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r

2 _

3

V/hich of th e follow ing BEST defines th e~carcit}I")

( 1 \) - - : , -- . Good S , , 1 1 ] ( 1 services to consumers ar elji short supply.

'C)-~

There (Ire not enough resourcesavailab le at present

- Tile excess of human wants over theeconomy's resources.

.(D) The wants o r society are grcn.tertil an tile suppl y of goods.

A baker can bake .my combination of itemsw; I'lgthe fo Ilowing options below.

W hat is t h e oppo r tun ity cost of producing onecake?

(A) I loafof bread(D ) .5 loaves of b read(C) 7 IOC l ves 0 r b readCD) 8 loa v es of b read

W h ich of th e fo llow ing s ta tc rnents 13ESTdefines a 'product ion possib ility frontier' '). , (A) The lim it of th e c omb in ati on s of

goods and services that can beproduced

The combinations of goods andserv ices that may be produced in acountry

The mix ture of goods and servicesthat a re des ir ed by a country

A n i l lustrat.io n of 8Jl economyproducing goods and services fo r j ts

c n )(C)(D)

cinzens

I f

_l1~!II__::l refers to the foIlow Ing d iagrarnsE ~ ~ ~ l l i : i & ! : ~ _ ? L r _ ? ~ o _ d l I C i i ( J _ I ! _ P ( J ~ . s i~ 1 i :W ' X _

(A l

(IJ)

(C)

(D)

RCapitalgOIH]S

RCapitalgoods

Capitalgoods

ItCapitalgoods

~ ) ~ - - - 7Co ns IIIII cr

goods

____ _____ ,lL__ :;,Consumer

goods

It - - - - - ~ - ~~~7COIlSll mcr

goods

l__----::..~---7Consumergoods

4. Which diagram i l iustrntcs decre.as ingopportunity costs?

(A)CB )(C)(D)

ABCD

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(A)

(B)

(C)

(D)

I ) ------- Qrn

.\Price

0------- .--~-~QID-'

o - - - - -- - -- - - - - - - = = /. (2 /1 )IPrlce

- _o -------.--+Qfl}'

.-------.----.-.-6. A variable whose value is determ incd

independently of the model may be classifiedasCA) exogenous(8) endogenous(C) relat ional(D) functional

021160lOJCAPE2007(JO ON TO THE NEXT PAGE

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JJ_Ql15_7_-=--B. refer 10 th e following di agrurns~A,~!.I.l",,'.':'.. L:~.Ulltl;:tIbudget line~Ji!f !~ft~ ' .f l r } ,

('

, -,Good y

7, What has happened to cause the budget iiueto shift Irorn ab (0 cd'!(A) Consumer income decreased and

prices remained unchanged.(D) Tile price of good x fell, ceteris

pal ibus(C) The price of good x rose and the price

ofgoody fell.C D ) The prices of good x and y fell in the

same proportion,

8, re i is downward s loping and conv ex to (h eorigm. 'The shape is convex because the(A) consumer opportunity cost IS

i nc r ea smg(B) rnar g inal ralc o f s ub s ti tu ti on IS

mcrcasing(C) rn a rg ina l rale o f s ub s ti tu ti on IS

decreasing(D) co nsurn er o ppo r t um tv cos t IS

decreasing

4-Uell1_~ rekrs (0 the d iagralll bci ow

O rQlIari i i t , f '( I c JII a l u T e ; ]

() ,--~~.--.~--.---.:~Income ..y

9, The diagram above BEST descr ibes (herela tionsh ip between income and quantitydemanded of(A) a normal good(8) a gi ffen good(C) an inferio r go odCD) ostentatious goods

10. The following is a caption [rom Tropic Islanddaily newspaper.

~------......--~~

l~:InCJ(EN I'nJCE~-~~~~~~~-~'r AS lJlnI;-;;'-'-;-;--THREATENS TBE ISLAND- -------~----'"----------.,---- . . . . . . .- - ----~~- -~--'Which of the following could have Jed to thefall in chicken prices?(A) Increasing demand for cI iicken(B) Decreasing demand for chicken(C) Increasing supply of chickenCD ) Decreasing supply of chicken

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.Ht;:F!..Jl. ((Jers in the diagram below'

11 In the above diagram of; IS the consumers'initial budget line. The price ofx falls and thebudgel Ii nc p iv ots to de . What is the incomeeffec t ofrh is pric e change?(A) fg(f~) fh(C) hb(D) hg

J 2. Which ofthe following UESTdescribes thePrJ ce e la s tic ity of dem and of a downwardsloping demand curve'!(A) Dec rea s ing ela s tic itiy of demand a s

price decreasesThe sa m e elasticity of d ern an dthroughout

J ncreas I ng e la st if : ity C 1 f clerna nd aspr ice decreases

Unitary elasticity of d e.m a n dthroughout

(B)

(C)(D)

13. In th e short ru n which ofih e folJow ing isNOT affected by fixed cost?(A) Total Cost(8) Marginal Cost(C) Aver age CostC D ) A verage Fix ed Cost

- 5 -1 4 , W h ic h o f lilt: I o l lo wi n g U [ ' . ) T d e lm e s

'margined cost'?

rom pi.~Q~ILpuL__ ..__._.(B) The addition [0 to ta l fi xed (USb ljomprucluci ng one more U11I ol out pill

The acid i r ion to avera ge loud ('0';;15from produc ing one more unit uf'output

T he a dd iti on to a ve ra ge v ar ia b le cos t sfrom prod uc m g one more un r! o foutput

(C)

(D)

] S. There is ad irect relat ionsh Ip b etw ee n q ua ntu ysupplied and pric e. Th is JS s o b ec au se(A ) producers b eliev e th at higher prices

lead 10 greater profits(8) prod ucers wan t to sec u re ca p IIat

el l Uipm ent to ma ss produc t: goods(C) as producers bu y m arc 0l fl factor 0 r

production, Its puce goes down(D) as production increases, competition

for factors ofproduction 11ICI(;'~Sestheir COSI

16 The table below shows tile percentage ofNationa l Inc om e ea rned by v ario us fa cto rs~ . .or prooucnon.- - - _ . _ . ._ _ . ._ j.Land 15%

Labour . 25%Capital 20% .En trepren e llfSlll ~ 40;') _

This table represents(A)(B)(C)C D )

functional distribu lion 0 f lncornepersonal distriburion o f In com esize d isrri bul ion of 1ncornecosrro flrrns of each factor

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17 . l n the grClph be low [he t ' - . / I arg inet1Revenuep-r.odB'a;;;eJaTvc."l'[[!TR!lif-F~dH~ 1l l- lVt H .Y lo:~~ _ - - _ _ _~"'_~~ 'i; , ,~_ - - - I

Wnge

0---------Qmllltity of labour

Which are the factors to h av e MOSTLIKELY caused this movement?

1 \Ill.IV

A rise in th e price of th e fina l goodA rise in th e s ize of the labour forceA fall in the price of the final goodA rise in w ork er produc tiv ity

(A)(m(C)(U)

l and 11 only[ [ a rid I II o nlyI and IV only[I and IV only

1 8 _ Which of the following will Gause the demandfor labour curve to shin to the r ight?(A) A decrease ill the price ofthe product(l\) A!l i11 C re (\s e in the p ric e 0 f a

substitute factor of production(C) A rise in the wage rate(D) A decrease ill the productiv ity of

labour

19 _ Wh ich of th e following I.cnTIS expla ins th erelationship between factor rewards andcosts ofproduction?(1\)(8)(C)(D)

InverseDirec tInel itee!Negative

-6 -20_ The M RP CIJI've sloDes dow nw ard b ecause' : ~ - : - : : : : ~ ~ : ' t A ' p ~ = a ~ f r ~ r l I T 5 1 i I : ~ l _ f 5 J l ~ ~ \ : P : , q _ f tl~t~C)Ts-

It o m oth er uses( 1 3 ) - ' iess-()r-aTa{jorl_.~_{Jt inal\deci at a

lower price(C) more of a factor is dernandetl atalower puce(D) the marginal physical product IS

constantly falling

llem 21 belews refers to th e graph show ingthe demand and supply for a factor ofproduction.

Price s

DD I ::.,_Quantity --

_____ So

21 -A shift of the demand curve (rom DD toD,Dr will result inI(A ) a ll inc rease in trans fer ea rn ings(8) an increase in economic rent(C) a decrease in transfer earrungs(D) a decrease in economic rent

22. Which of the following countries has thegreatest inequality of income distribution?

Value o rGini coeffieicnt-----1-----'-

. J

.37

' - - _ _ D ,_ _ - - - " - - , 9 _ _(A)(8)(C)(D)

Country ACountry I3Country CCountry D

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23 The labour force rna! be defined as personswho Dr':, e m p lo ye d pills th e '

(C)(D)

under em playedw o r k l i l ' g - p o p ~ l !!~!QIl

24 _ WhICh ofthe following mtluence the labourforce': participation rate?

1 1 .Ill.

(A)(13)(C)(D)

Total PopulationDemand fOI labourChange in altitudesj and II onlyI and llf onlyII ane l I I I onlyr , J l and J[f

IICHIS 25 - 26 refer to the followin g diagram(1f a Lorenz Curve.

QJ I o n !0,Ul':"- 80.~. . ,(,lJ. ~Oil ._ro ~. _ . < : < l 60"3JU SI... ;JQJ U.0. .__- 40 -

20l.------l ---------.__l __ _l_

20 ,,40 60 80 lOO--~%01 ' households25~ W ha Idocs 111s d ragrarn indicate about i J )COIne

d rstn burien?

(/-\)(8 )(C)(D)

It 15 d is tr ib uted eq ua ll yr li s c J is t r Ibo red a t a consian t rate .IIis unequally disuibured. ISixty per cent 0rhouseholds recei ves ix ty per cent of income.

- 7 -26, v\,'h Jch of the following call be obl

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- () --30, 'vVhich IS-lin examp le of ()sYflll'llelli~:

111(lnmllion?J I, Perfect corn pelion is based on v , , 1 1 ieh cd'the

following assumptions?

U\l( I : l j(C)(D)

Large number 0f!5tgLarge nurn bel 0l-buyet s-

(B) O ne patty h as r rio re k no wled ge thanthe other abl1i.iithc Il lat , tei:- -

(C) Both parties equ ally la ck k now led geabout th e m a tter . '

(D) One party refuses T c j - shareinformation with another party,

I tems 32 - 33 refer to th e fo llow ing d iag ramwh ich shows the cost and revenue curves 0ra profit max im ising monopolistica llycompetitive finn,

Cos!Revenue

Q-----,-~-

Me

H

o ----------_-----"---x y ------7Oulpu tMR

3 2 _ Which one of the following rectanglesrepresents total cost ofthe firm? 33 Which rectangle represents total revenue oft he f irm a te qu il ib r iu r n?(A) O P W X(B) ORUX(C) OSTX(D) OQVY

(A) OPWX(8) ORUX(C) OSTXCD) O Q V Y

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34 Tile con.Iiuon necessary fOI normal pr::)JlI isth.u

(Li) average cost nlu-s-C'be,.oequai [I)margrua I coS[----

a v e rage cost must be equal (f)marginal revenue

a v erag e cost must be -c 'q IIa I toaverage revenue

(C)

(0)

35 Which ofthe following is responsible for the'k ink ' in th e dem and C! irve of the oligopolist icl inn?

(A) Rival f i rms ill an oligopoly ma tchpr ice C uts bu t not pr ice increases.Rival firm s in an oligopoly matchprice increases but not p ric e c uts ,

The products sold by oligopolisticIi rm S me SlJ b sta nti a IIy d i ffe re nt i ro n 1each other.

T he p ro duc ts sold by oligopof isticfirm s a re slightly d liferent from ea chother.

(B)(C)

(D)

11.~!n3i> refers to the diagram below wh ic hsh ow s a firm opera ting in a per fec tlycorn peritive rnarker.

/\

3(i. Which segment of the c u r v e s shownrepl esents the sho rt run supply curv e?(A) C[O E(8) B to D(C) A to DCD) Ato F

c -- ) --

39.

\Vhich Ol"lIH:: rollowing 13ES'I"descllbes'rnarginalis: principle.'?

(D)(C)(D)

38 ,

lvl a r g i n a l c o s t e q u a l s a v e rrevenue

Average c o st equals rnarg irevenue

Marginal cosl equals 1Tl8rgllrevenue

Co uut r i es that allow m u l t i n at i oucorporations to undertake direc t foreiinvestment b en efit fro m

(A)(B)

(C)(D)

tra ns fer p ric ing practices ofmulf national co rpora l ionrapid depletion of local naturesources

t ransfer of technology and productite chn iquesIn0 110pso n y po we rill \"ianegotiations

The po in t a t wh ic h th e firm r n perfecompetit ion cover') its variable costs is callthe(A)(B)(C)(D)

closing down pointv ar ia tio n p oi nteconorn ies or scale pu i IIIlong run equilibrium point

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Lteonl.'tU refers (0 lhe diagram below showingcos I 811d ['ev e n IJ e- G urv,eS-E-j=j31uri'H~:e%... - . - . : . .:.~ ~". ---_ - ,--- il 1 t \ ( is h ) ;_

Me

40_ I r the inc!ustry is mandated to ac lopt margi 1181cost pr ic ing, wha t p rice wi II i t cha rge ' !(/\ )(Fl)(C)(I))

1 - ' IP 1l'1P ;

41 Econ om ice [fc ienc y in p roduc ti on oc cu rswhen

(i\) a ll firm s a re maximising pr ofits a ndproduc ing where M.e=MRthere is no spare capac i ty

th e outpu t of one good cannot b eincreased without reducing (heoutput of another good

th e economy does no t have to dependOn imported goods

(ll)(C)

C D )

- 10 -42 l\- -h lfk et fa ilu re .Iesc rib es th e la iiurc ofthe

rn a rket ee o 1l01~1X _ to ach i_e_vQ:o,g!ks:_C[ic.j_eq~- aI 10 ca li ol ') 0 1

(A) resources(B) capital(C) machinery(D) labour

43 . Marke l failure is usually correc ted by(A) consumers(D ) pub lic firm s(C) pr iva te f i rms(D) Government

44. W h ic h comb ina tion BEST desc r ib esexamples of'privatisation?(A ) Deregu la tion and franch is ing(B) Contrac ting out and regu la tion(C) De re gu la ti on a nd n at io na li sa ti on(D) F ranch is ing aJ id re d istn bu t i on

45. T he c on cept of' a dv er se s ele cti on ' impliesth a t(A ) persons who h av e insu ranc e m ay

lend 10 b e les s ca re Iu I and UJUSinc rease r isk s

(D) persons who ta k e ou t insu ranc e a teth ose w ith th e h igh es t r isk

(C ) those who sell in suranc e po lic ies a rcmore well inforrned than those whobuy them

(D) th ose wh o refuse insu ranc e polic iesa re often th e sam e on es w ho reallyneed them

fFYOlJFINlSnBEFOltETIM.EISCALLED,CHECKYOLJRWOIU(ONTHfSTEST.

'' '~ f 1(:-/\' ,,/,-, ADC ')f\il7