QUESTION 1(20 Marks)

Choose the most appropriate answer. Write down numbers 1.1 to 1.10 in your answer book and next to each number write the letter that represents the correct answer. E.g. 1.11 a

1.1Which one of the following statements is incorrect?

a) Rich people do not experience scarcity.

b) Because resources are scarce, everyone has to make choices.

c) Every time a choice is made, opportunity cost is incurred.

d) The opportunity cost of a particular choice is the value of the best opportunity forgone (sacrificed) as a result of the choice.

1.2 Which one of the following statements is false?

a) The basic economic problem is one of choice.

b) Choice is necessary because of limited wants.

c) The means available to satisfy wants are limited.

d) The wants of human beings are unlimited.

1.3Microeconomics is a branch of economics that studies:

a) The determination of the gross domestic product.

b) The behaviour of individual decision-making units in the economy.

c) The effects and consequences of the aggregate behaviour of all decision-making units.

d) Both b and c above.

1.4 In the circular flow of income and spending in South Africa, ________ firms in the factor market becomes ________ households, while ________ households in the goods market becomes ________ firms. Expenditure by foreigners on South African products constitutes ________ the circular flow.

a) spending by; income to; spending by; income to; an injection into

b) income to; spending by; income to; spending by; a leakage from

c) income to; income to; spending by; spending by; an injection into

d) spending by; spending by; income to; income to; a leakage from

1.5 Which one of the following statements is incorrect?

a) An entrepreneur is a person who combines the other factors of production and is the driving force behind production.

b) The quality of labour is usually described by the term human capital.

c) Capital as a factor of production refers to the finance that is required to make production possible.

d) The quality of labour in South Africa is a serious concern.

1.6 How can the impact of an increase in the price of bread on the demand curve for bread be illustrated?

a) The demand curve for bread will shift to the left.

b) The demand curve for bread will shift to the right.

c) The demand curve for bread will remain unchanged.

d) The demand curve will become more elastic.

1.7 If the price of 3G data bundles, a substitute for fixed-line data bundles, decreases, then:

a) The demand curve for fixed-line data bundles will shift to the right.

b) The equilibrium quantity and price of fixed-line data bundles will not change.

c) The quantity of fixed-line data bundles demanded will increase.

d) The demand curve for fixed-line data bundles will shift to the left.

1.8 When the price of sugar rises by 10%, the revenue received by firms that sell sugar rises by 5%.This is an example of:

a) Perfectly elastic demand.

b) Elastic demand.

c) Inelastic demand.

d) Perfectly inelastic demand.

1.9Which one of the following statements is correct?

a) The short run is a time period of one year or less.

b) The short run is a period of time during which the quantity of at least one input is fixed and the quantities of the other inputs can be varied.

c) The short run is a period of time during which the quantities of all inputs can be varied, but technology is held constant.

d) The time period separating the short run from the long run is at least 3 months.

1.10 A jam making firm finds that by producing and selling the last jar of jam, the marginal revenue it earns is R25 andthe marginal cost it incurs is R24. In order to maximise profits, the firm should:

a) Decrease its output if it is a perfectly competitive firm, but not necessarily if it is a monopolistic firm.

b) Decrease its output if it is a monopolistic firm, but not necessarily if it is a perfectly competitive firm.

c) Increase its output irrespective of the type of firm it is.

d) Decrease its output irrespective of the type of firm it is.