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| Subject Code | 0525 |
| Subject Title | O Level Economics |
| Session | June 2020 Paper 1 |
Click on the correct answer below. If it is maked wrong, click another option and you can always see the explanation
Cameroon GCE O Level Economics Paper 1 Solution - June 2020
1. The agricultural sector in Cameroon is important because
A. It operates in large scale all over the country
B. It leads to the cultivation of crops
C. It employs the greatest proportion of the working population
D. It is the main source of government revenue
Correct Answer: C. It employs the greatest proportion of the working population
Explanation: The agricultural sector in Cameroon is vital because it employs a significant portion of the population, contributing to the economy through agriculture-based activities.
Explanation: The agricultural sector in Cameroon is vital because it employs a significant portion of the population, contributing to the economy through agriculture-based activities.
2. Which of the following is a key determinant of both the quantity demanded and supplies?
A. Price
B. Income
C. Population
D. Tax
Correct Answer: A. Price
Explanation: Price is the primary determinant of both the quantity demanded and the quantity supplied in the market, as it directly influences both consumer demand and producer supply.
Explanation: Price is the primary determinant of both the quantity demanded and the quantity supplied in the market, as it directly influences both consumer demand and producer supply.
3. A good example of a public good is:
A. Air
B. Education
C. National defense
D. Health
Correct Answer: C. National defense
Explanation: National defense is a public good because it is non-rivalrous and non-excludable, meaning it benefits everyone, and one person's consumption does not reduce its availability to others.
Explanation: National defense is a public good because it is non-rivalrous and non-excludable, meaning it benefits everyone, and one person's consumption does not reduce its availability to others.
4. The main function of a commercial bank is:
A. Keep valuables
B. Accept deposits
C. Grant loans
D. Provide night safe facilities
Correct Answer: B. Accept deposits
Explanation: The primary function of a commercial bank is to accept deposits from individuals and organizations, which are then used to provide loans and other financial services.
Explanation: The primary function of a commercial bank is to accept deposits from individuals and organizations, which are then used to provide loans and other financial services.
5. In economics, “Ends” refers to:
A. Economics resources
B. Human resources
C. Goods and services
D. Human wants
Correct Answer: C. Goods and services
Explanation: "Ends" in economics refers to the goods and services that satisfy human wants, contrasting with "means," which are the resources used to produce them.
Explanation: "Ends" in economics refers to the goods and services that satisfy human wants, contrasting with "means," which are the resources used to produce them.
6. Which of the following is an example of direct government intervention in an economy?
A. Price control
B. Open market operation
C. Taxes
D. Funding
Correct Answer: A. Price control
Explanation: Direct government intervention refers to actions like price controls, where the government sets maximum or minimum prices for goods and services in the market.
Explanation: Direct government intervention refers to actions like price controls, where the government sets maximum or minimum prices for goods and services in the market.
7. The method of calculating national Income by summing together the earnings of all factors of production is:
A. Output method
B. Income method
C. Expenditure method
D. Value added method
Correct Answer: B. Income method
Explanation: The income method calculates national income by adding up the earnings of all factors of production.
Explanation: The income method calculates national income by adding up the earnings of all factors of production.
8. The third law of demand and supply states that:
A. At higher prices, more is demanded than lower prices
B. At lower prices, less is supplied than at higher prices
C. At the equilibrium price, quantity demanded equals quantity supplied
D. The higher the price, the lower the quantity demanded
Correct Answer: C. At the equilibrium price, quantity demanded equals quantity supplied
Explanation: The third law of demand and supply states that at the equilibrium price, the amount demanded by consumers equals the amount supplied by producers.
Explanation: The third law of demand and supply states that at the equilibrium price, the amount demanded by consumers equals the amount supplied by producers.
9. A bank observed a cash ratio of 10%. If she receives an additional deposit of 100,000 FCFA, the amount of deposit created will be:
A. 1,000,000 FCFA
B. 900,000 FCFA
C. 90,000 FCFA
D. 10,000 FCFA
Correct Answer: C. 90,000 FCFA
Explanation: The amount of deposit created is calculated as: 100,000 FCFA * (1 - Cash ratio) = 100,000 * 0.9 = 90,000 FCFA.
Explanation: The amount of deposit created is calculated as: 100,000 FCFA * (1 - Cash ratio) = 100,000 * 0.9 = 90,000 FCFA.
10. The following items are found in the balance of payment of Country X (Figures are in million of francs CFA):
| ITEM | Million FCFA |
|---|---|
| Visible export | 20 |
| Invisible imports | 8 |
| Visible imports | 15 |
| Invisible exports | 6 |
Calculate the current balance:
A. 5 million FCFA
B. 2 million FCFA
C. -5 million FCFA
D. 3 million FCFA
Correct Answer: A. 5 million FCFA
Explanation: Current balance = (Visible export + Invisible exports) - (Visible imports + Invisible imports) = (20 + 6) - (15 + 8) = 26 - 23 = 5 million FCFA.
Explanation: Current balance = (Visible export + Invisible exports) - (Visible imports + Invisible imports) = (20 + 6) - (15 + 8) = 26 - 23 = 5 million FCFA.
11. Cost-saving advantages enjoyed by firms independent of what is happening to other firms in the industry are called:
A. External economies of scale
B. External diseconomies of scale
C. Internal economies of scale
D. Internal diseconomies of scale
Correct Answer: C. Internal economies of scale
Explanation: Internal economies of scale are cost-saving advantages that firms enjoy as they expand, independent of what happens to other firms in the industry.
Explanation: Internal economies of scale are cost-saving advantages that firms enjoy as they expand, independent of what happens to other firms in the industry.
12. If a consumer increases his quantity demanded of ice cream by 100% when his income rises by 25%, then his income elasticity of demand is:
A. 4
B. 8
C. 2.5
D. 0.25
Correct Answer: A. 4
Explanation: The income elasticity of demand is calculated as: (Percentage change in quantity demanded) / (Percentage change in income) = 100% / 25% = 4.
Explanation: The income elasticity of demand is calculated as: (Percentage change in quantity demanded) / (Percentage change in income) = 100% / 25% = 4.
13. An example of a positive check that can control population growth is:
A. Late marriages
B. Famine
C. Abstinence
D. Family planning
Correct Answer: D. Family planning
Explanation: Family planning is a positive check that controls population growth by allowing individuals to manage the number of children they have.
Explanation: Family planning is a positive check that controls population growth by allowing individuals to manage the number of children they have.
14. Which of the following represents a non-competitive market structure?
A. Monopoly
B. Perfect competition
C. Oligopoly
D. Monopolistic competition
Correct Answer: C. Oligopoly
Explanation: An oligopoly is a market structure where a small number of firms dominate, leading to limited competition.
Explanation: An oligopoly is a market structure where a small number of firms dominate, leading to limited competition.
15. A rise in income causes an increase in demand for which of the following goods?
A. Normal goods
B. Inferior goods
C. Giffen goods
D. None of the above
Correct Answer: A. Normal goods
Explanation: Normal goods are those for which demand increases as consumer income rises.
Explanation: Normal goods are those for which demand increases as consumer income rises.
16. The main function of the financial sector in an economy is:
A. To control inflation
B. To facilitate the flow of funds between savers and borrowers
C. To reduce the level of unemployment
D. To regulate taxes
Correct Answer: B. To facilitate the flow of funds between savers and borrowers
17. Which of the following partners only allows his name to be used in the promotion of the business?
A. Quasi partner
B. Ordinary partner
C. Sleeping partner
D. Nominal partner
Correct Answer: D. Nominal partner
Explanation: A nominal partner does not actively participate in the business but allows their name to be used for promotion or credibility purposes.
Explanation: A nominal partner does not actively participate in the business but allows their name to be used for promotion or credibility purposes.
18. The best definition of a direct tax is:
A. Tax levied on goods and services
B. Tax levied on incomes and wealth
C. A compulsory payment made by individuals and firms
D. Tax levied on expenditure
Correct Answer: B. Tax levied on incomes and wealth
Explanation: Direct taxes are imposed on income, wealth, or profits and are paid directly by the individual or entity to the government.
Explanation: Direct taxes are imposed on income, wealth, or profits and are paid directly by the individual or entity to the government.
19. “Cash” used in money and banking refers to:
A. Coins
B. Bank notes
C. Cheques
D. Coins and bank notes
Correct Answer: D. Coins and bank notes
Explanation: Cash in money and banking refers to the physical currency in the form of coins and banknotes.
Explanation: Cash in money and banking refers to the physical currency in the form of coins and banknotes.
20. Forest, minerals, and rivers are all examples of:
A. Land
B. Labour
C. Capital
D. Entrepreneur
Correct Answer: A. Land
Explanation: Forests, minerals, and rivers are all natural resources, which are classified as land in economics.
Explanation: Forests, minerals, and rivers are all natural resources, which are classified as land in economics.
21. When demand increases, the demand curve moves:
A. To the left
B. To the right
C. Upwards
D. Downwards
Correct Answer: B. To the right
Explanation: An increase in demand causes the demand curve to shift to the right, indicating more goods are being demanded at each price.
Explanation: An increase in demand causes the demand curve to shift to the right, indicating more goods are being demanded at each price.
22. Which of the following theories best explains the basis of international trade?
A. International specialization
B. Absolute advantage
C. Comparative cost advantage
D. Division of labour
Correct Answer: C. Comparative cost advantage
Explanation: The theory of comparative advantage suggests that countries should specialize in producing goods where they have the lowest opportunity cost, allowing for more efficient trade.
Explanation: The theory of comparative advantage suggests that countries should specialize in producing goods where they have the lowest opportunity cost, allowing for more efficient trade.
23. The economic system in which the basic economic problems are solved through the price system is:
A. Traditional economic system
B. Capitalist economic system
C. Socialist economic system
D. Mixed economic system
Correct Answer: B. Capitalist economic system
Explanation: In a capitalist economic system, prices are determined by the forces of supply and demand, which solve basic economic problems.
Explanation: In a capitalist economic system, prices are determined by the forces of supply and demand, which solve basic economic problems.
24. One reason for international trade is:
A. Natural resources are everywhere
B. For developed countries to sell their goods
C. The ease of mobility of resources between countries
D. Resources are unequally distributed
Correct Answer: D. Resources are unequally distributed
Explanation: International trade allows countries to access resources they lack, because these resources are unevenly distributed across the globe.
Explanation: International trade allows countries to access resources they lack, because these resources are unevenly distributed across the globe.
25. The aggregate demand curve is downward sloping because:
A. Interest rate effect
B. Wealth effect
C. Price level effect
D. Substitution effect
Correct Answer: B. Wealth effect
Explanation: The wealth effect describes how lower price levels increase the real value of wealth, encouraging more consumption, which leads to higher aggregate demand.
Explanation: The wealth effect describes how lower price levels increase the real value of wealth, encouraging more consumption, which leads to higher aggregate demand.
26. The production possibilities frontier (PPF) shows:
A. The maximum output combinations of two goods that can be produced
B. The trade-offs in production between two goods
C. The optimal production point in an economy
D. The efficiency of labor in producing goods
Correct Answer: B. The trade-offs in production between two goods
Explanation: The PPF illustrates the trade-offs and opportunity costs of allocating resources between the production of two goods or services.
Explanation: The PPF illustrates the trade-offs and opportunity costs of allocating resources between the production of two goods or services.
27. The law of demand states that:
A. As the price of a good increases, the quantity demanded decreases
B. As the price of a good increases, the quantity demanded increases
C. Price does not affect the quantity demanded
D. Quantity demanded is constant at all price levels
Correct Answer: A. As the price of a good increases, the quantity demanded decreases
Explanation: The law of demand indicates that, all else being equal, consumers tend to buy less of a good as its price increases, and more when its price decreases.
Explanation: The law of demand indicates that, all else being equal, consumers tend to buy less of a good as its price increases, and more when its price decreases.
28. The supply curve typically slopes:
A. Downwards
B. Upwards
C. Horizontally
D. Vertically
Correct Answer: B. Upwards
Explanation: The supply curve slopes upwards, reflecting that as the price of a good increases, suppliers are willing to provide more of it.
Explanation: The supply curve slopes upwards, reflecting that as the price of a good increases, suppliers are willing to provide more of it.
29. In economics, “marginal cost” refers to:
A. The total cost of producing one additional unit
B. The cost of producing one additional unit
C. The total cost of producing all units
D. The fixed cost per unit produced
Correct Answer: B. The cost of producing one additional unit
Explanation: Marginal cost refers to the change in total cost when producing one more unit of output. It is calculated by dividing the change in cost by the change in quantity.
Explanation: Marginal cost refers to the change in total cost when producing one more unit of output. It is calculated by dividing the change in cost by the change in quantity.
30. What is the primary function of a market economy?
A. To allocate resources based on supply and demand
B. To centralize economic planning
C. To rely on government intervention for production
D. To produce goods solely for domestic consumption
Correct Answer: A. To allocate resources based on supply and demand
Explanation: In a market economy, the allocation of resources is determined by supply and demand forces with minimal government interference.
Explanation: In a market economy, the allocation of resources is determined by supply and demand forces with minimal government interference.
31. A change in the price of a good leads to a change in:
| Price (FCFA) | Quantity Demanded (000kgs) | Quantity Supplied (000kgs) |
|---|---|---|
| 200 | 2 | 6 |
| 160 | 3 | 5 |
| 120 | 4 | 4 |
| 80 | 5 | 3 |
| 40 | 6 | 2 |
A. Supply
B. Quantity demanded
C. The demand curve
D. Income
Correct Answer: B. Quantity demanded
Explanation: A change in price leads to a movement along the demand curve, affecting the quantity demanded but not the demand curve itself.
Explanation: A change in price leads to a movement along the demand curve, affecting the quantity demanded but not the demand curve itself.
32. The opportunity cost of an action is:
A. The cost of the next best alternative that is forgone
B. The total cost of the chosen option
C. The cost of producing a good
D. The marginal cost of production
Correct Answer: A. The cost of the next best alternative that is forgone
Explanation: Opportunity cost refers to the value of the next best alternative that must be given up when a decision is made to pursue one option.
Explanation: Opportunity cost refers to the value of the next best alternative that must be given up when a decision is made to pursue one option.
33. A common characteristic of subsistence farming is:
Correct Answer: C. Practice of mono-cropping
Explanation: Subsistence farming often involves growing one primary crop for personal consumption, which is typical of mono-cropping.
Explanation: Subsistence farming often involves growing one primary crop for personal consumption, which is typical of mono-cropping.
34. Two goods where the quantity demanded of one increases as the price of the other falls are:
Correct Answer: A. Complementary demand
Explanation: Complementary goods are those that are often used together. When the price of one decreases, the demand for the other tends to increase.
Explanation: Complementary goods are those that are often used together. When the price of one decreases, the demand for the other tends to increase.
35. The government can increase the level of economic activity by:
Correct Answer: B. Buying bonds in the open market
Explanation: Buying bonds in the open market helps increase the money supply, thereby boosting economic activity.
Explanation: Buying bonds in the open market helps increase the money supply, thereby boosting economic activity.
36. A reason for the survival of small firms is:
Correct Answer: C. Nature of the product
Explanation: Small firms often thrive due to the specialized or unique nature of their products, catering to niche markets.
Explanation: Small firms often thrive due to the specialized or unique nature of their products, catering to niche markets.
37. Which of the following curves represents a proportionate tax system?
Correct Answer: B. Curve (ii)
Explanation: A proportionate tax system, or flat tax, implies a constant tax rate regardless of income level, represented by a straight-line curve.
Explanation: A proportionate tax system, or flat tax, implies a constant tax rate regardless of income level, represented by a straight-line curve.
38. Which of the following is found in the public sector?
Correct Answer: A. Municipal undertaking
Explanation: Municipal undertakings are government-run entities that provide services like water, electricity, or transportation within a municipality.
Explanation: Municipal undertakings are government-run entities that provide services like water, electricity, or transportation within a municipality.
39. Students scored the following marks in a test: 10, 15, 9, 8, 10, 11, 9, 10 and 6.
Correct Answer: C. 10
Explanation: The mode of the marks (most frequent score) is 10, as it appears three times.
Explanation: The mode of the marks (most frequent score) is 10, as it appears three times.
40. A market characterized by many buyers and sellers is known as:
| Output (kg) | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| Total Costs (FCFA) | 100 | 150 | 175 | 200 |
Correct Answer: D. Perfect competition
Explanation: Perfect competition features many buyers and sellers, each having no control over the price.
Explanation: Perfect competition features many buyers and sellers, each having no control over the price.
41. A business that focuses on producing one type of product is known as a:
Correct Answer: C. Specialization
Explanation: Specialization occurs when a company focuses on producing a single type of product or service to improve efficiency and expertise.
Explanation: Specialization occurs when a company focuses on producing a single type of product or service to improve efficiency and expertise.
42. Which of the following factors affects the demand for a good or service?
Correct Answer: B. The price of the good or service
Explanation: The demand for a good or service typically decreases as the price increases, according to the law of demand.
Explanation: The demand for a good or service typically decreases as the price increases, according to the law of demand.
43. The term ‘economies of scale’ refers to:
Correct Answer: A. Reduction in the cost per unit as output increases
Explanation: Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with the cost per unit of output generally decreasing as the scale of output increases.
Explanation: Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with the cost per unit of output generally decreasing as the scale of output increases.
44. A country that specializes in the production of a good has a:
Correct Answer: A. Comparative advantage
Explanation: Comparative advantage occurs when a country can produce a good at a lower opportunity cost compared to other countries, making it efficient to specialize in that good.
Explanation: Comparative advantage occurs when a country can produce a good at a lower opportunity cost compared to other countries, making it efficient to specialize in that good.
45. The main aim of fiscal policy is to:
Correct Answer: C. Influence economic activity
Explanation: Fiscal policy involves government spending and taxation to influence the economy's overall level of activity.
Explanation: Fiscal policy involves government spending and taxation to influence the economy's overall level of activity.
46. A firm that is a price taker operates in a market that is:
Correct Answer: B. Perfect competition
Explanation: In perfect competition, firms are price takers, meaning they accept the market price as given and cannot influence it.
Explanation: In perfect competition, firms are price takers, meaning they accept the market price as given and cannot influence it.
47. A monopolist maximizes profits by producing where:
Correct Answer: B. Marginal cost equals marginal revenue
Explanation: A monopolist maximizes profit by producing the quantity of output where marginal cost equals marginal revenue.
Explanation: A monopolist maximizes profit by producing the quantity of output where marginal cost equals marginal revenue.
48. Which of the following is an example of a public good?
Correct Answer: A. National defense
Explanation: Public goods are non-excludable and non-rivalrous, meaning that no one can be excluded from using them, and one person's use does not reduce their availability to others. National defense is an example.
Explanation: Public goods are non-excludable and non-rivalrous, meaning that no one can be excluded from using them, and one person's use does not reduce their availability to others. National defense is an example.
49. The law of demand states that as the price of a good increases, the quantity demanded:
Correct Answer: B. Decreases
Explanation: According to the law of demand, as the price of a good rises, the quantity demanded typically falls, assuming all other factors remain constant.
Explanation: According to the law of demand, as the price of a good rises, the quantity demanded typically falls, assuming all other factors remain constant.
50. What is the primary goal of monetary policy?
Correct Answer: B. Control inflation and stabilize the economy
Explanation: The primary goal of monetary policy is to manage inflation and ensure the economy remains stable through tools like interest rates and money supply control.
Explanation: The primary goal of monetary policy is to manage inflation and ensure the economy remains stable through tools like interest rates and money supply control.
