(a) ''Production involves the use of factors of production (resources). In relation to

these resources, all business organisations face what is known as the basic

economic problem''.

Identify and explain the three questions that arise while making choices about

the use of scarce resources.

[7 Marks]

(b) ''The recent foot and mouth disease also known as '' fivre Aphteuse''

outbreak in Rodrigues has quickly found its way to Mauritius. While local

breeders welcome the measures taken by the Ministry of Agriculture to

counter the disease, the breeders in Rodrigues are expecting some kind

of compensation from the government following heavy losses of stock.

The authorities immediately took necessary measures to contain the

disease and prevent it from spreading further. It was decided to cull the

worst affected animals. As such there is now a temporary ban on the

import of animals and of meat from Rodrigues because it has been

established that the outbreak in Mauritius originates from Rodrigues''

Use appropriate supply and demand diagrams to analyse the effects on the

market equilibrium price and quantity traded of beef, following:

(i) A fall in the price of fish.

[6 marks]

(ii) An outbreak of ''fivre Aphteuse'' resulting in the slaughtering and

disposal of a large number of infected cattle heads.

[6 marks]

(iii) The government decide to grant subsidies as compensation to vulnerable

breeders.

[6 marks]

(c) Using appropriate examples, explain the concepts of price elasticity, income

elasticity and cross elasticity of demand.

[10 marks]

(d) Discuss how knowledge of price elasticity, income elasticity, and cross elasticity

might be of practical use to a firm dealing in sales of smart phones.

[15 marks

(1) Define the term "barriers to entry". List down the types of barriers that

monopolists impose to new entrants.

[10 Marks]

(2) Are monopolies always bad? Justify your answer.

[5 Marks]