IGCSE - Mock 2 Econ Paper 2 QP

THE INDIAN PUBLIC SCHOOL
Model Examination 2 – August 2023
ECONOMICS (0455) Paper 2: Structured Questions

Maximum Marks: 90 Time: 2 Hours 15 Minutes
___________________________________________________________________
You must answer on the enclosed answer booklet.
You will need: Answer booklet (enclosed)
_________________________________________________________________________________________
INSTRUCTIONS
● Answer four questions in total:
Section A: answer Question 1.
Section B: answer three questions.
● Follow the instructions on the front cover of the answer booklet. If you need additional answer paper, ask the
invigilator for a continuation booklet
● You may use a calculator.
_________________________________________________________________________________________
INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ]
1
Section A
Answer this question.
1. Coal mining Coal is used directly to heat homes throughout the world and produces more than 40% of the
world’s electricity. There are, however, a number of challenges facing the coal industry. These include
increasing concerns about the environmental effects of using coal and the increased competition from other
fuels. Mining and using coal to produce electricity causes air pollution. Coal-fired power stations emit carbon
dioxide, which has a harmful effect on people’s health. Wildlife habitats are damaged when new mines are
opened and when coal waste is dumped on landfill sites. However, demand for coal has declined recently. This
resulted in the price of a tonne of coal falling from US$300 in 2010 to US$150 in 2015. Even China, the
world’s largest consumer of coal, purchased less in 2015. Some high-cost deep mines were closed in the USA.
In the same year, Europe’s largest producer, Poland, sold coal at a loss of US$37 a tonne. The fall in demand for
coal arises partly from competition from renewable energy. For instance, advances in technology are reducing
the costs of producing energy from wind power. Fig. 1 shows how the market for wind power changed in 2015.
Some countries protect their energy industries from foreign competition, in some cases to reduce a current
account deficit. The governments of a number of coal-producing countries also regulate their coal industries.
The extent of government intervention is influenced by the type of economic system operated.
2
(a) Identify, using information from the extract, two external costs that arise from using coal to produce
electricity. [2]
(b) Explain two reasons why a firm may continue to produce a good despite making a loss. [4]
(c) Calculate, using information from the extract:
(i) the percentage fall in the price of coal between 2010 and 2015 [2]
(ii) the cost (in US$) of producing a tonne of coal in Poland in 2015. [2]
(d) Analyse how resources are allocated in a mixed economy. [5]
(e) Discuss whether governments should regulate the coal industries of their countries. [5]
(f) Explain, using information from the extract and Fig. 1, what happened to the market for wind power in
2015. [4]
(g) Discuss whether a government should use trade protection to reduce a current account deficit.
[6]
Section B
Answer any three questions.
2. In the Netherlands in 2018, there were 1.3 bicycles per person and the world’s largest underground bicycle
parking area was built in the capital city. Land is scarce in city centres, where most cycling takes place.
Demand for bikes in the Netherlands is price-inelastic. Only a few people in the Netherlands borrow money to
buy bikes. The government encourages cycling by spending on both bike parking areas and leisure cycle parks.
(a) Identify one difference between land and labour. [2]

(b) Explain two reasons why demand for a product may be price-inelastic. [4]
(c) Analyse why households in one country may borrow more than households in another country. [6]
(d) Discuss whether or not a government should encourage more people to cycle. [8]
3. Sweden has a mixed economic system. In 2018, it was operating at a point inside its production possibility
curve (PPC). In 2018, the country’s schools employed nearly 2500 extra teachers. A few of these had previously
been actors. A higher number had previously been government officials involved with regulation of Swedish
monopolies.
(a) Define a mixed economic system. [2]

(b) Explain the difference between a point inside a PPC and a point outside a PPC. [4]
(c) Analyse why an actor may decide to become a teacher. [6]
(d) Discuss whether all monopolies have low costs of production. [8]
3
4. Uruguay’s inflation rate reached 8.4% in July 2018. The central bank considered increasing the interest rate
to reduce the inflation rate. An increase in interest rates might influence total demand in an economy and lead to
an appreciation of its currency. This might influence Uruguay’s exports, especially soybean exports. The total
revenue of Uruguay’s soybean firms might change if there is an appreciation of the Uruguayan peso.
(a) Define total revenue. [2]

(b) Explain two causes of inflation. [4]
(c) Analyse how an increase in the interest rate could reduce total demand in an economy. [6]
(d) Discuss whether or not an appreciation of a country’s domestic currency will have negative effects on its
economy. [8]
5. Some economists criticise high government spending and trade unions for creating market disequilibrium.
However, trade unions may also play a key role in economic development. There are over 60 trade unions in
Singapore, in both labour-intensive and capital-intensive industries.
(a) Define market disequilibrium. [2]
(b) Explain the difference between labour-intensive and capital-intensive industries. [4]
(c) Analyse how trade unions could increase economic development. [6]
(d) Discuss whether or not high government spending can help a government achieve its macroeconomic aims.
[8]

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THE INDIAN PUBLIC SCHOOL

Model Examination 2 – August 2023

ECONOMICS (0455) Paper 2: Structured Questions

You will need: Answer booklet (enclosed)

● Answer four questions in total:

Section A: answer Question 1.

Section B: answer three questions.

● You may use a calculator.

● The total mark for this paper is 90.

Answer this question.

Answer any three questions.

(a) Identify one difference between land and labour. [2]

(a) Define a mixed economic system. [2]

(a) Define total revenue. [2]

(a) Define market disequilibrium. [2]

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