Free GCE O Level Economics June 2024 Past Paper 1 Questions

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Subject Code	0525
Subject Title	O Level Economics
Session	June 2024 Paper 1

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Cameroon GCE O Level Economics Paper 1 Solution - June 2024

1. Touch-light and battery are good examples of:

A. Joint demand

B. Composite demand

C. Competitive demand

D. Derived demand

The correct answer is Derived demand. Derived demand occurs when a product is needed because of the demand for another product.

2. The supply of labour can be increased by:

A. An increase in the school leaving age

B. An increase in vocational training

C. An increase in retirement age

D. An increase in welfare services

The correct answer is An increase in vocational training, which equips people with skills needed to enter the workforce.

3. Which one of the following is likely to cause inflation?

A. An increase in direct taxes

B. Budget surpluses

C. Sale of securities to the public

D. An increase in indirect taxes

The correct answer is Budget surpluses, which can lead to increased government spending, a factor contributing to inflation.

4. Weight-losing industries are likely to locate:

A. Near the source of raw materials

B. Near the source of power

C. Near the source of labour

D. Near the market

The correct answer is Near the source of raw materials. Weight-losing industries reduce weight in production, so it's efficient to locate near raw materials.

5. Assuming there are four consumers of fish in a town; Mrs. X, Miss A, BC, and DT. From Monday to Saturday, Miss A bought 4kg on Monday and 3kg on Saturday, Miss B bought 3kg on Tuesday, and 5kg on Sunday respectively, while BC consumed Wednesday and Thursday. What is the weekly demand at 850 Fefa per kg?

A. 18kg

B. 22kg

C. 26kg

D. 30kg

The correct answer is 22kg. The total demand is calculated by summing up the weekly consumption of all four consumers.

6. Question 6 is based on the following data on population:

Population (millions)	Food production (million tons)
50	220
70	210
90	275

A. 60

B. 80

C. 90

D. 100

The correct answer is 80. Use the data table to calculate the optimum population size.

7. A tax system in which the tax rate increases as income rises is described as:

A. Regressive tax

B. Progressive tax

C. Flat rate tax

D. Proportional tax

The correct answer is Progressive tax, where tax rates increase as the taxable income grows.

8. The following data represents some items of a commercial bank's balance sheet:

ITEMS	AMOUNT (Fefa)
Site deposit	25
Loans and advances	35
Current account	65
Coin and bank notes	10

A. 35m Fefa

B. 25m Fefa

C. 65m Fefa

D. 130m Fefa

The correct answer is 65m Fefa, calculated as the total liabilities of the bank.

9. The productivity of labour is defined as:

A. Maximum number of hours worked

B. Output per worker in a short time

C. Output per worker in a given time

D. Average output produced

The correct answer is Output per worker in a given time, which reflects the efficiency of labour in production.

10. Disequilibrium unemployment is said to exist when:

A. There is excess demand

B. Labour supply equals demand

C. There is full employment

D. There is a shortage of capital

The correct answer is There is excess demand. Disequilibrium occurs when market forces are not in balance.

11. When the price of gari increases from 50Fefa to 60Fefa, the quantity of gari consumed reduces from 500 units to 450 units. The coefficient of price elasticity of supply is:

A. 0.5

B. 0.3

C. 0.7

D. 0.9

The correct answer is 0.3. The elasticity is calculated using the formula for price elasticity of demand.

12. The principle of "limited liability" implies that:

A. Shareholders are liable up to their share capital

B. The debts of the company are paid using assets

C. Shareholders do not have to pay debts

D. The shareholder takes the debt

The correct answer is Shareholders are liable up to their share capital, ensuring personal assets are not at risk.

13. The bank rate is generally fixed by:

A. ECO Bank

B. BEEC

C. BEAC

D. NFC

The correct answer is ECO Bank. The bank rate, also known as the discount rate, is the interest rate at which a central bank lends money to commercial banks. ECO Bank, in this context, serves as the governing institution responsible for fixing this rate to regulate monetary policy and influence the overall economic environment.

14. The following are items of a country's balance of payments:

ITEMS	MILLIONS (Fefa)
Visible imports	17,000
Visible exports	15,000
Invisible imports	10,000
Invisible exports	20,000

What is the value of the balance of trade?

A. 8,000 M Fefa

B. 2,000 M Fefa

C. -2,000 M Fefa

D. -10,000 M Fefa

The correct answer is -2,000 M Fefa. The balance of trade is calculated as the difference between visible exports and visible imports. In this case, 15,000 M (exports) - 17,000 M (imports) = -2,000 M. A negative balance indicates a trade deficit where imports exceed exports.

15. Given that fixed cost is 50,000 Fefa, variable cost is 150,000 Fefa, and the output is 50 units, what would be the average total cost of producing one unit?

A. 3,000 Fefa

B. 4,000 Fefa

C. 5,000 Fefa

D. 4000.6 Fefa

The correct answer is 5,000 Fefa. Average total cost is calculated as the total cost (fixed cost + variable cost) divided by the output. In this case, (50,000 + 150,000) / 50 = 200,000 / 50 = 5,000 Fefa per unit.

16. The incidence of a tax implies:

A. The effect of the tax

B. The burden of the tax

C. The base of the tax

D. The rate of the tax

The correct answer is "The burden of the tax." Tax incidence refers to the analysis of the effect of a particular tax on the distribution of economic welfare. It identifies who ultimately bears the tax burden—consumers or producers—depending on elasticity of demand and supply.

17. The merging of firms engaged in different stages of production is referred to as:

A. Horizontal integration

B. Vertical integration

C. Diversification

D. Lateral integration

The correct answer is "Vertical integration." This occurs when firms at different stages of production or supply within the same industry combine, such as a manufacturer acquiring its supplier or distributor, to control the supply chain and reduce costs.

18. A black market is the result of:

A. Minimum price control

B. Price competition

C. Maximum price control

D. Price regulation

The correct answer is "Maximum price control." Black markets often arise when governments impose a price ceiling, leading to shortages in supply. This forces buyers to seek goods illegally at higher prices than the set maximum.

19. Factory building, machinery, and raw materials are examples of:

A. Consumer goods

B. Capital goods

C. Social services

D. Public wealth

The correct answer is "Capital goods." These are physical assets used by companies to produce goods and services. Unlike consumer goods, capital goods are not finished products meant for consumption but are essential for production.

20. A characteristic of plantation agriculture is:

A. Mixed cropping

B. Mono cropping

C. Bush fallowing

D. Shifting cultivation

The correct answer is "Mono cropping." Plantation agriculture typically involves the cultivation of a single crop on a large scale for commercial purposes, such as tea, coffee, or rubber. It relies heavily on labor and may include export-oriented production.

21. The use of government income and expenditure to regulate the economy falls under:

A. Physical policy

B. Monetary policy

C. Fiscal policy

D. Regional policy

The correct answer is "Fiscal policy." Fiscal policy involves government adjustments to its spending levels and tax rates to influence a country's economy. It aims to achieve economic stability, control inflation, and encourage growth.

22. If we assume that the demand for a good is represented by Qd=20-2P and supply by Qs=6+P, where P represents the price of the good and Q represents quantity demanded or supplied, what is the equilibrium quantity?

A. 6 units

B. 8 units

C. 12 units

D. 18 units

The correct answer is "12 units." To find the equilibrium quantity, set Qd = Qs.
Qd = 20 - 2P and Qs = 6 + P, so:
20 - 2P = 6 + P.
Solve for P: 20 - 6 = 3P ⟹ P = 14 / 3.
Substitute P into either equation to get Qd or Qs. Qd = 12 units, which equals the equilibrium quantity.

23. The following data represents the quantities of fish bought by seven restaurants in a market: 30, 70, 40, 30, 20, 10. The mode will be:

A. 30

B. 40

C. 50

D. 20

The correct answer is "30." The mode is the most frequently occurring number in a data set. In this case, 30 appears twice, while all other numbers appear once.

24. A fall in the external value of a country's currency due to changes in the forces of demand and supply is referred to as:

A. Revaluation of the currency

B. Evaluation of the currency

C. Depreciation of the currency

D. Devaluation of the currency

The correct answer is "Depreciation of the currency." Currency depreciation occurs in a floating exchange rate system when the value of a currency decreases relative to others due to market forces like demand and supply, rather than government intervention.

25. The price paid for human efforts in production is known as:

A. Bonus

B. Wages

C. Salary

D. Profit

The correct answer is "Salary." A salary refers to the fixed payment made to workers or employees for their labor. It is distinct from profit (return on capital) or wages (often associated with hourly payments).

26. Given that a country has a Gross National Product of 200 million Fefa in a year with a population of 5 million inhabitants, the Gross National Product per capita will be:

A. 400

B. 40

C. 20

D. 100

The correct answer is "40." To calculate the Gross National Product (GNP) per capita, divide the total GNP by the population:
GNP per capita = Total GNP / Population = 200 million Fefa / 5 million people = 40 Fefa per capita.
This metric helps in understanding the average income or output per individual in the country.

27. If the birth rate of a country remains constant and the death rate declines, population size will:

A. Fall

B. Expand

C. Resume constant

D. Fluctuate

The correct answer is "Resume constant." When the birth rate remains unchanged and the death rate falls, it means there is a reduced number of deaths in the population. However, the population size will stabilize at a constant level over time, assuming other factors like migration remain constant.

28. When Mr. A is granted a loan of 300,000Ffs on an interest of 3% per annum, the interest he will pay per year will be:

A. 3000Ffs

B. 9000Ffs

C. 1000Ffs

D. 90000Ffs

The correct answer is "9000Ffs." To calculate the interest:
Interest = Principal × Rate × Time = 300,000Ffs × 3% × 1 year
Interest = 300,000 × 0.03 = 9,000Ffs.
This calculation assumes that the loan is a simple interest loan.

29. Small farms that grow cash crops to later supply the main plantations are called:

A. Small plantations

B. Subsistence farms

C. Cash farms

D. Smallholder schemes

The correct answer is "Smallholder schemes." These are small-scale farms that produce cash crops specifically for sale to larger plantations or organizations, acting as an important component in agricultural supply chains.

30. The expression "Terms of trade" is used to describe:

A. The difference between invisible export and imports

B. The difference between visible export and import

C. The ratio at which exports are exchanged for imports

D. The rate at which the country’s currency is exchanged for another

The correct answer is "The ratio at which exports are exchanged for imports." Terms of trade represent the relative prices of a country's exports compared to its imports, reflecting the purchasing power of exports in terms of imports.

31. A firm produces 50 units of output with a total variable cost (TVC) of 2000Ffs and total fixed cost (TFC) of 3000Ffs. Its average cost will be:

A. 4

B. 2

C. 10

D. 6

The correct answer is "10." The average cost (AC) is calculated by dividing the total cost (TC) by the quantity of output produced:
Total Cost (TC) = Total Variable Cost (TVC) + Total Fixed Cost (TFC) = 2000Ffs + 3000Ffs = 5000Ffs
Average Cost (AC) = Total Cost / Quantity = 5000Ffs / 50 units = 10Ffs per unit.
This shows the cost per unit of production, including both fixed and variable costs.

32. Question 32 is based on the diagram below showing various tax systems:

Which curve represents the proportional tax system?

A. D

B. C

C. B

D. A

The correct answer is "C." In a proportional tax system, the tax rate remains constant regardless of the income level, leading to a linear relationship where tax paid increases proportionally to income. Curve Z best represents this constant proportionality.

33. Which of the following is an example of a non-renewable resource?

A. Mineral deposit

B. Skilled labor

C. Unskilled labor

D. Forest

The correct answer is "Mineral deposit." Non-renewable resources are those that cannot be replenished within a human lifetime, such as fossil fuels or minerals. In contrast, skilled labor, unskilled labor, and forests can either be renewed or replaced under the right conditions.

34. An approach of calculating national income that involves the addition of the final values of transport, agriculture, and other services is known as:

A. Expenditure method

B. Output method

C. Value-added method

D. Price method

The correct answer is "Value-added method." This method calculates the national income by adding up the value added at each stage of production across all sectors in the economy, avoiding double counting by considering only the final contribution of each producer.

35. The type of capital invested that carries the least risk is:

A. Ordinary shares

B. Cumulative preference shares

C. Participating preference shares

D. Ordinary shares

The correct answer is "Cumulative preference shares." These shares offer fixed dividends, which must be paid before any dividends can be distributed to ordinary shareholders, thus ensuring lower risk to the investor.

36. Which of the following is a limitation to credit creation by commercial banks?

A. Availability of loans

B. An increase in collateral security

C. Availability of cash reserves

D. An increase in deposits

The correct answer is "Availability of cash reserves." The ability of commercial banks to create credit is directly tied to the cash reserves they hold. If these reserves are insufficient, it limits their capacity to issue loans, as regulatory requirements dictate a minimum reserve ratio to ensure the stability of the banking system.

37. Scarcity will continue to be a global problem in the future because:

A. Limited human needs

B. Unlimited land areas

C. Limited resources and unlimited wants

D. Continuous expansion of resources

The correct answer is "Limited resources and unlimited wants." Scarcity arises because the resources available to meet human needs and wants are finite, whereas human desires and demands are effectively limitless. This fundamental economic problem persists irrespective of advances in technology or resource allocation.

38. Which of the following is an example of an invisible item in the balance of payments?

A. Import of food items

B. Export of cars from Cameroon

C. Delivery of tourism services

D. Loans from IMF

The correct answer is "Delivery of tourism services." Invisible items in the balance of payments refer to non-tangible transactions such as services, remittances, and royalties. Tourism services involve transactions for non-physical goods, making them a clear example of an invisible item.

39. One common feature of a perfect market is:

A. Large number of buyers and few sellers

B. Similar knowledge of market

C. Product differentiation

D. Homogeneous products

The correct answer is "Homogeneous products." In a perfect market, all products are identical (homogeneous), leading to no brand differentiation. Buyers and sellers have complete knowledge of prices, and there are no barriers to entry or exit.

40. The natural increase in population occurs when:

A. Immigration exceeds birth rates

B. Death rate exceeds birth rates

C. Birth rate exceeds death rate

D. Emigration exceeds immigration

The correct answer is "Birth rate exceeds death rate." The natural increase in population refers to growth due to the excess of births over deaths in a given time period, not accounting for migration factors.

41. One cause of economic growth in an economy is:

A. Increase in output

B. Increase in technology

C. Increase in consumption

D. Increase in tax revenue

The correct answer is "Increase in output." Economic growth occurs when there is a sustained increase in the production of goods and services in an economy over time, often driven by improved efficiency, technology, and capital investment.

42. Payments made by the state to persons with no services rendered is called:

A. Transfer payments

B. Free gifts

C. Social security payments

D. Pensions

The correct answer is "Free gifts." These payments, often classified as transfer payments, are made without requiring any direct service or exchange, helping to support the unemployed or those in need.

43. A shareholder that partakes in the profit of a limited liability business, receives:

A. Wages or salaries

B. Dividends

C. Profits

D. Interest

The correct answer is "Dividends." Shareholders receive a portion of the profits, called dividends, which are distributed based on the number of shares they own.

44. One of the features of an underdeveloped economy is:

A. High unemployment rate

B. High inflation rate

C. High capacity utilization

D. Economic stability

The correct answer is "High unemployment rate." Underdeveloped economies are characterized by limited industrialization, underutilization of resources, and high rates of unemployment and poverty.

45. Roads and law and order, are examples of:

A. Merit goods

B. Free goods

C. Economic goods

D. Public goods

The correct answer is "Public goods." These are non-excludable and non-rivalrous, meaning that their use by one individual does not reduce availability for others, and it is difficult to exclude anyone from using them.

46. Given that fish and meat are substitutes, if the price of fish increases then the quantity demanded of meat will:

A. Increase

B. Remain constant

C. Fluctuate

D. Decrease

The correct answer is "Increase." When the price of a substitute good (fish) rises, consumers are likely to switch to the alternative (meat), leading to an increase in the quantity demanded of meat.

47. An example of a trade restriction that yields revenue to the state is:

A. Excise duties

B. Tariffs

C. Quotas

D. Value added tax

The correct answer is "Tariffs." Tariffs are taxes imposed on imported goods, and the revenue collected from these taxes goes to the state. They are also used to regulate trade and protect domestic industries.

48. An economic system in which the price helps to allocate resources is known as:

A. Mixed economic system

B. Market economic system

C. Economic system in transition

D. Planned economic system

The correct answer is "Market economic system." In this system, resources are allocated based on the interaction of supply and demand, with prices acting as signals to guide decisions.

49. One economic effect of inflation in an economy is that:

A. It encourages savings

B. It favors fixed income earners

C. It favors investors

D. It discourages borrowing

The correct answer is "It encourages savings." Inflation erodes the purchasing power of money over time, prompting individuals to save and invest in assets that may appreciate in value to preserve their wealth.

50. What name is given to a market situation with a few large sellers dominating the supply of a particular product?

A. Monopoly

B. Oligopoly

C. Perfect competition

D. Monopsony

The correct answer is "Oligopoly." An oligopoly is characterized by a market structure where a small number of large firms dominate, often leading to limited competition and potential for collusion or price-setting.

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