2 Econ, X01 4 ‘Which of the following situations is MOST likely to result when there are limited resources? (A) People must make choices (B) The poor will become poorer (C) Only the rich can acquire every- thing they desire (DP) — Some firms will be forced out of the business Item 2 refers to the production possibility frontier for a country that produces cookies and milk only. Mille Cookies ‘Which of the following is MOST likely to recount for the change from curve I to 1? (A) _ Death of cows due to disease (B) _—_ Asuccessful anti-cookies campaign (C) An increase in the population of cows (D) A rise in input prices for cookie production ‘The use of land to build hospitals reduce’ the amount available for factory construction. This statement BEST illustrates the concept of (A) choice @) scarcity (C) sationing (@) shortage ‘Which of the following BEST describes the ‘marginalist principle’? (A). Average cost equals average revenve. (B) Marginal cost equals average revenue, (C) Average cost equals marginal revenue, (D) Marginal cost equals marginal revenue, ‘Which of the following is an example of a normative economic statement? (A) Anincrease in the minimum wage will increase inflation. @®) © A reduction in the price of goods will benefit consumers, (© Governmént should give free medicine to senior citizens (@) An increase in interest rates will attract foreign investors, Item 6 refers to the following diagram which shows the price of cellular phones and the quantity demanded. ~~, Quo» Q Quantity Demanded Ata price of $50 for a cellular phone, the quantity demanded is 100. The shaded area in the diagram represents (A) economic reat B) market surplas (C) excess demand ©) consumer surplus GO ON TO THE NEXT PAGEaoe Iter 8 refer to the production 9. possibility frontier below. Good ¥| M a 10. a Gooax 7. Which of the following staternents about the points is true? : (A) Mis inefficient. un. @) Ris technically inefficient. (© Nis allocatively inefficient. (D) Qis productively inefficient. 8. _ If Point Q moves to Point O it can safely be assumed that (A) the state of technology has not 12. changed ®) the prices of the factors of production have increased (©) available resources have been fully utilized ®) adverse weather conditions have caused damage to resources A production possibility frontier that bows outwards indicates (A) achange in the resources available to the producer (B) _ increasing opportunity cost as more of one good is produced (© constant opportunity cost as more of either good is produced (©) decreasing opportunity cost as more of one good is produced A combination of output that is inside 2 production possibility frontier is termed (A) technical efficiency (B) productive efficiency (C) productive inefficiency @) allocative inefficiency Which of the following is an example of a price ceiling? (A) Rent controls (®) Fam price supports (©) Atexon the market ©) — Minimum wage laws Which of the following BEST explains the tem, ‘indifference curve’? (A) Goods for which the budget line is the same (B) Goods for which consumption is indifferent (©) > Goods which give the consumer maximum satisfaction (D) The combination of two goods which gives the consumer the same level of satisfaction GO ON TO THE NEXT PAGE13, Items 13 - 14 refer to the following diagram, Price De Quantity ‘Which of the following indicates the point 14, Assuming that a firm is earning normal of optimum production? profits, at which point would marginal revenue equal marginal cost? (A) T (mew aor © uw ® OQ Ww © © wv Item 15 refers to the graph below. 50 40 30 a ‘Total / Marginal Utility of Jee ercam (utils) wo 1 2 3 4 — Quantity of Tee Cream (aumber of cones) In the graph above, at which quantity is the consumer maximizing utility? (A) @) © @) GO ONTO THE NEXT PAGE16. 7 18, 19. Which of the following market structures is characterised by several firms which are too small to influence the market? (A) Perfect competition (B) —_Duopolistic competition (©), Oligopolistic competition (D) — Monopolistic competition Which of the following statements is correct ‘cial costs? (A) Social costs equal private cosis, (B) Social costs equal external costs. (c) Private costs minus external costs equal social costs. (D) Private costs plus external costs equal social costs. ‘Which of the following BEST; defines the term ‘external cost’? (A) The increase in total costthat arises from an extra unit of production (B), The total cost to gociety of "producing an extra unit of a good or service (©) A cost resulting from an activity that is imposed on parties outside that activity (P) The amount a consumer pays to consume an additional amount of a particular good or service ‘Which of the following statements outlines an important characteristic of a private good? (A) Its consumption by one person diminishes the quantity available to other persons. (B) _Itsconsumption has extemal effects onthe consumption or production of other goods. (C) itis provided by the private sector. () _Itisconsumed by everyone in equal quantity and quality. 20. 21. Price 22, ‘Hems 20 - 21 refer to the following table. Firms | Market Share % 1 50 2 23 3 10 | 4 10 3 3 6 2 What is the percentage of the FourFirm Concentration Ratio? (A) 5% ®) 25% © 5% ©) 95% Based on the size of the Herfindahl- Hirschman Index in the table ubove, how would this market be described? (A) Concentrated (B) Not concentrated (©) Highly concentrated ©) Slightly concentrated Item 22 refers to the graph below which shows a monopolistically competitive fra in the long-run equilibrium. aa Quantity ‘Using the marginalist approach to determine equilibrium price and quantity, what is the area between Q, and Q, called? (A) Shut-down point (B) Excess capacity (© Equilibrium point (©) Minimum efficiency scale GO ON TO THE NEXT PAGE23, 24, 25. 26. oe Which of the following is NOT a cause of market failure? A)» Taxation ®) — Monopoly (© —_ Extemalities @) Imperfect knowiedge If a firm cannot prevent a consumer fom enjoying the benefits of a good it produced at low cost, the good is (A) excludable (B) _non-excludable (©) tival in consumption (©) non-tival in consumption A situation is defined as ‘pateto efficient? ifitis (A) impossible to make anyone better oif without making someone else worse off : possible to make someone better off without making someone else worse off possible to make someone worse off and everyone better off impossible to make anyone better off without making someone pay @) © @) ‘The decision rule for profit maximisation ina firm is (A) total revenue = total cost (B) average revenue = total costs (©) marginal revenue = marginal costs @) average total revenue = total costs nairéarnina ve nat 27. situation in which people enjay the benefits of public goods without paying for them, is known as the (A) non-tivel problem (B) five-rider problem (©) _ non-excludable problem (D) " drop-it-the bucket problem Hem 28 refers to the graph below which shows the Social Marginal Costs (SMC), the Private Marginal Costs (PMC) and the Social Marginal Benefits (SMB). Price: , H QB Quantity 28, An analysis of the graph reveals that (A) Output Q, is efficient because SMC > PMC ®) Output Q is efficient because PMC = SMB (© Output Q, is efficient because SMB > PMC. ©) Output Q, is efficient because SMB = SMC GO ON TO THE NEXT PAGE29. 30. 31. 32, ee ‘A goverument wishes to calculate the share of an industry's output sold by some selected number of the industry's firms. ‘What measure should the government employ? (A): Concentration Ratio (B) Consumer Price Index (©) Huinan Development Index (D) — Herfindahl-Hirschman Index ‘Which of the following contributions is an example of privatisation? (A) Deregulation and franchising (B) Franchising and redistribution (C) Contracting out and regulation () Deregulation and nationalisation If.an investor borrows $1 000 atan interest rate of 14 per cent per annum; the annual interest payment is, @ su @) $s 140 (© $1000 @) 1680 The conceptof “asymmetric information” indicates that information is (A) available freely ®) evenly distributed (C) _ notavailable freely (D) unevenly distributed 33. 34, 35, Functional distribution of income measures the distribution of income according to (A) __ its functions @B) its source (C) the social class of persons who receive it (D) the levels of income received by individuals In the factor market, land is similar to labour in that (A) both are fixed in supply and are indestructible (B) the determinants of supply of both of them are similar (C)__ the owners of both may be repre- sented by a trade union (D) both are demanded for their contribution to production Item 35 refers to the following diagram depicting a labour market, Wage! ' MRP, o> —___> Quantity Labour ‘Which of the following economic concepts does the shaded area in the triangle represent? (A) Poverty (®B) Economic rent (©) Transfer earnings (@) — Consumer surplus GO ON TO THE NEXT PAGE36. a7y Percentage of Income -8- An outward shift in the demand curve for any product causes an outward shift in the derived demand curve for one factor utilized in the production of the commodity inward shift in the derived demand curve for all factors utilized in the production of the commodity outward shift in the derived demand curve for all factors utilized in the production of the commodity inward shift in the derived demand curve for one factor utilized in the production of the commodity A @) © @) Item 37 refers to the following diagram of a Lorenz curve. > 8 a “4 20 20 40) 00 Percentage of Households By examining the portion of the entire area that is shaded, an economist can determine the (A) Gini coefficient (B) concentration ratio (©) elasticity coefficient (D) marginal rate of substitution 38. 39. Item38 refersto the graph below showing the demand and supply fora factor of production. Quantity Avshift of the demand curve fom DD to D,D, will result in (A) adecreasein economic rent (B) am increase in economic rent (©) adecrease in transfer earnings (D) am increase in trensfer earnings ‘Miss Bent feels unwell and visits her local doctor who, efter an examination, discovers an incurable illness. The doctor does not tell her of his diagnosis, instend he prescribes costly medicine, What economic concept does the above statement describe? (A) Inefiiciency (B) Morel hazard (C) Adverse selection (©) Asymmetric information GO ON TO THE NEXT PAGE40. aL. 43. =o. Which of the following is NOT likely to cause a shift in the supply curve for labour? (A) Cost of labour (B) Increase in birth rate (C),__ Increased population growth (D) Migration of skilled workers ‘The higher the demand for houses, and hence the higher their price, the higher will be the demand for bricklayers. The concept explained above BEST describes (A) derived demand (B) increase in demand (C) increase in factors demanded (D) increase in quantity demanded Which of the following is NOT 2 measure of poverty? (A) The poverty line (B) The Gini coefficient (©) The UNDP's Human Development Index (D) Accessibility and affordability of basic needs ‘Which of the following facts can positively affect social welfare? 1. An improvement in the terms of trade w. A fall in crime statistics MI An increase in environmental degradation TV. A fall in the level of consumption (A) Land only (@) Land only (C) Wand I only ©) Wand IV only 45. Item_44 refers to the diagram below applying indifference curve analysis to labour supply. Income ak Budget line c © Indifference curve ° a by Leisure Which of the following represents labour supply? (A) ora @) o-e (C) arb @) c-d Item 45 refers to the graph below in which the Marginal Revenue Product (MRP) Curve bas shifted from MRP, to MRP, Wace) mp, MRP, ‘Quantity of Labour ‘Which of the following factors are MOST likely to have caused this movement? I. Arise in worker productivity I A fall in the price of the final good I. Arise in the price of the final good IV. Arise in the size ofthe labour force (A) Tand Ionly (8) TandIfonly (©) Wand IV only @) Mand IV only IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.