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SPECIMEN PAPER
MULTIPLE CHOICE QUESTIONS
FOR
ECONOMICS
UNIT 1
90 minutes
Sample Item
The best answer to this item is “cost of materials used”, so answer space (D) has been shaded.
02116010/SPEC 2008
-2-
1. In one day Peter can produce EITHER ten Item 5 refers to the diagram below showing
kites OR five spinning tops. Each kite is sold two demand curves representing ladies’
for $25.00 while each spinning top is sold for trousers.
$20.00. The opportunity cost of Peter not
working, for three days is P
(A) $ 225.00 D1
(B) $ 300.00 D
(C) $ 750.00
(D) $1050.00
7. The BEST factor combination for a firm Items 9 - 10 refer to the following diagram
operating at least cost would be showing a change in supply after a fixed tax
was imposed.
MPPa MPPb
(A) = S1
Pb Pa
S
Pa Pb
(B) =
MRPb MRPa
D
MPPa MPPb C
(C) =
Pa Pb E
B
MRPa MRPb
(D) =
Pa Pb A F
D
(A) BCDE
B (B) ACDF
(C) ACDE
(D) ABEF
(A) DE
(B) CE
(C) BE
(D) AE
Items 11 - 13 refer to the diagram below. Item 14 refers to the diagram below showing
four supply curves.
good
y P I
a IV
a
II
e2
IC2
e1
III
i
IC1
O Q
(A) oligopoly
13. Which of the following statements is TRUE (B) monopoly
about the diagram above? (C) perfect competition
(D) monopolistic competition
(A) The negative income effect out-
weighs the negative substitution
effect.
(B) The negative substitution effect
outweighs the negative income
effect.
(C) The income effect is positive.
(D) The substitution effect is positive.
17. The demand curve for firms in oligopolistic Item 20 refers to the diagram below which
markets can be described as ‘kinked’. This illustrates the cost and revenue curves of a
suggests that firms will monopoly.
(A) RU
(B) ST
(C) SV
(D) UT
22. With Deregulation what role does 26. The MAIN drawback of regulating a
Government play in resource allocation? monopoly is that the firm
29. Harry drives to and from work daily. He is Item 32 refers to the following graph which
usually a very safe driver. Because of his depicts the demand for and supply of labour.
accident free record, he was offered a life
insurance policy with a reputable insurance
Wages
company, which he accepted. Subsequently,
Harry began to drive recklessly. What SL
problem did the insurance company
encounter?
31. Which of the following is explained by the 33. A country’s labour supply can be measured
Theory of Income Distribution? by the number of
(A) How wages and salaries are (A) hours workers work at a given wage
distributed among income earners (B) workers willing and able to work at
(B) How factor rewards are allocated to a given wage
the factors of production (C) workers entering the potential labour
(C) Government’s attempt to address the force at a given wage
problem of income inequalities (D) workers employed at a given wage
(D) Income earner’s efforts to increase
their incomes
34. The ‘minimum level of income required to
satisfy basic needs’ refers to
35. Rent and wages are alike in that they are both 38. When examining the Lorenz Curve, a Gini
coefficient of 100% refers to complete
(A) factor inputs
(B) factor outputs (A) employment in the country
(C) factor rewards (B) equality of income distribution
(D) factors of production (C) inequality of income distribution
(D) separation of the rich and the poor
36. Which of the following measures can be used
by government to reduce poverty?
39. Social welfare is maximized when society’s
resources are allocated so that social marginal
I. Transfer payments to the vulnerable
cost
II. A depreciation of the country’s
currency
(A) equals social marginal benefit
III. Subsidies to producers in the country
(B) equals private marginal benefit
IV. The introduction of VAT on selected
(C) is less than social marginal benefit
items
(D) is greater than social marginal benefit
(A) I and II only
(B) I and III only
Item 40 refers to the following table which
(C) I and IV only
shows how income is distributed in a
(D) I, II and III only
Caribbean territory.
SL
2
(A) Size
W1 (B) Unequal
(C) Personal
W2
(D) Functional
MRP
Q1 Q2 QL
SL
3500
Minimum
wage set
3000
by union
2500
Wages
($)
2000
1500 MRPL
1000
500
0
10 20 30 40 50 60 70 80 90 100
Quantity of labour
44. How many workers will the perfectly 45. Assume the union intervenes in the market
competitive firm employ? and sets a minimum wage of $3 300. How
many workers will the perfectly competitive
(A) 10 workers firm employ?
(B) 35 workers
(C) 66 workers (A) 10 workers
(D) 95 workers (B) 35 workers
(C) 66 workers
(D) 95 workers
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
02116010/SPEC 2008
CARIBBEAN EXAMINATIONS COUNCIL
ECONOMICS - UNIT 1