wh soneenkdscarcity of the following BEST defines the Goode and services to consumers are 4 short supply. (B) There are not enough resources available at present. (C) © Theexcessof human wants over the economy's resources, (D) The wants of society are greater than the supply of goods A baker can bake any combination of items, using the following options below. [ “Loaves |< | of bread | 36 ‘What isthe opportunity cost of producing one cake? (A) Lloafof bread (B) — Stoaves of bread (C)— Tloavesofbread (D) B loaves of bread Which of the following statements BEST ‘production possibility frontier"? (A) The limit of the combinations of goods and services that can be produced (8) The combinations of goods and services that may be produced in a country (C) The mixture of goods and services iat are desired by a country (P) An illustration of an economy producing goods and serviees for its citizens Item 4 refers to the following diagiams _Hthssteastfonrsypes of production passibility Montes + ® Capital \ goods |S (A e__ é poods (ls zoos K Capital Pom fo Roods \ - Consumer goods R Capital (o) boots oe goods Which diagram illustrates decreasing opportunity costs? (A) A @) OB a ¢ (D) DdWhich of the following diay ams ilustrates a perfectly elastic dentand curve? Biss mt w | Price w ~ Om” — Price! o 6. A variable whose value is determined independently of the model may be classified as (A) exogenous (B) endogenous (©) relational (0) functional GO ONTOTHE NEXT PAGE 021 16010/CAPE20074. Hens 7-8 refer to the following diagrams ehese-adeis the consumer's initial buelget line getline. Good 5| Lem 9 refers to the diagram heiow Oa vantiy | 9, The diagram above BEST describes the relationship between income and quantity demanded of What has happened to cause the budget line (A) anonnal good ta shift from @@ toed? (B)—agiffen good (©) aninferior good (A) Consumer income decreased and {D) ostentatious goods prices remiained unchanged (B) The price of good x fell, ceteris paribus, 10, The following isa caption from Tropic Island (C) ‘The price of good x rose and the pri daily newspaper of good y Fell (p) prices of good.xand yfell inthe = . -) same proportion [ease PRICES PLUMMET AS BIRD PLU | THREATENS THE ISLAND | IC, is downward sloping and convex to the L _s origin. Theshape is convex because the (A) consumer opportunity cost is increasing, (B) marginal rate of substitution is increasing (C)_— marginal rate of substitution is decreasing. (DP) consumer opportunity cost is decreasing, Which of the following could have led to the fallin chicken prices? (A) Increasing demand for chicken (B) Decreasing demand for chicken (C) Increasing supply of chicken (D) Decreasing supply of chickenuw 12 B f ALJ] refers to the diagram below. Inthe above diagram ab is the consumers” initial budget hne. The price of falls and the budget line pivotstoac. What isthe inconie ceifect ofthis price change? a (6) © «@) fig th bb bp Which of the following BEST describes the price elasticity of demand of downward sloping demand curve? (a) (By © i) Decreasing elastivitiy of demand as price decreases The same elasticity of demand ‘throughout Increasing elasticity of demand as price decreases Unitary elasticity of demand throughout In the short rua which of the following is NOT affected by fixed cost”? @ (8) «© (Dy otal Cost Marginal Cost Average Cost Average Fixed Cost 16 Which of the following BEST defines “marginal cost”? Blecosts Fone Mare unit oF m produc oupal “The addition to tot fixed costs fiom producing one more unit of ourput The addition to average total costs from producing one more unit of output ‘Theaddition to average variable casts fiom producing one more uni of output “There isadiveet relationship between quantity supplied and price. This is so because @ ®) «) wD) producers believe that higher prices lead to greater profits, producers want to sec equipmentto mass produce goods as producers buy more of a factor of production, its price goes down 4s production increases, competition for factors of production increases their cost wre capital ‘The table below shows the percentage of National Income earned by various factors of production Land 15% Labour 25% Capital 20% Entrepreneurship 40% ‘This table represents (ay (8) «© {D) funetional distribution of Ineame personal distribution of Income size distribution of Income cost to firms af each factor19 In the graph below the Marginal Revenue DngdaesGite tmealititatiagy MRD, to ~ MRP, Which are the factors to have MOST LIKELY caused this movement? 1. Arise in the price of the final good IL Arise in the size of the labour force WA fallin the price of the final good LV. Arisein worker procluctivity (A) Landifenly (B) and fllonly (©) Land lV only (D) Wand 1V only Which ofthe following will couse the demand for labour eurve to shil to the right? (A) Adeclease in the price ofthe product (B) An increase in the price of @ substitute factorof production (C)— Avise in the wage rate (D) A decrease in the productivity of labour Which of the following (erins explains the relationship between factor rewards and costs of proxluction? (A) Inverse (B) Direct (C) Indirect (D) Negative 20 24 22. The MRP curve stones downward becanse (SSAA MOE TOUTS fiom other uses (8). less AF a acta IS Temainded al a lower pice so (C) more of a factor is demanded ata lower price (D) the marginal physical product is constantly falling Item 21 belows refers to the graph showin the demand and supply for a factor of production Price], s A shift of the demand curve fom DD to D,D, will result in (A) an increase in transfer earnings (B) an increase in economic rent (C)— adecrease in transfer earnings (D) adecrease in economic rent Which of the following countries has the greatest inequality of ficome distribution? Country (A) Country A (B) Country B (C) Country (D) — Countey D24 z z 25: {cumulative} The labour force may be defined as persons who are employed plus the =ar4 (C) underemployed (0) working population Which of the following influence the labour force participation rate? 1 Total Population U. Demanel far labour UL Change in attitudes (A) Land I only : (B) Land Ill only (©) Wand floaty (D) A Aland ttl lems 25 - 26 refer to the following diagram ofa Lorenz Curve. 100 ~ 8000 % of households Whar does this diagram indicate about income distribution? (A) Itisdistributed equally (B) IUis distributed at a constant rate. (CO) ttisunequally distibuted. (D) Sixty percent ofhouseholds teceive sixty pei centaf income. 26 7 28. 29. Which of the following can be obtained by examining the portion of the entire area thal ig shaded * (Ayo TRE RRB COSC (B) The ginicoefficient (©) The eqneenitaiion valio (D) The marginal rate of substitution Which of the following measwes are MOST LIKELY to contribute to poverty reduction inthe long nun’? 1 Increased educational and training opportunities Il Increased taxes on producers of necessities ‘ I Increased occupational and geographical mobility of labour 1V, Establishment ofa govemment social ‘welfare program (A) 1, JE and Ill only: (B) 1, Hand PV only «) 1, JU and IV only (©) Hh land tV only Which of the following BEST deseribes the concept of a welfare function? (A) A functioning government welfare Fayment-sysiem where-exenune benefits (8) The relationship between an individual’s well being and the factors that influence it (©) The function of Government to help those less fortunate by giving them monthly grants ‘The relationship berween the different economic fictions of Government (D) Which-of the following-can-negatively influence social welfare? (A) Fall inctime (B) Pall in interest rates (C)_— Riseimemployment Rise in inflation (0)1. Perfect competion is based on which of the 30. Which is an example of asymmetric following assumptions? information? (A) (A) _Perfecteouteuleborigg (}) *Sialliiastehe seams {B) (c) Large number of big firms: (D) —_Largenumber of buyers- the ather about the matter (©) Both partieseqiially lack knowledge about the mater (D) One party refvses 1 share inforrvation with another party ‘tems32-33 refer to the following diagram which shows the cost and revenue curves of a profit maximising monopolistically competitive firm. | a \ ee 2 x ¥ Output wt By Which one of the following rectangles 33, Which rectangle represents total revenue of represents total cost of the firm? the firmat equilibrium? (A) OPWX (A) OPWx (B) ORUX (B) ORUX (Q OSTX (©) OSTX w@) = 9QVvY (D) OQVY GO ONTO THE NEXT PAGE 61 BAIA A PE 2007a4 36 The condition necessary for narmal pestis that (a). (b) average cost must be equal wo. marginal eost-— (©) average cost most bé equal to marginal revenue (P) average cost must be equal to average revenue Which of the following is responsible forthe “Fen? in the demand curve of the oligopolistic finn? (A) Rival firms in an oligopoly match pice cuts but nat price increases (B) Rival firms in an oligopoly match price increases but not price cuts. (C) The products sold by oligopolistic finns ave substantially ifferent from each other (D) The products sald by aligopolistic finnsare slightly different from each other Hem 36 reters to the diagram below which shows a firm operating in a perfectly competitive market Which segment of the curves shown represents the short run supply curve? (A) CwEk (8) Bed (c) AtwD (0) AtwF 38. Which of the following BEST desceibes the Smarginalis: principle"? Aug sil (GB) Marginal cost equals average (©) © Average cost equals marginal (D) Marginal cost equals marginal revenue Countries that allow multinational corporations to undertake direct foreign investnent benefit from (A) transfer pricing practices of the ‘mulfinational corporation (B) rapid depletion of local natural resources (C)___tmansferoftechnology and production, techniques (P). monapsony power in wage negotiations ‘Vhe point at which the Liem in perfect competition coversits viriable costs is called the (A) closing down point (B) variation point (C) economies of seale point (D) tong runequilibrium point= 10- {tem 40 refersto the diagram below showing 42 cost and revenue.curvessatsinaionntisad ifchusiry. M Cost pe ad Revenue Are AR BS 40. Tthe industry is mandated to adopt marginal cost pricing, what price will itcharge” 4s ) », @ P, ©? @ P, 41. Economic efficiency in production occurs, when 45 (A) all firms are maximising profits and producing where MC= MR (8) there isno spare capacity (©) the output of one good « increased without redw output ofanather good (D)_theeconomy doesnot havetodepend on imported goods IF YOU FINISH BEFORE TIME IS CALLED, CHI Market failure describes the failure of the market economy to achieve.an.efficient allocation of (A) resources (8) capital (C) machinery (D) —abour Market failure is usually corrected by (A) consumers (B) public finns (C) private firms {D) Government Which combination BEST describes examples of privatisation? (A) Deregulation and franchising (B) Contracting out and regulation (©) Deregulation and nationalisation (D) Franchising and redistribution ‘The concept of ‘adverse selection’ implies that (A) persons who have insurance may tend to be less carefial and thus inctease risks {B) persons who take out insurance ace those with the highest risk (©) those who sell insurance policies are more well informed than those who buy them (D) those who refiise insurance policies are often the same ones who really need them 1K YOUR WORK ONTHIS TI