CSEC Economics Paper 1 May/June 2026 - Free CXC Past Paper with Answers

Item 1 refers to the following diagram which illustrates the production possibility frontier for an economy that is capable of producing bauxite and sugar in different combinations.

Sugar L M X N- P E 0 F G Bauxite

Point X on the diagram above represents

unemployed resources

an efficient combination

an unattainable combination

Which of the following actions is LEAST likely to be among a government's potential economic decisions for businesses?

Passing minimum wage legislation

Regulating the emission of toxic waste

Identifying areas where businesses should be located

The Government of Country P decides to move resources from manufacturing to crop production. The opportunity cost of this decision is the

profit earned by farmers

wages earned by farm workers

profit earned from manufacturing

rent for the land on which crops are grown

An 'economy' is BEST described as

a system whereby all the goods and services used by citizens of a country are provided by the government

the utilization of resources by manufacturers to produce goods and maximize profits

a system where suppliers produce all the goods and services needed by consumers

a system of production, distribution and consumption

The difference between microeconomics and macroeconomics is that

microeconomics focuses on the decisions made by individuals in the allocation of resources, while macroeconomics focuses on the decisions made by businesses in the allocation of resources

microeconomics involves the decisions of businesses and governments in the allocation of resources, while macro- economics involves the alloca- tion of resources by individuals

microeconomics involves the decisions of businesses and individuals relating to the demand for goods, while macroeconomics involves the decisions of governments in the supply of public goods

microeconomics focuses on deci- sion-making by individuals and businesses in the alloca- tion of resources, while macro- economics focuses on decision- making in the allocation of resources by the government

ABC Ltd produces fabric from raw cotton. XYZ Ltd buys fabric from ABC Ltd and makes T-shirts which it markets directly to clothing stores.

In which of the following sectors are BOTH firms engaged?

How many units of labour produce the HIGHEST average product of labour?

Which of the following is a reward to a factor of production?

Taxes paid to government

Promotion to a higher grade in the workplace

Profits declared by a company in its annual report

Managerial skills of the managers of a business

Line Y in the diagram represents

average variable cost

CableMe is a large Caribbean firm that has increasing costs due to a lack of communication systems across islands. CableMe is experiencing

diseconomies of scale

financial economies of scale

technical economies of scale

A large firm that makes pens reduces production costs by using more efficient machinery. This firm is experiencing

managerial economies of scale

marketing economies of scale

technical economies of scale

financial economies of scale

Which of the following is LEAST likely to affect the efficiency of labour?

Profitability of the firm

Motivation of workers

Education and training

Prices of goods in market economies fluctuate while prices of goods in planned economies tend to be fixed. The MOST likely reason for this difference is that in the market economy

producers are never efficient

buyers and sellers determine prices

there are higher unemployment levels

Item 14 refers to the following information which relates to a manufacturing company.

Total fixed cost $10 000 Total cost $50 000 Output 100 units

The average variable cost is

When Bargain Supermarket increased the price of tissue by 65%, tissue sales fell by 115%. Therefore, the price elasticity of demand for Bargain's tissue is

The price elasticity of supply for rice is zero and the price elasticity of supply for chicken is two. This means that with an increase in price, suppliers

reduce the supply of rice but increase the supply of chicken

do not change the supply of rice but increase the supply of chicken

reduce the quantity of rice supplied but increase the quantity of chicken supplied

do not change the quantity of rice supplied but increase the quantity of chicken supplied

Item 17 refers to the following diagram which shows the price of Good X and the quantity of Good X demanded.

Price ^ | S | / | / | / D | /____D₁ --+------------> Quantity O

The movement of the demand curve for Good X, from D to D₁, results from an increase in the

price of a complement

cost of inputs used to produce Good X

All things being equal, an increase in the supply of a good will result in

an increase in both price and quantity traded

a decrease in both price and quantity traded

an increase in price and a decrease in quantity traded

a decrease in price and an increase in quantity traded

Which of the following would MOST likely have a price inelastic demand?

Seta sells a pen for $5 when the equilibrium price is $2. In this market, there will be

a surplus and the market price of pens will decrease

a shortage and the market price of pens will increase

a shortage and the market price of pens will decrease

a surplus and the market price of pens will increase

A normal supply curve for farm produce will slope upwards from left to right if farmers

pass on increased costs to customers

are willing to produce more as price increases

increase their profit margins as price increases

are willing to increase supply as demand increases

Which of the following market supply curves shows that the price elasticity of supply is unitary?

Travis and his friend sell candies to their classmates during lunch time at school. This scenario is an example of a

The cross elasticity of demand for car tyres and rims is -2. If the price of car tyres increases by 50%, the quantity of rims is MOST likely to

Governments often put measures in place to control monopolies because monopolies

promote consumer sovereignty

Smartphone brands offer similar devices but differentiate themselves through features, design, branding and marketing, ensuring their products differ despite serving the same essential function. This is an example of which of the following types of market structure?

Monopolistic competition

A pure public good can be described as

Which of the following economic concepts is defined as the benefits received by a third party as a result of an economic transaction?

Imperfect information

Negative externality

Positive externality

Which of the following is LEAST likely to occur when there is market failure?

An increase in poverty throughout the economy.

The provision of the right amount of goods and services for consumers.

The production of goods and services creates benefits for third parties.

An increase in the level of unemployment among skilled and unskilled labour.

Item 30 refers to the following diagram which illustrates a negative externality.

Price R R Quantity

Which of the following represents the curve labelled R?

Marginal social cost

Marginal private cost

External benefit to society

Marginal benefit to society

Items 31 and 32 refer to the following financial institutions. (A) World Bank (B) Central Bank (C) International Monetary Fund (D) Caribbean Development Bank Match each institution with the correct numbered statement. The relevant institution may be used once, more than once, or not at all.

This institution provides a fair and balanced distribution of funds to countries in the subregion for the financing of development projects.

International Monetary Fund

Caribbean Development Bank

The institution with an objective to monitor, record, analyse and provide information about the social and economic development of every country.

International Monetary Fund

Caribbean Development Bank

Ravi's neighbour pays him $100 for washing his car. In this scenario, money is functioning as a

standard of deferred payments

Robin has a debt security that matures in six months. Her sister, Seeta, also has a debt security but it matures in 25 years. Which of the following is true?

Robin has a treasury note and Seeta has a treasury bill.

Robin has a treasury bill and Seeta has a treasury bond.

Robin has a treasury note and Seeta has a treasury bond.

Robin has a treasury bond and Seeta has a treasury bill.

Which of the following is NOT a function of the financial sector?

Making credit available to households and firms

Facilitating payments for goods and services

Preventing liquidity within the economy

Providing a safe place for saving

The organization responsible for the regulation and control of the financial sector is the

Which of the following are ways of calculating national income? I. Income method II. Elasticity method III. Expenditure method

Which of the following factors is the cause of cyclical unemployment?

High wages in a country

Fluctuations in economic activity

Workers searching for suitable jobs

Technological changes displacing workers

Item 39 refers to the following economic measures. I. Reducing bank rates II. Increasing interest rates III. Decreasing money supply

Which of the measures above can be used to reduce inflation?

Which of the following is an example of frictional unemployment?

Ben is a seasonal worker in the tourism industry.

Ralph is currently attending college full time and sells fruits while on campus.

Laura resides at the local penal institution after being convicted for selling drugs.

Maria lost her job two months ago and is currently searching for a new job.

In seeking to stabilize the economy of a Caribbean territory, the role of the government should be to

increase taxes, borrow more and forecast revenues

encourage skilled labourers to stay within the territory

review its policies on taxation, borrowing and expenditure

import more consumer goods to satisfy the needs of the people

In which year was the increase in real wages the GREATEST?

The table shows that ALL countries experienced

a decline in gross domestic product

a decline in the sale of manufactured products

a decline in manufacturing output relative to gross domestic product

an increase in employment in the manufacturing sector relative to gross domestic output

With all other things being equal, which of the following, when increased, will NOT lead to cost-push inflation?

Disruptions in production

Total demand in the economy

Free trade is based on the principle of

comparative advantage

substantive advantage

production possibility

Jack, Jill and Jane live in Country A. Jack opens a business in Country B; Jill teaches students online in Country B and Jane buys clothes from Country B. Country A's foreign direct investment is from

A 'quota' is defined as a

tax on the goods imported

tax on the goods exported

limit on the price charged for imports

limit on the amount of goods imported

An example of a transfer that is recorded in the balance of payments is

a maternity benefit received from the local government agency

an unemployment benefit received by citizens in their country from their government

a subsidy for a local firm to encourage increased production for the export market

a donation of relief supplies by a foreign government to a country following the passage of a hurricane

Which of the following situations would lead to an improvement in a country's terms of trade? I. Export prices rise and import prices fall. II. Export prices rise faster than import prices. III. Import prices rise faster than export prices.

Country A is experiencing a balance of payments deficit. Which of the following measures would the government MOST likely use to reduce the deficit in the short term?

Reduce the volume of exports to other countries.

Engage in trade with other low-cost producers of goods.

Increase the importation of goods from other countries.

Impose restrictions on goods imported from other countries.

A country with a floating exchange rate regime and high interest rates will experience

a revaluation of its currency

a devaluation of its currency

a depreciation of its currency

an appreciation of its currency

Which of the following accounts is NOT included in the balance of payments statement?

Most Caribbean economies are characterized by

strong economic growth

resistance to external shocks

Import substitution is a development strategy aimed at

increasing the number of imports

increasing the number of exports

replacing local goods with better quality imports

replacing imports with locally produced goods

There is a bilateral agreement between

Country A and Country D

Country B and Country C

Country A and Country B

Country B and Country D

The acronym FDI, in economics, means

foreign direct income

foreign direct investment

fixed domestic investment

floating domestic investment

'Globalization' may be MOST accurately defined as the

movement of technology and financial markets regionally

movement of tangible and intan- gible goods among countries

international trade of goods and services including skilled workers

integration of financial services, technology and commodity markets worldwide

One benefit CARICOM countries enjoy from preferential trade agreements is

improved market access

setting market rules for neigh- bouring countries

CSEC Economics Paper 1 May/June 2026 - Free CXC Past Paper with Answers

CSEC Economics Paper 1 May/June 2026 Questions