Pearson Edexcel International GCSE Economics: Globalisation, MNCs and FDI (4EC1) – 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 covers section 2.2.1 of the Pearson Edexcel International GCSE Economics (4EC1) specification, Issue 3: globalisation, MNCs and FDI. The specification has one tier. All countries, firms and figures are invented. Teaching is in the study guide and revision notes. See also the Edexcel IGCSE Economics hub, the checklist and the free 10-minute diagnostics.

Questions

1. What is meant by globalisation? [2]

2. State two reasons for globalisation. [2]

3. Country K sells tiles to Country L. The factory price is 20.00 a tile, transport is 4.00 and Country L charges a tariff of 10% of the factory price. Later, transport falls by 25% and the tariff is removed.

(a) Calculate the landed cost before the changes. [2] (b) Calculate the landed cost after the changes. [2] (c) Calculate the percentage fall in landed cost, to 1 decimal place. [1]

4. Explain one way that lower communication costs help an MNC to grow. [3]

5. (a) What is meant by foreign direct investment? [2] (b) FDI into Country M rose from 40 million to 52 million. Calculate the percentage increase. [2]

6. A firm compares sites for a new plant. Unit costs (illustrative):

Site	Materials	Labour	Delivery to customers
1	6	5	4
2	5	3	3
3	4	4	8

(a) Calculate the total unit cost at each site. [3] (b) Explain one reason, other than cost, why the firm might still choose Site 3. [3]

7. A manufacturer has fixed costs of 48 million and variable costs of 30 a unit.

(a) Calculate average cost at output of 1.2 million units and at 4.8 million units. [4] (b) Calculate, to 1 decimal place, the percentage by which average cost falls. [1] (c) Explain how economies of scale may encourage a firm to become an MNC. [3]

8. A town has a labour force of 15,000 and 4% unemployment. Cheaper imports close a footwear industry employing 900. An MNC call centre opens and employs 400.

(a) Calculate the net change in jobs. [1] (b) Calculate the new unemployment rate, to 2 decimal places, assuming the labour force is unchanged. [3] (c) Analyse one reason why the closure may harm workers for longer than the first few months. [4]

9. A subsidiary of an MNC earns 30 million profit in Host H, which taxes profit at 25%. It then pays an 18 million fee to a group company in another country.

(a) Calculate the tax paid in H before the fee. [1] (b) Calculate the tax paid in H after the fee. [2] (c) Calculate the fall in H’s tax revenue. [1] (d) What is meant by tax avoidance? [2]

10. Analyse two disadvantages of an MNC setting up in a host country. [6]

11. A car-parts MNC invests in Country A, a developing country. It employs 3,000 workers, trains them, builds a road to its plant and pays 15% tax on profit. It sends most of its profit abroad, and a river near the plant becomes polluted. Evaluate whether this FDI benefits Country A. [9]

Answers

1. Increased integration [1] and interdependence of economies [1]. [2] Examiner insight: Write both ideas, integration and interdependence. An answer about trade flows alone covers only part of what the question asks.

2. Any two of: fewer tariffs and quotas; lower transport costs; lower communication costs; more significant MNCs. First reason [1]. Second reason [1]. [2] Examiner insight: A State answer needs no explanation. Do not write more than a sentence, and do not give three in the hope that one is right.

3. (a) Tariff = 0.10 × 20.00 = 2.00 [1]. Landed cost = 20.00 + 4.00 + 2.00 = 26.00 [1]. [2] (b) Transport = 4.00 × 0.75 = 3.00 [1]. Landed cost = 20.00 + 3.00 + 0 = 23.00 [1]. [2] (c) (26 − 23) ÷ 26 × 100 = 11.5% [1]. [1] Examiner insight: Show each part of the landed cost on its own line. The specification’s command-word table says workings should be given on Calculate questions.

4. Lower communication costs make it cheaper to manage operations in several countries [1], for example by video link instead of travel [1], so the MNC can run more plants and sell to more markets [1]. [3] Examiner insight: A strong Explain answer states a point and then expands it twice, as the specification’s table describes. Name the cost that falls and the result for the firm.

5. (a) Investment by a firm [1] in business assets in another country [1]. [2] (b) (52 − 40) ÷ 40 × 100 [1] = 30% [1]. [2] Examiner insight: Divide by the original figure, not the new one. A bare “12” is a change, not a percentage.

6. (a) Site 1: 6 + 5 + 4 = 15 [1]. Site 2: 5 + 3 + 3 = 11 [1]. Site 3: 4 + 4 + 8 = 16 [1]. [3] (b) Stable rules and political conditions at Site 3 reduce risk [1], so the firm is less likely to face sudden costs or closure [1], which protects long-run investment even though unit costs are higher [1]. [3] Examiner insight: Pick a factor that is not on the cost table, such as skills, infrastructure or access to a market. Repeating labour cost adds nothing new.

7. (a) At 1.2 million: total cost = 48m + (30 × 1.2m) = 84m [1]. Average = 84m ÷ 1.2m = 70 [1]. At 4.8 million: total = 48m + 144m = 192m [1]. Average = 192m ÷ 4.8m = 40 [1]. [4] (b) (70 − 40) ÷ 70 × 100 = 42.9% [1]. [1] (c) Serving more markets raises output [1], which spreads fixed costs over more units and lowers average cost [1], and one way to reach those markets is to invest abroad as an MNC [1]. [3] Examiner insight: Link the lower average cost to the decision to locate abroad. Saying only “costs fall” stops short of the question.

8. (a) 400 − 900 = −500 [1]. [1] (b) Unemployed before = 0.04 × 15,000 = 600 [1]. After = 600 + 500 = 1,100 [1]. Rate = 1,100 ÷ 15,000 × 100 = 7.33% [1]. [3] (c) Footwear workers may have skills that suit few other jobs [1], so they may stay unemployed or take lower-paid work [1]. Their lost income reduces spending in local shops [1], which can cost further jobs in the town [1]. [4] Examiner insight: Work out the new number of unemployed before finding the rate. In (c), a chain such as lost wages, lower spending, fewer local jobs scores better than the word “unemployment” alone.

9. (a) 0.25 × 30 = 7.5 million [1]. [1] (b) Taxable profit = 30 − 18 = 12 [1]. Tax = 0.25 × 12 = 3 million [1]. [2] (c) 7.5 − 3 = 4.5 million [1]. [1] (d) Using legal rules [1] to reduce the amount of tax paid [1]. [2] Examiner insight: Define avoidance as legal. If you mention evasion, state that it is illegal, so the two terms are not mixed.

10. Suggested points: environmental damage and profits moved abroad. Disadvantage one: the plant may pollute air or water [1], especially where rules are weak [1], harming health and farming, so the host bears the cost [1]. Disadvantage two: profits are sent to owners overseas [1], so less income stays in the host economy [1], which limits the gain in spending and tax [1]. Credit any two of the specification’s disadvantages, such as avoiding paying taxes. [6] Examiner insight: For Analyse, push each disadvantage through a chain and keep to the host country. Two half-developed points usually do worse than two chains.

11. The marks below are a suggested way to self-mark, not the board’s scheme. Benefits (3 marks): jobs and wages raise spending [1]; training develops skills so workers can earn more later [1]; the road is infrastructure other firms can use, and the 15% tax adds to government revenue [1]. Costs (3 marks): most profit leaves, so less income stays in Country A [1]; river pollution harms health and fishing, and the damage may cost more than the gain [1]; the firm may move if costs rise elsewhere, ending the jobs [1]. Judgement (3 marks): weigh the two sets using the case [1]; name a deciding factor, such as whether the tax and pollution rules are enforced and how much profit is kept [1]; reach a supported conclusion, for example that the FDI helps if rules are enforced and workers move into skilled posts, but not if profits leave and the river stays polluted [1]. [9] Examiner insight: An Evaluate answer needs a conclusion that follows from your own weighing. Use the facts given (3,000 workers, 15% tax, pollution), not general statements.

Where marks are usually lost

• Defining globalisation as “trade between countries” only.
• Showing only the final figure on a Calculate question, where the table says workings should be given.
• Using the later figure as the base when working out a percentage change.
• Adding the tariff to the transport cost instead of taking a percentage of the factory price.
• Writing “jobs” as an advantage with no link to wages and spending.
• Mixing up tax avoidance and tax evasion.
• Describing the problem for the home country when the question asks about the host.
• Concluding “it depends” without naming what it depends on.

Next steps

• Re-read the revision notes and the study guide.
• Check progress on the Edexcel IGCSE Economics checklist and the course hub.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Pearson Edexcel International GCSE in Economics (4EC1), specification Issue 3, February 2026, published by Pearson Education Limited: section 2.2.1 Globalisation.