ECS1501 May/Jun 2016 exam paper — questions
Question 1 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Among the following statements about economics, identify the one that is incorrect.Show the full question
Question 2 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
NASA has limited resources to build new telescopes or send spaceships into space, illustrated by a production possibility curve (PPC) diagram with telescopes on the vertical axis and spaceships on the horizontal axis. Point A lies above the curve, point B lies just outside PPC1 near PPC2, point C lies on PPC1, and point D lies inside the curve. The curve can shift outward from PPC1 to PPC2. Assuming NASA is currently operating on PPC1, which of the points (A, B, C or D) can possibly be reached but would represent an ineffective use of resources?Show the full question
Question 3 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Referring to the same NASA production possibility curve diagram (telescopes on the vertical axis, spaceships on the horizontal axis, with the curve able to shift outward from PPC1 to PPC2), which of the following could have caused this shift from PPC1 to PPC2?Show the full question
Question 4 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Continuing with the same NASA PPC diagram, after the curve shifts from PPC1 to PPC2, one point (out of A, B, C, D) becomes newly attainable, another point shows an effective use of resources, and a third point remains unattainable. Which combination, in that order (attainable, effective use, unattainable), is correct?Show the full question
Question 5 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Identify which of the following is a normative statement.Show the full question
Question 6 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Consider the following list of economic systems: (i) the traditional system; (ii) the command system; (iii) the market system; (iv) a mixed economy. Which of these are concerned with addressing the fundamental economic questions?Show the full question
Question 7 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Select the example that illustrates an economy operating under a command system.Show the full question
Question 8 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Identify the statement that does not describe the term "market".Show the full question
Question 9 · Participants and the circular flow of income · 1.43 marks
Regarding the three major flows in the economy, which of the following statements is incorrect?Show the full question
Question 10 · What economics is about: scarcity, choice and the economic problem · 1.43 marks
Identify which of the following is not a factor of production.Show the full question
Question 11 · Participants and the circular flow of income · 1.43 marks
If John sells his capital to firms on the factor market, what type of remuneration will he receive?Show the full question
Question 12 · Participants and the circular flow of income · 1.43 marks
Determine the correct statement describing the difference between the goods market and the factor market.Show the full question
Question 13 · Participants and the circular flow of income · 1.43 marks
Identify which of the following represents a leakage from the circular flow of income and expenditure in South Africa.Show the full question
Question 14 · Participants and the circular flow of income · 1.43 marks
Determine which one of the following statements about the circular flow of income and expenditure is true.Show the full question
Question 15 · Demand, supply and market equilibrium · 1.43 marks
Complete the following statement: the demand for a product is said to be effective when ___.Show the full question
Question 16 · Demand, supply and market equilibrium · 1.43 marks
Identify which one of the following factors will cause the demand curve for butter to shift to the right.Show the full question
Question 17 · Demand, supply and market equilibrium · 1.43 marks
In a diagram for the market for product A, price (P) is on the vertical axis and quantity (Q) is on the horizontal axis. A downward-sloping demand curve D1 is shown, along with two upward-sloping supply curves, S1 and S2, with the supply curve moving rightward from S1 to S2. What could most likely explain this movement of the supply curve from S1 to S2?Show the full question
Question 18 · Demand, supply and market equilibrium · 1.43 marks
Using the same market-for-product-A diagram, where the supply curve moves rightward from S1 to S2 against a downward-sloping demand curve D1, what would be the likely effect on price and quantity of this movement?Show the full question
Question 19 · Demand, supply and market equilibrium · 1.43 marks
Still referring to the market for product A (with the supply curve able to move from S1 to S2 against demand curve D1), if this movement of the supply curve took place but the price failed to adjust to the new level of market equilibrium, which of the following would likely be observed in the market for product A?Show the full question
Question 20 · Demand, supply and market equilibrium · 1.43 marks
Identify which one of the following statements is incorrect.Show the full question
Question 21 · Demand, supply and market equilibrium · 1.43 marks
Given the two equations Qd = 100 − 3P and Qs = 50 + 2P, determine which option correctly indicates the equilibrium price and quantity.Show the full question
Question 22 · Demand, supply and market equilibrium · 1.43 marks
Identify which one of the following factors causes an increase in demand.Show the full question
Question 23 · Demand, supply and market equilibrium · 1.43 marks
Complete the following statement: an increase in the supply of bananas ___.Show the full question
Question 24 · Demand, supply and market equilibrium · 1.43 marks
Determine which one of the following statements is correct.Show the full question
Question 25 · Demand, supply and market equilibrium · 1.43 marks
Products A and B are substitutes, products B and C are complements, and the markets for products A and C are unrelated. Which one of the following statements regarding the markets for products A, B and C is true?Show the full question
Question 26 · Government intervention: price controls, taxes and subsidies · 1.43 marks
Determine which one of the following statements is correct.Show the full question
Question 27 · Demand, supply and market equilibrium · 1.43 marks
Identify which one of the following statements is incorrect.Show the full question
Question 28 · Price and income elasticity · 1.43 marks
Determine which one of the following statements is correct.Show the full question
Question 29 · Price and income elasticity · 1.43 marks
Identify which one of the following statements is incorrect.Show the full question
Question 30 · Price and income elasticity · 1.43 marks
Determine which one of the following statements is correct.Show the full question
Question 31 · Price and income elasticity · 1.43 marks
When the price of a product increases by 5% and the quantity demanded of the product changes from 1 500 to 1 200, what is the price elasticity of demand of the product?Show the full question
Question 32 · Consumer behaviour and utility · 1.43 marks
Complete the statement: marginal utility is ___.Show the full question
Question 33 · Consumer behaviour and utility · 1.43 marks
Complete the statement: cardinal utility means ___.Show the full question
Question 34 · Consumer behaviour and utility · 1.43 marks
Identify which one of the following is a feature of utility.Show the full question
Question 35 · Consumer behaviour and utility · 1.43 marks
Complete the statement: the total utility gained from consuming additional units of a good will increase if ___.Show the full question
Question 36 · Consumer behaviour and utility · 1.43 marks
Consider the following statements: (i) the more units a consumer consumes consecutively of a product, the greater the marginal utility; (ii) the more units a consumer consumes consecutively of a product, the smaller the total utility; (iii) when the marginal utility becomes negative, it is called disutility. Which one of the following combinations is correct?Show the full question
Question 37 · Consumer behaviour and utility · 1.43 marks
Complete the statement: a consumer is in equilibrium when ___.Show the full question
Question 38 · Consumer behaviour and utility · 1.43 marks
Suppose John has R100 available to spend on apples, bananas and oranges, and each of these products costs R10 per kilogram. The total utility (in utils) for consuming 1 to 5 kg of each fruit is as follows: apples give 120, 188, 226, 256 and 280 utils for 1, 2, 3, 4 and 5 kg respectively; bananas give 64, 94, 119, 134 and 144 utils for the same quantities; oranges give 100, 144, 180, 210 and 234 utils for the same quantities. If John spends the full R100 on these three products, he will be in equilibrium if he buys ___.Show the full question
Question 39 · Consumer behaviour and utility · 1.43 marks
Using the same total-utility data for apples, bananas and oranges given for John (who has R100 to spend at R10 per kilogram on each fruit), what will John's total utility be at equilibrium?Show the full question
Question 40 · Consumer behaviour and utility · 1.43 marks
Sipho consumes two goods, A and B. Let PA and PB represent their prices, MUA and MUB their marginal utilities, and TUA and TUB their total utilities. Under what condition will Sipho achieve consumer equilibrium?Show the full question
Question 41 · Consumer behaviour and utility · 1.43 marks
Referring to a table where quantity consumed (1 to 5 units) yields a total utility of 5, 16, 40, 60 and 65 utils respectively, at what quantity consumed will diminishing marginal utility begin?Show the full question
Question 42 · Production and the costs of the firm · 1.43 marks
Determine which one of the following statements is correct.Show the full question
Question 43 · Production and the costs of the firm · 1.43 marks
Determine which one of the following statements is correct.Show the full question
Question 44 · Production and the costs of the firm · 1.43 marks
A firm's revenue schedule shows the following: output of 1 unit gives a total revenue of R10; output of 2 units gives an average revenue of R15; output of 3 units gives a marginal revenue of R6; output of 4 units gives an average revenue of R10; output of 5 units gives a total revenue of R42,5; and output of 6 units gives a marginal revenue of R2,5. What is the total revenue of six units?Show the full question
Question 45 · Production and the costs of the firm · 1.43 marks
Using the same revenue schedule (output of 1 unit gives total revenue R10; output of 2 units gives average revenue R15; output of 3 units gives marginal revenue R6; output of 4 units gives average revenue R10; output of 5 units gives total revenue R42,5; output of 6 units gives marginal revenue R2,5), what is the average revenue of three units?Show the full question
Question 46 · Production and the costs of the firm · 1.43 marks
Using the same revenue schedule, what is the marginal revenue of the fifth unit?Show the full question
Question 47 · Production and the costs of the firm · 1.43 marks
Complete the statement: the law of diminishing returns ___.Show the full question
Question 48 · Production and the costs of the firm · 1.43 marks
Refer to a total product (TP) diagram in which total product (in units) is plotted against units of labour (N). The curve shows that 2 units of labour give a total product of 50; 3 units of labour give a total product of 75; 5 units of labour give a total product of 150; 6 units of labour give a total product of 170; and the curve reaches a maximum at around 9 units of labour before it starts to decline. Which one of the following statements is correct?Show the full question
Question 49 · Production and the costs of the firm · 1.43 marks
A labour-production table shows the following: 1 unit of labour gives a marginal product of 20; 2 units of labour give a total product of 45; 3 units of labour give a total product of 66; 4 units of labour give an average product of 21; 5 units of labour give a total product of 100; and 6 units of labour give a marginal product of 14. What is the average product of six units of labour?Show the full question
Question 50 · Production and the costs of the firm · 1.43 marks
Using the same labour-production table, what is the marginal product of the fifth unit of labour?Show the full question
Question 51 · Production and the costs of the firm · 1.43 marks
Refer to a diagram plotting cost per unit of output (MC, AC) against quantity of output (Q). Curve 1 declines to a minimum of 30 at quantity Q1, then rises and intersects curve 2 at a cost of 40 at quantity Q2; curve 2 also passes through this same intersection point at a cost of 40 at Q2. Which one of the following statements is correct?Show the full question
Question 52 · Production and the costs of the firm · 1.43 marks
A beer manufacturer's short-run total cost schedule is as follows: 0 workers per day produce 0 bottles at a total cost of R400; 1 worker produces 30 bottles at R700; 2 workers produce 80 bottles at R1 000; 3 workers produce 120 bottles at R1 300; 4 workers produce 140 bottles at R1 600; and 5 workers produce 150 bottles at R1 900. When output increases from 30 to 80 bottles of beer, what is the marginal cost of producing one of those additional 50 bottles?Show the full question
Question 53 · Production and the costs of the firm · 1.43 marks
Using the same beer manufacturer's cost schedule, what is the average variable cost to the firm when 30 bottles of beer are produced?Show the full question
Question 54 · Production and the costs of the firm · 1.43 marks
Complete the statement: the average fixed cost ___.Show the full question
Question 55 · Market structures: perfect competition to monopoly · 1.43 marks
Identify which one of the following is not a requirement for or characteristic of perfect competition.Show the full question
Question 56 · Market structures: perfect competition to monopoly · 1.43 marks
Consider the following characteristics: (i) influence over market price; (ii) product differentiation; (iii) complete information; (iv) agreements between sellers to control supply. Which of these characteristics are not associated with perfect competition?Show the full question
Question 57 · Market structures: perfect competition to monopoly · 1.43 marks
If a firm faces a perfectly elastic demand for its product, which of the following relationships holds?Show the full question
Question 58 · Market structures: perfect competition to monopoly · 1.43 marks
In a perfectly competitive industry, the market price is R20. An individual firm produces output at which MC = R25. What should the firm do to maximise short-run profits or minimise losses?Show the full question
Question 59 · Market structures: perfect competition to monopoly · 1.43 marks
Explain why perfectly competitive firms earn normal profit only in the long run.Show the full question
Question 60 · Market structures: perfect competition to monopoly · 1.43 marks
Complete the statement: if a firm in a perfectly competitive industry raises its price above market price ___.Show the full question
Question 61 · Market structures: perfect competition to monopoly · 1.43 marks
A firm sells its product in a perfectly competitive market at a price of R120 per unit. Its cost structure is as follows: total cost at zero units produced is R48; the marginal cost of the first unit is R32; total variable cost at two units is R100; total cost at three units is R216; marginal cost of the fourth unit is R104; average cost at five units is R88; and total variable cost at six units is R564. What is the total cost of producing one unit?Show the full question
Question 62 · Market structures: perfect competition to monopoly · 1.43 marks
Using the same cost structure for the firm selling its product at R120 per unit, how many units must the firm produce in order to maximise profits?Show the full question
Question 63 · Market structures: perfect competition to monopoly · 1.43 marks
Using the same cost structure, what is the marginal cost of the sixth unit?Show the full question
Question 64 · Market structures: perfect competition to monopoly · 1.43 marks
Refer to a diagram plotting revenue and cost against quantity per period, showing MC, AC and AVC curves, with marked points a, b, c, d and e corresponding respectively to prices P5, P4, P3, P2 and P1 at quantities Q5, Q4, Q3, Q2 and Q1. Which statement is incorrect?Show the full question
Question 65 · Market structures: perfect competition to monopoly · 1.43 marks
Complete the statement: a perfectly competitive industry is in equilibrium in the long run if ___.Show the full question
Question 66 · The labour market and wages · 1.43 marks
Identify which one of the following is not a characteristic of the labour market.Show the full question
Question 67 · The labour market and wages · 1.43 marks
Consider a diagram of changes in the labour market equilibrium, where wage rate is plotted against quantity of labour (N). Initially, demand curve D0 intersects supply curve S0 at equilibrium E0, giving wage w0 and quantity N0. The demand curve then shifts rightward to D1, intersecting S0 at a new equilibrium E1, giving a higher wage w1 and a higher quantity N1. Which one of the following would cause this shift of the demand curve for labour, as shown in the graph?Show the full question
Question 68 · The labour market and wages · 1.43 marks
Complete the statement: in addition to belonging to a trade union, workers are likely to have more bargaining power to negotiate higher wages with employers if ___.Show the full question
Question 69 · The labour market and wages · 1.43 marks
Trade unions can employ various strategies in an attempt to increase the wage rates of their members. Which one of the following options will not tend to be accompanied by lower employment (increased unemployment)?Show the full question
Question 70 · The labour market and wages · 1.43 marks
Refer to a diagram of a perfectly competitive labour market where demand curve D and supply curve S intersect at equilibrium E, giving equilibrium wage w0 and quantity of labour N0. A minimum wage wm, set above w0, is imposed, resulting in a quantity of labour demanded of Nm and a quantity of labour supplied of N1. Which of the following statements is correct regarding the imposition of this minimum wage (wm) in a perfectly competitive labour market?Show the full question
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