Free GCE O Level Economics June 2014 Past Paper 1 Questions

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Subject Code	0525
Subject Title	O Level Economics
Session	June 2018 Paper 1

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Cameroon GCE O Level Economics Paper 1 Solution - June 2023

1. Which of the following factors is an example of "positive checks" in the Malthusian Theory of population?

A. Late marriage

B. Floods

C. Abstention

D. Moral Restraint

The correct answer is "B. Floods." Positive checks are events that increase mortality, such as natural disasters.

2. A method of measuring National Income by considering the rewards of factors of production is known as:

A. Value Added Approach

B. Income Approach

C. Expenditure Approach

D. Output Approach

The correct answer is "B. Income Approach." This approach calculates National Income by summing up all incomes earned by factors of production.

3. A firm that is capable of diversifying its production is said to be enjoying:

A. Financial economies of scale

B. Welfare economies of scale

C. Technical economies of scale

D. Risk-bearing economies of scale

The correct answer is "C. Technical economies of scale." Diversification often occurs due to technical advantages that reduce costs.

4. If income increases from 20,000 FCFA to 40,000 FCFA and quantity demanded increases from 80 units to 120 units, calculate the income elasticity of demand:

A. 0.5

B. 1.0

C. 2.0

D. 2.5

The correct answer is "C. 2.0." Income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income.

5. A country with a persistent Balance of Payments deficit will employ one of the following measures. Choose the most appropriate measure:

A. Revaluation

B. Borrowing

C. Devaluation

D. Import restrictions

The correct answer is "C. Devaluation." Devaluing a country's currency can help make exports cheaper and imports more expensive, improving the balance of payments.

6. In order to increase the supply of money in circulation in an economy, the central bank has to:

A. Reduce the cash ratio

B. Sell securities in the open market

C. Call on special deposits

D. Convert short-term funds to funded bonds

The correct answer is "D. Convert short-term funds to funded bonds." This action increases liquidity and supply of money in the economy.

7. A business organization which is guided by self-help and democratic principles is known as:

A. Public corporation

B. Parastatals

C. Local authorities

D. Cooperative Societies

The correct answer is "D. Cooperative Societies." Cooperative societies operate on self-help and collective democratic management.

8. Disposable income is derived as follows:

A. Household income minus taxes

B. Savings plus investment

C. National Income plus transfer payments

D. Saving minus investment

The correct answer is "C. National Income plus transfer payments." Disposable income is the total income available for spending and saving.

9. When much of what is produced from agriculture is meant for household consumption, it is called:

A. Plantation agriculture

B. Commercial farming

C. Peasant agriculture

D. Smallholder schemes

The correct answer is "C. Peasant agriculture." This type of agriculture is primarily for subsistence, catering to the needs of the household.

10. Study the following pairs of examples of factors of production and state which pair is an appropriate description of a specific factor of production:

A. Raw materials and Teachers

B. Telephone and Computer

C. Land and Accountants

D. Medical doctors and night watchmen

The correct answer is "B. Telephone and Computer." These are examples of capital, a specific factor of production.

14. Use the table below and answer the question that follows:

Description	Amount in Million FCFA
Visible Exports	500
Visible Imports	600
Invisible Exports	350
Invisible Imports	800

What is the value of the Balance of Trade?

A. -150 million FCFA

B. 450 million FCFA

C. -550 million FCFA

D. 300 million FCFA

The correct answer is "C. -550 million FCFA." The Balance of Trade is calculated as Visible Exports minus Visible Imports.

15. An Active balance is money held for:

A. Transactions motive only

B. Transactions and Precautionary motives only

C. Transaction and speculative motive only

D. Precautionary and speculative motives only

The correct answer is "D. Precautionary and speculative motives only." Active balances cater to unforeseen needs and market opportunities.

16. This question is based on the cost of producing chairs in a carpentry workshop:

Output (Number of chairs)	Total Cost (in FCFA)
0	10,000
2	20,000
4	35,000
6	45,000

The fixed cost of the 4th chair is:

A. 30,000 FCFA

B. 20,000 FCFA

C. 10,000 FCFA

D. 7,500 FCFA

The correct answer is "C. 10,000 FCFA." Fixed costs remain constant regardless of production levels.

17. Which of the following factors is a characteristic of developed countries?

A. Low dependency ratio

B. Low per capita income

C. Low life expectancy

D. Low standards of living

The correct answer is "A. Low dependency ratio." Developed countries often have a lower dependency ratio due to better economic and social systems.

18. Economists often find it difficult to give perfect forecasts or predictions like pure scientists because:

A. Human behavior can be easily measured

B. Economic conditions are always static

C. Human behavior can be controlled

D. Human behavior cannot be easily measured

The correct answer is "D. Human behavior cannot be easily measured." Human behavior is dynamic and influenced by numerous unpredictable factors.

19. Study the table which shows the National Income figures and population statistics for 4 countries W, X, Y, and Z:

Country	Population (in millions)	National Income (in million FCFA)
W	35	770
X	20	500
Y	50	300
Z	16	240

Which of the above countries would you consider underdeveloped?

A. Country Z

B. Country Y

C. Country X

D. Country W

The correct answer is "B. Country Y." Underdeveloped countries often have high populations with low national income.

20. Reluctance of an industry to move to another location although its original locational factors have disappeared is described as:

A. Footloose industry

B. Weight gaining industry

C. Weight losing industry

D. Industrial inertia

The correct answer is "D. Industrial inertia." Industrial inertia occurs when industries resist relocation despite changes in their initial locational advantages.

21. Study this demand and supply schedule for Garri in a local market and answer the question below:

Price per cup (in FCFA)	Demand (000 cups)	Supply (000 cups)
100	400	300
40	120	250
30	150	150
10	190	80

At the price of 10 FCFA, what will be the excess demand for Garri?

A. 110 FCFA

B. 110,000 FCFA

C. 110 cups

D. 110,000 cups

The correct answer is "D. 110,000 cups." Excess demand is calculated as demand minus supply (190,000 - 80,000 = 110,000 cups).

22. Mineral deposit is an appropriate example of which factor of production?

A. Land

B. Labour

C. Capital

D. Entrepreneur

The correct answer is "A. Land." Natural resources like mineral deposits are categorized under land as a factor of production.

23. Which pairs of goods can be described as having a competitive demand?

A. Wool and Mutton

B. Torch and Battery

C. Flour and Bread

D. Butter and Margarine

The correct answer is "D. Butter and Margarine." Competitive demand refers to goods that serve as substitutes for each other.

24. When internal economies of scale occur:

A. Total costs will fall

B. Total revenue will fall

C. Average cost will fall

D. Profit margin will fall

The correct answer is "C. Average cost will fall." Internal economies of scale reduce the cost per unit as production increases.

25. A situation where a prospective taxpayer escapes from paying a tax is described as:

A. Tax avoidance

B. Tax evasion

C. Tax exemption

D. Tax holiday

The correct answer is "B. Tax evasion." Tax evasion involves illegal actions to avoid paying taxes.

26. Assume that the population of country X is 4 million inhabitants, with 80,000 new births and the death rate is 15 per thousand. Calculate the natural growth rate:

A. 20%

B. 15%

C. 3%

D. 0.5%

The correct answer is "D. 0.5%." The natural growth rate is calculated as the difference between birth and death rates, expressed as a percentage of the total population.

27. Which of the following is an appropriate definition of dumping as used in International Trade?

A. Selling at a price equal to the selling price in the home market

B. Selling at a price equal to the cost price in the home market

C. Selling at a price lower than that in the home market

D. Selling at a price higher than that in the home market

The correct answer is "C. Selling at a price lower than that in the home market." Dumping refers to selling goods in a foreign market at a price lower than the domestic price or production cost.

28. A company's capital structure is as follows:

• 10% Debentures of 5,000,000 CFA Francs
• 5% Preference shares of 30,000,000 CFA Francs
• Ordinary shares of 15,000,000 CFA Francs

If the company declared a profit of 20,000,000 CFA Francs in a business year, how much will the debenture holders receive?

A. 500,000 CFA Francs

B. 2,000,000 CFA Francs

C. 5,000,000 CFA Francs

D. 12,500,000 CFA Francs

The correct answer is "B. 2,000,000 CFA Francs." Debenture holders receive interest at the agreed percentage of their investment amount.

29. A businessman with a nominal capital of 10 million CFA Francs makes a profit of 2 million CFA Francs and pays a corporation tax of 10 percent. What is his tax base?

A. 200,000 CFA Francs

B. 1,600,000 CFA Francs

C. 2,000,000 CFA Francs

D. 10,000,000 CFA Francs

The correct answer is "C. 2,000,000 CFA Francs." The tax base is the profit made, as tax is calculated on the profit.

30. Economic goods are similar to free goods because:

A. Both goods have opportunity cost

B. Both goods yield satisfaction to consumers

C. Both goods are unlimited in supply relative to demand

D. Both goods are limited in supply relative to demand

The correct answer is "B. Both goods yield satisfaction to consumers." Economic and free goods both provide utility, though they differ in scarcity.

31. Assume that the index of export prices is 150 while the index of import prices is 125 for country A in 2010. Calculate the terms of trade.

A. 83.3%

B. 120%

C. 150%

D. 125%

The correct answer is "B. 120%." Terms of trade is calculated as (Export Price Index ÷ Import Price Index) × 100 = (150 ÷ 125) × 100 = 120%.

32. A market where medium and long-term loans are made available for investment is known as:

A. Money market

B. Capital market

C. Stock exchange market

D. Futures market

The correct answer is "B. Capital market." The capital market facilitates long-term financing and investments.

33. What relationship exists between farmland and grazing land in a local community?

A. Joint supply

B. Joint demand

C. Competitive supply

D. Competitive demand

The correct answer is "D. Competitive demand." Farmland and grazing land compete for the same resources in local communities.

34. The following items relate to National Income of country A:

• Gross National Income = 100
• Investment = 60
• Consumption = 40
• Depreciation = 10

Figures are in billion CFA Francs. What is the size of Net National Income for country A?

A. 90 billion CFA Francs

B. 210 billion CFA Francs

C. 100 billion CFA Francs

D. 110 billion CFA Francs

The correct answer is "A. 90 billion CFA Francs." Net National Income is calculated as Gross National Income minus Depreciation.

35. The price of a currency in terms of another is described as:

A. Equilibrium price

B. Exchange rate

C. Interest rate

D. Terms of Trade

The correct answer is "B. Exchange rate." The exchange rate determines the value of one currency relative to another.

36. One main reason why every employed citizen in a country is obliged to pay tax is:

A. To avoid the consumption of harmful goods

B. To protect infant industries

C. To enable government finance her expenditure

D. To ensure an equitable redistribution of income

The correct answer is "C. To enable government finance her expenditure." Taxes are the primary source of government revenue used for public services and infrastructure.

37. The term "ceteris paribus" means that:

A. Everything is changing and only one remains constant

B. Only one factor is changing while others remain constant

C. Everything is changing at the same time

D. Nothing at all is changing

The correct answer is "B. Only one factor is changing while others remain constant." This assumption is used in economics to analyze the effect of one variable while holding others constant.

38. Who among the following will stand to benefit during an inflationary period?

A. Debtors

B. Creditors

C. Savers

D. Fixed income earners

The correct answer is "A. Debtors." Inflation reduces the real value of debt, making it easier for debtors to repay.

39. A dominant factor responsible for the location of most tertiary firms in Cameroon is:

A. Supply of electricity

B. Government policy

C. Nearness to market

D. Availability of labour

The correct answer is "C. Nearness to market." Tertiary firms, such as retail, typically locate close to their customers to maximize accessibility and sales.

40. Three employees in a company earn 150,000 CFAF, 200,000 CFAF, and 300,000 CFAF respectively. Assume that each pays 150,000 CFAF of income as tax. What is the tax system used?

A. Equity tax system

B. Regressive tax system

C. Proportional tax system

D. Progressive tax system

The correct answer is "B. Regressive tax system." Under a regressive tax system, lower-income earners pay a higher percentage of their income as tax.

41. This question is based on the diagram below:

Which of the following factors is responsible for a shift of the supply curve from S₁ to S₂ in the diagram above?

A. Increase in population

B. Increase in disposable income

C. Increase in costs of production

D. Increase in prices of other goods

The correct answer is "D. Increase in prices of other goods." An increase in the price of substitutes can encourage producers to shift resources, leading to a rightward supply shift.

42. This question is based on the utility table below:

What is the value of Z?

A. 18

B. 10

C. 6

D. 0

The correct answer is "C. 6." The marginal utility values are calculated by the change in total utility, and based on the table, Z equals 6.

43. A market structure in which there is a single buyer of a good is known as:

A. Monopoly

B. Monopsony

C. Oligopoly

D. Oligopsony

The correct answer is "B. Monopsony." A monopsony occurs when there is only one buyer in the market, giving them significant power over pricing and supply.

44. Calculate the price elasticity of supply if a 15% rise in price causes the quantity supplied to increase by 30%:

A. 0.5

B. 1.5

C. 1

D. 2

The correct answer is "D. 2." Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price (30% ÷ 15% = 2).

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