economics

1 the diagram shows the production possibility curve of a desert island economy where the
inhabitants produce just two commodities, coconuts and fish.
coconuts | \
g fish
what explains the shape of the production possibility curve?
a coconuts and fish are perfect complements.
b_ coconuts and fish are perfect substitutes.
c_ the inhabitants consume more fish than coconuts.
d_ the opportunity cost of increasing fish production is constant.

2 a worker earns $40 per hour. rather than work, she decides to visit a museum for three hours.
the visit costs a total of $40.
what is the opportunity cost of visiting the museum?
a $40 b $80 cc $120 d $160

3 anewspaper article contains the following comments.
1 the burden of tax should be shifted more to the highest earners.
2 itis in the public interest that key services are nationalised.
which type of economic statement is illustrated by each comment?
pf |
a normative normative
b normative positive
cc positive normative
d positive positive

4 which change in the way resources are allocated in an economy is consistent with moving from a
planned economy to a market economy?
a aminimum price guarantee for apple producers is removed.
b anew government authority is established to monitor inefficiencies in apple production.
c_ the production of apples is subsidised to increase output.
d_ the sale of apples has a maximum price imposed.

9 = in which circumstance will the total expenditure by consumers on a good increase when its price
increases?
a demand for the good is income elastic.
b demand for the good is price inelastic.
c_ the price of a complementary good also increases.
d_ the price of substitute goods also increases.

6 when will a manufacturers ability to increase the quantity supplied in the snort run be greater ¢
a_ when labour is immobile
b_ when spare capacity exists
c_ when the product is perishable
d when unemployment is low

8 good x is related to good y. incomes increase and the price of good y falls.
which combination would give the greatest increase in demand for good x?
[| sen | sa
a inferior good complements

b inferior good substitutes
cc normal good complements
d normal good substitutes

9 what must be correct when the free market for a good is in disequilibrium?
a consumers can buy all of the good that they demand at the market price.
b_ producers can sell all of the good that they supply at the market price.
c_ the market price of the good will not change.
d_ the quantity of the good demanded differs from the quantity supplied.

10 a power station burns waste to produce electricity. this also produces a by-product of fertiliser for
farmers.
what is the effect in the fertiliser market of an increase in the demand for electricity?
a the price of fertiliser falls and the quantity demanded rises.
b_ the price of fertiliser falls and the quantity supplied falls.
c_ the price of fertiliser rises and the quantity demanded falls.
d_ the price of fertiliser rises and the quantity supplied rises.

11. the table shows the supply and demand for avocados in mexico city.
price per quantity demanded quantity supplied
kilogram ($) per day (kg) per day (kg)
45 170 230
40 190 190
35 210 150
30 230 110
as a result of lower transport costs, supply rises by 60 kg at all prices.
what is the new equilibrium price?
a $45 b $40 c $35 d $30

12 the diagram shows a demand curve for pineapples.
2
price
($) 15 x
1
0.5 bi
0 d
0 3 6 9 12
quantity (000s)
what happens to the value of price elasticity of demand (ped) when there is a movement from
point x to point y and what describes the value at point y?
effect on value of
value of ped ped at y
a fall elastic
b fall inelastic
cc rise elastic
d unchanged unitary

13 four firms produce furniture. the table shows the price elasticity of supply (pes) for each firm.
if the price of furniture rises by 5% which firm would experience an increase in quantity supplied
of 2.5%?
pes for
firm ;
furniture
a 2.5
b 2.0
cc 0.6
d 0.5

14 which argument has often been used to justify the privatisation of state enterprises?
a private firms can produce the same outputs using fewer inputs.
b_ private firms try to earn large profits.
c_ state enterprises are always monopolies which exploit consumers.
d_ state enterprises cannot operate without government subsidies.

15 a government imposes a maximum rent in order to make rented housing more affordable.
what is likely to be a long-run consequence if the maximum is set below the current free market
level?
a_ashortage of applicants for rented housing
b_ashortage of rented housing
c_anincrease in supply to satisfy the increased demand for rented housing
d_anincrease in the number of houses being rented

16 what would be categorised as direct government provision of goods and services?
a agovernment grant to a firm to provide healthcare services
b  agovernment regulation on the amount of sugar in soft drinks
c agovernment subsidy to a firm that operates a regional train service
d  agovernment takeover of a local bus service

17 which type of tax is the 15% sales tax levied in south africa?
aad valorem direct
bad valorem indirect
c specific direct
d _ specific indirect

18 what is an example of a transfer payment?
a ahousehold moving savings from one bank account to another
b  amonthly repayment on a loan used to buy a new cooker
c_ the amount paid to transport goods from one city to another
d_ the payment of student grants by the government

19 what will lead to an immediate improvement in the balance of payments deficit on current
account?
a _afall in interest rates
b_areduction in dividend payments to foreign investors
c_ areduction in the standard rate of income tax
d_anincrease in the level of government current expenditure

20 an appreciation of the south african rand in the foreign exchange markets is most likely to assist
the south african government achieve which policy objective?
a aredistribution of income
b_areduction in the rate of inflation
c_ areduction in the volume of imports
d_anincrease in the level of employment

21 four countries, a, b, c and d, trade internationally.
each circle in the diagram represents a free trade area between the countries within the circle. a
country can belong to more than one free trade area. countries outside of a circle face trade
barriers.
which country has the greatest opportunity to benefit from free international trade?

22 the diagram shows greece’s trade position with the eu between 2005 and 2014.
60
greek sets
trade 20 we iy ™
$bn 40 ro mr, _
aeoeet? “esaeeeeeee,, sesssseeees imports from eu
30 pic ccunceuusnsustt --—-+ exports to eu
20 _ _—— sai
ao ee ee” —s ss
10--"
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
how does the greek trade balance with the eu differ in 2014 compared to 2005?
a_anincreased deficit
banincreased surplus
c  areduced deficit
d  areduced surplus

23 a central bank forecasts a rise in raw material costs. the government plans to increase spending
on health and education.
the initial equilibrium point is shown by x on the aggregate demand, ad, and aggregate supply,
as, diagram.
what would be the new equilibrium point in the short run if the forecasts prove to be accurate and
the government plans are implemented?
as,
general as. as
price c, 2
level
p b
a
ad, ap ad2
o real output

24 acountry with a floating exchange rate experiences a large surplus on the current account of its
balance of payments.
what is likely to decrease as a consequence?
a_ exports of capital from the country
b the level of employment in the county
c the prices of imports into the country
d_ the value of the country’s currency

25 in 2018 an investor in the united states (us) purchased shares in a german bank. in december
2018 the us investor was paid a dividend on these shares.
how were these activities recorded in the us balance of payments for 2018?
a capital account credit current account credit
b capital account credit current account debit
cc capital account debit current account credit
d capital account debit current account debit

26 which statement describes disinflation?
a _afall in the price level
b sa fall in the rate of inflation
c_ arise in the value of money
d inflation below zero

27 in aclosed economy a rise in aggregate demand is needed to increase output in the country.
what is necessary to achieve this increase in output in the economy?
a_ enough capacity to produce the extra goods and services demanded
b free trade to allow imports to make up any shortages in supply
c government spending to be less than tax revenue
d_ reduced credit to lower inflation

28 a country with a tlxed exchange rate and a deficit in the current account of its balance of
payments enters a recession. it devalues its currency in an effort to correct its balance of
payments.

under which conditions is the deficit most likely to improve?
price elasticity of price elasticity of income elasticity of
demand for imports demand for exports demand for imports
a 0.3 0.5 0.8
b 0.4 0.8 0.8
cc 0.3 0.5 1.2
d 0.4 0.8 1.2

29 what is an example of fiscal policy aimed at increasing aggregate demand in an economy?
a increasing expenditure by firms on skills training programmes for unskilled workers
b_ increasing the commercial banks’ lending ability
c_ reducing the rate of income tax for all income earners
d_ reducing the rate of interest on loans to manufacturing companies

30 acountry with a fixed exchange rate experiences a balance of payments surplus.
which policy measure will enable it to maintain its exchange rate?
a decreasing government borrowing
b_ decreasing government spending
c_ decreasing the interest rate
d_ decreasing the money supply

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