| Subject Code | 0525 |
| Subject Title | O Level Economics |
| Session | June 2021 Paper 1 |
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Cameroon GCE O Level Economics Paper 1 Solution - June 2021
1. A determinant of price elasticity of supply is:
Explanation: Time period affects how supply responds to price changes; in the short term, supply is often less elastic.
2. Which of the following is the main aim of conglomerates?
Explanation: Conglomerates aim to spread risk by producing diverse goods in different industries.
3. The main feature of money in an economy is:
Explanation: Money functions effectively only when widely accepted in exchange for goods and services.
4. The most important problem that affects the agricultural sector in Cameroon is:
Explanation: Diseases and pests severely impact crop yields and livestock health, reducing overall agricultural productivity.
Study the table below carefully and answer the questions that follow:
| Price (FCFA) | Quantity Demanded ('000) | Quantity Supplied ('000) |
|---|---|---|
| 201600 | 2 | 6 |
| 160 | 3 | 5 |
| 120 | 4 | 4 |
| 80 | 5 | 3 |
| 40 | 6 | 2 |
5. If the government fixed a minimum price at 160 CFA per unit, how much will this cost the government?
Explanation: The cost to the government is calculated based on the surplus quantity at the minimum price.
6. Based on the table below showing population and output, what is the average output per person when the population is 30 million?
| Population (in million) | Output of Food (in million tons) |
|---|---|
| 15 | 30 |
| 20 | 50 |
| 30 | 90 |
| 40 | 110 |
Explanation: Average output is determined by dividing total output by the population. In this case, 90 million tons ÷ 30 million people = 3 tons per person.
7. The national debt is defined as:
Explanation: National debt encompasses both domestic and foreign debt owed by the government.
8. If the initial deposit of a bank is 1,000,000 FCFA and the cash ratio is 12.5%, the amount the bank will create as a deposit will be:
Explanation: The deposit multiplier is 1 ÷ cash ratio (0.125), so 1,000,000 × 8 = 12,500,000 FCFA.
9. The main aim of backward and vertical integration is to:
Explanation: Backward integration ensures control over inputs, reducing dependency on suppliers.
10. Unemployment caused by a fall in the general level of aggregate demand is known as:
Explanation: Cyclical unemployment arises due to reduced economic activity during downturns in the business cycle.
11. The main function of commercial banks is:
Explanation: Commercial banks primarily function as intermediaries, accepting deposits and providing credit to individuals and businesses.
12. When a country’s currency depreciates, what is most likely to happen?
Explanation: Currency depreciation lowers the price of domestic goods in foreign markets, increasing export competitiveness.
13. The market structure where there is only one seller is called:
Explanation: A monopoly is a market structure where a single seller dominates the market, with no close substitutes for the product.
14. The increase in the general level of prices over a period of time is referred to as:
Explanation: Inflation is characterized by a sustained increase in the general price level of goods and services in an economy over time.
15. Use the table below to answer the question that follows:
| Total cost (FCFA) | 120 | 190 | 220 | 235 | 240 |
|---|---|---|---|---|---|
| Output (kg) | 0 | 1 | 2 | 3 | 4 |
The value of the fixed cost at an output of zero is:
Explanation: The fixed cost is the total cost when the output is zero, which in this case is 120 FCFA.
16. If the government wishes to reduce inequalities in income, it would apply which of the following tax systems:
Explanation: A progressive tax system taxes higher incomes at a higher rate, reducing income inequality.
17. Street lighting, law and order, and national defense are examples of:
Explanation: These are services provided by the government that are non-excludable and non-rivalrous, such as street lighting and defense.
18. Retailers in an economy perform the main function of:
Explanation: Retailers act as intermediaries in the exchange process, connecting producers to consumers.
19. Crude oil is an example of:
Explanation: Crude oil is a natural resource classified under the factor of production known as land.
20. A system of agriculture carried on a large scale with modern techniques of production is known as:
Explanation: Plantation agriculture is characterized by large-scale farming with modern methods and techniques.
21. Full employment can be described as a situation where:
Explanation: Full employment refers to a situation where everyone willing and able to work can find employment.
22. This question is based on the diagram below:
Which part of the curve represents abnormal demand?
Explanation: Abnormal demand occurs when the demand curve behaves in an unusual manner, such as rising as price increases.
23. Question 23 is based on the utility table below, which shows the level of satisfaction for beans consumed:
| Quantity (in units) | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Marginal utility (utils) | 18 | 10 | 6 | 2 | 0 | -1 |
What is the total utility when 4 units of beans are consumed?
Explanation: Total utility is the sum of marginal utilities. For 4 units: 18 + 10 + 6 + 2 = 36 utils.
24. The economic organization that replaced GATT is:
Explanation: The World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade (GATT) in 1995.
25. Another name for fixed cost is:
Explanation: Fixed costs are often referred to as supplementary costs as they do not change with the level of output.
26. This question is based on the table below:
| Year | 2011 | 2012 |
|---|---|---|
| Gross National Product (million FCFA) | 30 | 42 |
| Population (000) | 20 | 24 |
What is the increase in per capita income?
Explanation: Per capita income = GNP ÷ Population. For 2011: 30M ÷ 20K = 1,500 FCFA. For 2012: 42M ÷ 24K = 1,750 FCFA. The increase is 1,750 - 1,500 = 250 FCFA.
27. Which of the following will likely cause the size of the working population of a country to reduce?
Explanation: Emigration reduces the number of people available for work in a country, thus reducing the working population.
28. A commercial bank receives an initial deposit of 20,000,000 FCFA. Given that it operates with a cash ratio of 5%, how much should the bank keep as reserve?
Explanation: The cash reserve is calculated as 5% of the total deposit: 5% of 20,000,000 = 1,000,000 FCFA.
29. Which of the following factors can lead to an increase in industrialization in Cameroon?
Explanation: Subsidies to home industries help reduce production costs, encouraging industrialization.
30. What is the full meaning of C.I.F as used in international trade?
Explanation: C.I.F refers to the cost, insurance, and freight, covering the cost of the goods, insurance, and transportation to the destination port.
31. Question 31 is based on the table below:
| No. Of workers | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
|---|---|---|---|---|---|---|---|
| Total outputs (units) | 24 | 46 | 60 | 84 | 95 | 110 | 115 |
From the table above calculate the average product of the fifth worker.
Explanation: Average product of the fifth worker = (Total output with 5 workers) - (Total output with 4 workers) = 95 - 84 = 11 units. The average product per worker is then calculated as 11 units divided by the number of workers.
32. If an enterprise declares a profit of 5 million FCFA and pays 10% corporation tax, the tax base is:
Explanation: The tax base is the taxable amount before tax, which is 10% of 5 million FCFA = 500,000 FCFA.
33. The main activity of the primary stage of production is:
Explanation: The primary stage of production involves the extraction of natural resources, such as mining, agriculture, and fishing.
34. Which of the following is the primary function of money in an economy?
Explanation: The primary function of money is to serve as a medium of exchange, allowing people to buy and sell goods and services.
35. If a country’s currency depreciates, what is the likely effect on its exports?
Explanation: A depreciation of the currency makes a country’s goods cheaper for foreign buyers, potentially increasing exports.
36. Which of the following is a characteristic of monopolistic competition?
Explanation: Monopolistic competition is characterized by firms offering differentiated products, meaning they are similar but not identical.
37. What is the main purpose of the central bank of a country?
Explanation: The central bank's primary role is to manage the nation's monetary policy, including controlling inflation and stabilizing the currency.
38. What type of business organization is best for a large-scale operation that involves high capital investment?
Explanation: A corporation is ideal for large-scale operations because it can raise significant capital by issuing shares and has a separate legal identity.
39. Which of the following best describes the process of globalization?
Explanation: Globalization refers to the increasing interconnectedness of economies, cultures, and societies through trade, technology, and communication.
40. In economic terms, what does 'GDP' stand for?
Explanation: GDP measures the total value of all goods and services produced within a country's borders during a specific time period.
41. Which of the following is the best example of a public good?
Explanation: Public goods are non-excludable and non-rivalrous, meaning they are available to all without diminishing their availability to others. National defense is an example.
42. Any addition to the stock of capital is called:
Explanation: Net investment refers to the addition to the stock of capital after accounting for depreciation.
43. A public limited company issued 100 preference shares at 60FCFA per share and 150 ordinary shares at 20FCFA per share. What percentage of the company’s capital is contributed by the preference shareholders?
Explanation: The total capital raised is (100 x 60) + (150 x 20) = 6000 + 3000 = 9000 FCFA. The capital from preference shares is 100 x 60 = 6000 FCFA. Thus, the percentage of capital contributed by preference shareholders is (6000 / 9000) * 100 = 40.6%.
44. Economic growth is slower in developing countries because of:
Explanation: Economic growth is often slower in developing countries due to low levels of savings and investment, which hampers capital accumulation.
45. Which of the following is a limitation of labour?
Explanation: A limitation of labor is monotony, which occurs when workers perform repetitive tasks, leading to a decrease in motivation and productivity.
46. Question 46 is based on the diagram below
Explanation: Excess demand occurs when the quantity demanded exceeds the quantity supplied at the current price level.
47. The value of a country’s visible exports is 500,000FCFA and that of her visible imports is 625,000FCFA. This indicates:
Explanation: An unfavorable balance of trade occurs when a country’s imports exceed its exports, which in this case is true since imports (625,000) are greater than exports (500,000).
48. Which of the following is another name for a command economy?
Explanation: A command economy is also known as a socialist economy, where the government controls all aspects of production and distribution of goods.
49. Which of the following is a liability to a commercial bank?
Explanation: Bank deposits are liabilities because they represent the amount the bank owes to its customers.
50. “Good of ostentation” refers to those good:
Explanation: "Goods of ostentation" are luxury goods that people buy to show off their wealth, and demand for them increases as prices rise.
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