Cambridge IGCSE Economics: International specialisation, globalisation, MNCs and free trade (0455) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

This set tests sections 6.1.1, 6.1.2 and 6.2.1 to 6.2.3 of the Cambridge IGCSE Economics 0455 syllabus for examination in 2026. All countries, firms and figures are invented. Teaching is in the study guide and the revision notes. Other links: the Cambridge IGCSE Economics hub, the printable checklist and the free diagnostics.

Questions

1. Define globalisation. [2]

2. State the two broad bases for specialisation at national level. [2]

3. Country R and Country S each have 40 worker-years. Each worker-year makes the following.

	Fish (tonnes)	Wheat (tonnes)
Country R, all on one good	10	5
Country S, all on one good	6	6

Each country currently splits its worker-years equally between the two goods.

(a) Calculate the opportunity cost of one tonne of wheat in each country. [2] (b) State which country should make fish, with a reason. [2] (c) Calculate the combined output of each good before specialisation. [2] (d) Calculate the combined output after full specialisation, and the gain in each good. [2]

4. A firm has fixed costs of 250,000 and variable costs of 6 per unit.

(a) Calculate average cost when output is 25,000 units. [2] (b) Calculate average cost when exports raise output to 100,000 units. [2] (c) Calculate the percentage fall in average cost, to 1 decimal place. [1] (d) Explain why selling abroad can lower average cost. [2]

5. Explain two disadvantages of specialisation at national level for an economy. [4]

6. Country T exports 200,000 tonnes of a mineral at 150 per tonne. Total exports are 50 million. The world price falls by 12%.

(a) Calculate earnings from the mineral before and after the fall, assuming volume is unchanged. [2] (b) Calculate the percentage fall in total export earnings. [2] (c) Explain why the government of Country T might want to diversify its exports. [2]

7. Country U (illustrative): exports 55, imports 65 and GDP 400 in year 1. In year 2 exports are 70, imports 80 and GDP 420.

(a) Calculate trade as a percentage of GDP in each year, to 1 decimal place. [2] (b) Explain what the change suggests about Country U and globalisation. [2]

8. An MNC runs a factory in Host Country V. Annual revenue is 90 million. Costs are wages 12 million, local suppliers 18 million, imported parts 20 million and other local costs 10 million. Tax is 20% of profit, and 75% of after-tax profit is sent to the home country.

(a) Calculate profit before tax. [1] (b) Calculate the tax paid. [1] (c) Calculate the profit sent to the home country. [2] (d) Calculate how much of the 90 million stays in Host Country V. [2]

9. (a) Explain two costs to a host country of hosting an MNC. [4] (b) Explain one benefit and one cost to the home country of its MNC operating abroad. [4]

10. Discuss whether MNCs bring more benefits than costs to a host country. [8]

11. In Country W the price of a washing machine is 200 and 30,000 are sold a year. After the market opens to imports, the price falls to 160 and sales rise to 42,000.

(a) Calculate the percentage change in price. [1] (b) Calculate the percentage change in quantity sold. [1] (c) Calculate total spending before and after, and the percentage change. [3] (d) Explain two benefits of free trade for producers. [4]

Answers

1. The growing integration and interdependence of the world’s economies [1] through trade, capital, labour, technology or information flows [1]. [2] Examiner insight: A definition earns more credit when it names what is being linked and what links it. “Trading with other countries” alone is only part of the idea.

2. Superior resource allocation [1] and cheaper production methods [1]. [2] Examiner insight: Use the two named bases. Examples such as “good climate” support a basis but are not a substitute for naming it.

3. (a) Country R: 10 ÷ 5 = 2 tonnes of fish [1]. Country S: 6 ÷ 6 = 1 tonne of fish [1]. (b) Country R should make fish [1] because its opportunity cost of fish (0.5 tonnes of wheat) is lower than S’s (1 tonne) [1]. (c) Each country has 20 worker-years on each good. R: 200 fish, 100 wheat. S: 120 fish, 120 wheat [1]. Combined: 320 fish and 220 wheat [1]. (d) R makes 40 × 10 = 400 fish. S makes 40 × 6 = 240 wheat [1]. Gain: 80 fish and 20 wheat [1]. [8] Examiner insight: Show the division behind each opportunity cost. A bare number leaves your method hidden, and a reversed ratio is a common slip.

4. (a) Total cost = 250,000 + (6 × 25,000) = 400,000 [1]. Average cost = 400,000 ÷ 25,000 = 16 [1]. (b) Total cost = 250,000 + (6 × 100,000) = 850,000 [1]. Average cost = 850,000 ÷ 100,000 = 8.50 [1]. (c) (16 − 8.5) ÷ 16 × 100 = 46.9% [1]. (d) Fixed costs are spread over more units [1], so each unit carries a smaller share of them [1]. [7] Examiner insight: Part (d) needs the mechanism, not only “economies of scale”. Say what is being spread and why unit cost falls.

5. Overspecialisation [1]: if the economy relies on one or two exports, a fall in their price or demand cuts income, jobs and tax revenue together [1]. Structural unemployment [1]: workers in industries that shrink may lack the skills for new jobs, so unemployment may last a long time [1]. (Other valid points: dependence on imports, resources used up.) [4] Examiner insight: Two disadvantages need two separate developed chains. Repeating the same idea in different words adds nothing, so choose two distinct disadvantages.

6. (a) Before: 200,000 × 150 = 30 million [1]. After: 30 × 0.88 = 26.4 million [1]. (b) Fall = 3.6 million [1]. 3.6 ÷ 50 × 100 = 7.2% [1]. (c) The country depends on one mineral for 60% of exports, so a price fall hits earnings sharply [1]. Several products mean losses in one can be offset by others [1]. [6] Examiner insight: Use the figures in your explanation. Saying that the mineral is 60% of exports is stronger than a general statement of risk.

7. (a) Year 1: (55 + 65) ÷ 400 × 100 = 30.0% [1]. Year 2: (70 + 80) ÷ 420 × 100 = 35.7% [1]. (b) Trade has grown as a share of GDP [1], so the economy depends more on trade and is more integrated with other economies [1]. [4] Examiner insight: State both values and the direction of change, then link it to the idea of integration. A trade ratio shows only one part of globalisation.

8. (a) Costs = 12 + 18 + 20 + 10 = 60. Profit = 90 − 60 = 30 million [1]. (b) 20% × 30 = 6 million [1]. (c) After tax 24 million [1]. 75% × 24 = 18 million [1]. (d) Retained profit = 24 − 18 = 6. Stays = 12 + 18 + 10 (local costs) + 6 (tax) + 6 (retained) [1] = 52 million [1]. [6] Examiner insight: In part (d) imported parts and profit sent home both leave. Check your answer by adding both groups to 90.

9. (a) Profits may be sent abroad [1], so less of the income stays to be spent in the host economy [1]. Local firms may be driven out [1] because the MNC can sell more cheaply, which may cut local jobs [1]. (Other valid: poor pay, environmental damage, may leave.) (b) Benefit: profits return home [1] and add to income and tax revenue [1]. Cost: jobs may move abroad [1], raising unemployment in some home industries [1]. [8] Examiner insight: Keep home and host apart. Each point needs a consequence for the economy named in the question.

10. Indicative content; other relevant points gain credit. Benefits: jobs and income raise spending in the host [1], and capital, technology and skills may spread to local firms [1]. Tax revenue and exports can also rise [1]. Costs: profits may be sent home, so less income stays [1], and local firms may close [1], and the MNC may leave if costs rise elsewhere [1]. Judgement: the balance depends on how much is bought locally, the pay and training offered, and how long the firm stays [1], so a reasoned conclusion on whether benefits outweigh costs [1]. [8] Examiner insight: A one-sided list limits the answer. Weigh the two sides and say what the outcome depends on.

11. (a) (160 − 200) ÷ 200 × 100 = −20% [1]. (b) (42,000 − 30,000) ÷ 30,000 × 100 = +40% [1]. (c) Before: 200 × 30,000 = 6,000,000. After: 160 × 42,000 = 6,720,000 [1][1]. Change = +12% [1]. (d) Larger markets let producers sell more [1] and gain economies of scale [1]. Cheaper imported inputs lower costs [1], and competition pushes firms to be efficient [1]. (Other valid points accepted.) [9] Examiner insight: Producers’ benefits differ from consumers’. Answers that discuss only lower prices miss the producer side.

Where marks are usually lost

• Reversing an opportunity cost ratio, or giving the figure without the division.
• Writing “economies of scale” with no mechanism.
• Treating disadvantages of specialisation as simple lists with no chain to income, jobs or tax.
• Confusing home and host countries for an MNC.
• Forgetting that imported inputs and profits sent home leave the host economy.
• Omitting the base in percentage change calculations.
• Giving consumer benefits when the question asks for producers or the economy.
• Not weighing costs against benefits in discuss questions.

Next steps

• Revisit the revision notes for any weak areas.
• Reread the study guide.
• Return to the course hub and tick off the checklist.
• Try all free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Source: Cambridge IGCSE Economics 0455 syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment (Cambridge International), section 6.1 and sections 6.2.1 to 6.2.3.