SECTION A [40 MARKS]

Answer ALL questions in this section.

QUESTION ONE (40 Marks)

Choose the most appropriate answer. Write down numbers 1.1 to 1.20 in your answer book and next to each number

write the letter that represents the correct answer. E.g. 1.21 a

1.1 When there are not enough resources to produce the desired goods and services, we say that there is. ...

a) Unemployment.

b) A shortage

c) Scarcity

d) All of the above

1.2 Thomas has the following options in order of preference

i. Go to campus

ii. Go to the beach

iii. Stay home and play video games.

If he chooses to go to campus, then his opportunity cost of doing so is represented by...

a) i only

b) ii only

c) i and ii

d) i, ii and iii

1.3 Efficiency is illustrated by...

a) Points beyond the PPF curve

b) Points along the PPF curve

c) Points within the PPF curve

d) None of the above

1.4 South African companies are shifting towards, capital intensive production processes. The reason for such a shift

can be explained by considering...

a) The labour laws of the country

b) The quality of the labour available

c) The prices of the resources available

d) All of the above

1.5 In a hypothetical economy that produces two goods, there is an improvement in the production of one of the goods.

This will be illustrated by...

a) A point on the PPF diagram

b) An outward swivel of the PPF diagram

c) An outward shift of the PPF diagram

d) An inward shift of the PPF diagram

1.6 In the goods market, firms receive _____________ for their activities.

a) Profit

b) Sales revenue

c) Rent

d) Interest

1.7 In an economy, the government...

a) Produces public goods and services

b) Purchases factors of production in the factor market

c) Purchases goods in the goods market

d) All of the above

1.8 Which of the following will not change the demand for good X?

a) The price of the good X

b) The income of the consumers of good X

c) The expected price of good X

d) The price of good Y, a substitute of good X

1.9 All of the following will result in a change in the supply of good X except...

a) The price of production substitutes of good X

b) The expected future prices of good X

c) The state of technology available to produce good X

d) The price of good X

1.10 Prices will increase in a market if...

a) The price is above equilibrium price

b) Quantity is above equilibrium quantity

c) Quantity is below equilibrium quantity

d) None of the above

1.11 The following will result in a definite increase in equilibrium price and equilibrium quantity...

a) An increase in demand and in supply

b) A decrease in demand and in supply

c) An increase in demand and a decrease in supply

d) None of the above

1.12 Which of the following is not a form of government intervention?

a) Minimum prices

b) Subsidies

c) Taxation of products

d) None of the above

1.13 In order for a price ceiling to be effective...

a) It must be fixed above the equilibrium price

b) It must be fixed below the equilibrium price

c) It must be fixed equal to the equilibrium price

d) None of the above

1.14 When the price is equal to zero....

a) Price elasticity of demand equals infinity

b) Price elasticity of demand equals zero

c) Price elasticity of demand equals one

d) Price elasticity of demand lies between zero and one

1.15 If total revenue increases as the price is increased, price elasticity of demand is...

a) Perfectly elastic

b) Unitary elastic

c) Inelastic

d) Elastic

1.16 Accounting profit is equal to...

a) Total revenue less total explicit costs

b) Normal profit plus economic profit

c) All of the above

d) None of the above

1.17 When average product is decreasing...

a) Marginal product is decreasing

b) Marginal product is increasing

c) Marginal product equals zero

d) Average product is increasing

1.18 Which of the following firms do not earn normal profits

in the long run?

a) Monopolistic competition

b) Monopoly

c) Perfectly competitive firms

d) None of the above

1.19 For a firm in an oligopoly market structure with a kinked demand curve, equilibrium is determined by...

a) Marginal revenue equals marginal cost

b) Price equals marginal cost

c) All of the above

d) None of the above