economy combines private and public enterprises, which can lead to a fairer distribution of income compared to purely capitalist or command economies.
13. A Veblen good is one for which quantity demanded increases as:
Explanation: A Veblen good defies the law of demand, as higher prices may make it more desirable due to its status symbol effect.
14. The function of money that enables a student to attend classes on credit and effect payment in the future is:
Explanation: This function of money allows transactions to be deferred and values to be compared across time.
15. An international organization that stabilizes exchange rates is:
Explanation: The International Monetary Fund (IMF) plays a key role in stabilizing exchange rates and promoting global financial stability.
16. Goods that do not have an opportunity cost are known as:
Explanation: Free goods are naturally abundant and available without cost, thus they do not involve any opportunity cost.
17. Which item is subtracted from Gross National Product to obtain National Income?
Explanation: Capital consumption, also known as depreciation, is subtracted from Gross National Product to arrive at National Income.
18. The information in Table 3 below relates to changes in output when population increases.
Table 3
Output (kg): 50, 100, 150
Population: 10, 20, 30
Explanation: As population increases, the average product (output per individual) decreases because the increase in population is not matched by a proportional increase in total product.
19. In Economics, the concept of choice is as a result of:
Explanation: Choice arises in economics because resources are scarce, requiring individuals and societies to make decisions on allocation.
20. Geographical mobility of labour is limited by:
Explanation: Social ties, such as family and community connections, often prevent individuals from relocating for work, limiting geographical mobility.
21. An example of two commodities which are in joint supply are:
Explanation: Palm oil and palm kernels are produced from the same palm fruit, making them commodities in joint supply.
22. In national income, factors of production flow:
Explanation: In the circular flow of income, households provide factors of production like labor and capital to firms in exchange for income.
23. The weekly incomes of five students are: 3,500FCFA, 5,000FCFA, 3,500FCFA, 6,000FCFA, and 5,500FCFA. Calculate the median income.
Explanation: To find the median, the incomes are arranged in ascending order: 3,500, 3,500, 5,000, 5,500, 6,000. The median is the middle value, which is 5,500 FCFA.
24. A barrier on trade that yields revenue to the state is:
Explanation: Tariffs are taxes imposed on imports or exports, providing revenue for the government.
25. The internal affairs of a public limited company are regulated by:
Explanation: The Articles of Association outline the internal rules and regulations governing a company's operations and management.
26. In the year 2017, there were 100,000 deaths in a population of 5 million people. What was the death rate?
Explanation: Death rate is calculated as (100,000 ÷ 5,000,000) × 100 = 10 percent.
27. When the external value of a country’s currency is officially reduced, it is known as:
Explanation: Devaluation occurs when a government lowers the value of its currency relative to other currencies.
28. People who benefit during inflation include:
Explanation: Businessmen benefit from inflation because they can raise prices faster than costs, increasing their profits.
29. Street lighting and public roads are examples of:
Explanation: Public roads and street lighting contribute to the infrastructure that businesses and society rely on.
30. A market where goods are traded for immediate delivery is known as:
Explanation: A spot market is where financial instruments or commodities are bought and sold for immediate delivery.
31. Companies raise funds externally through:
Explanation: Companies raise funds externally by using savings accumulated in the past, as well as through debentures or issuing shares.
32. Unemployment caused by mental and physical disability is called:
Explanation: Frictional unemployment is a type of unemployment that occurs when individuals are temporarily between jobs or are seeking their first job, which may include disabilities.
33. The control of weights and measures used by businessmen to avoid consumer exploitation is called:
Explanation: Monetary policy involves controlling the supply of money and setting interest rates, including controls to ensure fairness in transactions.
34. When the minimum price is fixed, the people who gain are:
Explanation: Producers benefit from a minimum price because it guarantees that they receive a certain price for their goods or services.
35. Firms maximise profits at the output level where:
Explanation: A firm maximizes profit when marginal cost (MC) is equal to marginal revenue (MR).
36. Credit creation is limited by:
Explanation: The cash ratio determines how much banks are required to hold in reserve. A reduction in this ratio increases the bank's ability to create credit.
37. The transformation of cocoa beans into chocolate is:
Explanation: Secondary production involves the processing of raw materials, such as transforming cocoa beans into chocolate.
38. If a 30% rise in the price of petrol causes a 60% fall in the quantity demanded of motor bikes, the price elasticity of demand is:
Explanation: Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, 60% ÷ 30% = 1.5.
39. When short-term securities are converted into long-term securities, it is known as:
Explanation: Funding refers to the conversion of short-term securities into long-term securities to secure financing over an extended period.
40. Given that a country’s GNP for a given year was 400 billion FCFA and it had a population of 20 million people, its per capita GNP was:
Explanation: Per capita GNP is calculated by dividing the total GNP by the population. Here, 400 billion FCFA ÷ 20 million people = 200,000 FCFA.
41. Two employees in a company earn 200,000 FCFA and 500,000 FCFA respectively, with each paying 20,000 FCFA as tax. What is the tax system applied?
Explanation: A flat rate tax implies that every individual pays the same fixed amount of tax irrespective of their income.
42. Identify supply curve X on the graph:
Explanation: A perfectly inelastic supply curve is vertical, indicating that quantity supplied does not change regardless of price changes.
43. When diseconomies of scale occur:
Explanation: Diseconomies of scale occur when a firm becomes too large, leading to inefficiencies and higher average costs.
44. An alternative name for peasant farming is:
Explanation: Peasant farming often involves small-scale, subsistence farming, while plantation agriculture refers to large-scale, commercial farming.
45. That part of disposable income not spent on current consumption is known as:
Explanation: Savings are the portion of disposable income not used for consumption but set aside for future use or investment.
46. Given that the exchange rate between the dollars and the FCFA is 1 dollar = 600 FCFA, how many dollars can be exchanged for 105,600 FCFA?
Explanation: To convert FCFA to dollars, divide the amount in FCFA by the exchange rate. 105,600 ÷ 600 = 105 dollars.
47. A method of measuring national income by summing up wages, profits, rents, etc., is known as:
Explanation: The income approach calculates national income by adding all income earned by individuals and businesses in an economy.
48. When the index of export prices is 98 and the index of import prices is 105, terms of trade are:
Explanation: Terms of trade are considered unfavorable when the export price index is lower than the import price index, meaning the country pays more for imports than it earns from exports.
49. The movement from point A to point B on a production possibility curve (PPC) is known as:
Explanation: Movement along the PPC indicates a reallocation of resources or improvement in efficiency, reflecting actual economic development.
50. The likely source of government’s highest tax revenue is:
Explanation: Value added tax (VAT) generates significant revenue because it applies to a wide range of goods and services and is collected at multiple points in the production and distribution process.
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