18 2018

MODULE NAME: MODULE CODE:

ECONOMICS 1A PMIC6111
ECONOMICS 1A PMIC6111d
ECONOMICS 1A PMIC6111e
ECONOMICS 1A PMIC6111f
ECONOMICS 1A PMIC6111p
ECONOMICS 1A PMIC6111w
ECONOMICS A (Micro) ECMS6211
ECONOMICS A (Micro) ECMS6211d

ASSESSMENT TYPE: EXAMINATION (PAPER ONLY)

TOTAL MARK ALLOCATION: 120 MARKS
TOTAL HOURS: 2 HOURS (+10 minutes reading time)
INSTRUCTIONS:
1. Please adhere to all instructions in the assessment booklet.
2. Independent work is required.
3. Five minutes per hour of the assessment to a maximum of 15 minutes is dedicated to
reading time before the start of the assessment. You may make notes on your question
paper, but not in your answer sheet. Calculators may not be used during reading time.
4. You may not leave the assessment venue during reading time, or during the first hour or
during the last 15 minutes of the assessment.
5. Ensure that your name is on all pieces of paper or books that you will be submitting. Submit
all the pages of this assessment’s question paper as well as your answer script.
6. Answer all the questions on the answer sheets or in answer booklets provided. The phrase
‘END OF PAPER’ will appear after the final set question of this assessment.
7. Remember to work at a steady pace so that you are able to complete the assessment within
the allocated time. Use the mark allocation as a guideline as to how much time to spend on
each section.
Additional instructions:
1. This is a CLOSED BOOK assessment.
2. Calculators are allowed.
3. For multiple-choice questions, give only one (1) response per question. The marker will
ignore any question with more than one answer, unless otherwise stated. You should,
therefore, be sure of your answer before committing it to paper.
4. Answer All Questions.

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Question 1 (Marks: 40)

Multiple-choice questions: Select one correct answer for each of the following. In your answer
booklet, write down only the number of the question and next to it, the letter of the correct
answer.

Q.1.1 A(n) ______________ good is one where each unit differs from another unit. (2)
(a) homogenous
(b) heterogeneous
(c) free
(d) economic

Q.1.2 Referring to the table below, what is the total revenue generated in the market (2)
when the product is selling at R5?
Price in Rand Thebe’s quantity Lerato’s quantity
demanded demanded
50 1 0
40 2 1
30 4 3
20 7 5
10 10 7
5 15 12
(a) R27
(b) R60
(c) R75
(d) R135

Q.1.3 Which of the following does not indicate a state of disequilibrium? (2)
(a) There is a discrepancy between quantity demanded and quantity supplied.
(b) Quantity demanded is less than quantity supplied.
(c) Quantity demanded is greater than quantity supplied.
(d) Quantity demanded is not different from quantity supplied.

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Q.1.4 As more and more units of a good are consumed by a household, the total utility (2)
gained from that good will:
What would the consumer buy at his equilibrium?
(a) Diminish.
(b) Increase, but by successively smaller amounts.
(c) Rise steeply.
(d) Remain unchanged.

Q.1.5 Suppose there is an increase in both the supply and demand for personal (2)
computers. Further, suppose the supply of personal computers increases more
than demand for personal computers. In the market for personal computers, we
would expect:
(a) The change in the equilibrium quantity to be ambiguous and the equilibrium
price to fall.
(b) The equilibrium quantity to rise and the equilibrium price to rise.
(c) The equilibrium quantity to rise and the change in the equilibrium price to be
ambiguous.
(d) The equilibrium quantity to rise and the equilibrium price to fall.

Q.1.6 If the price elasticity of demand of the economics textbook is -0.3, what action (2)
should the Van Schaik Book shop take regarding the price of the textbook in order
to maximise total revenue?
(a) Decrease the price.
(b) Producers will have to cut back on production.
(c) The price should remain unchanged.
(d) Increase the price.

Q.1.7 A cut in train fares leaves the total revenue from train fares the same as before. (2)
This is an example of:
(a) Perfectly elastic demand;
(b) Unitary elasticity of demand.
(c) Elastic demand;
(d) Inelastic demand.

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Q.1.8 Using the table below, what is the average product of labour when two workers (2)
are employed?
Number of machines Number of workers Output (Cricket balls)
5 0 0
5 1 60
5 2 140
5 3 230
5 4 300
5 5 340
5 6 360
(a) 30 cricket balls;
(b) 80 cricket balls;
(c) 140 cricket balls;
(d) 70 cricket balls.

Q.1.9 The marginal cost curve intersects the: (2)

(a) AC, AVC and AFC curves at their minimum points;
(b) AC and AVC curves at their minimum points;
(c) AC and AFC curves at their minimum points;
(d) AVC and AFC curves at their minimum points.

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Q.1.10 Suppose a firm produces 15 units of output per month and has a total variable (2)
cost of R5 000 per month. If its average fixed costs are R350 per month, what are
its total costs per month?
(a) R350;
(b) R5 000;
(c) R10 250;
(d) R 5 350.

Q.1.11 Which one of the following formulas is correct? (2)

(a) 𝑇𝐶 = 𝐴𝑉𝐶 + 𝐴𝐹𝐶
(b) 𝐴𝐶 = 𝑀𝐶 ÷ 𝑄
(c) 𝐴𝑃 = 𝑇𝑃 ÷ 𝑄
(d) 𝑀𝐶 = ∆𝑇𝑅 ÷ ∆𝑄

Q.1.12 Which of the following is a likely example of monopolistic competition? (2)

(a) Eskom;
(b) Pete’s Pizza Den;
(c) The maize market;
(d) Transnet.

Q.1.13 Which one of the following statements is correct? (2)

(a) Monopolistic competition and oligopoly have incomplete information about
market conditions;
(b) An important similarity between the monopolistic competitor and the
oligopolist is that entry is restricted;
(c) The monopolistic firm does not have control over the price of the product;
(d) The long-run economic profit of a monopolistically competitive firm can be
positive.

Q.1.14 Product differentiation occurs when (2)

(a) Buyers perceive differences in the products of several companies;
(b) A completely new process is used to produce a familiar product;
(c) A firm produces many different goods;

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(d) Different prices are charged for the same good in different markets.

Q.1.15 Restricting entry into an occupation will __________ supply into that occupation (2)
and ________ wages.
(a) Increase; increase;
(b) Decrease; increase;
(c) Increase; decrease;
(d) Decrease; decrease.

Q.1.16 The vertical distance between the total cost and the total variable cost curves: (2)
(a) Decreases as output increases;
(b) Is equal to average fixed cost;
(c) Is equal to total fixed cost;
(d) Is equal to marginal cost.

Q.1.17 A perfectly competitive firm is in equilibrium where marginal cost is equal to (2)
marginal revenue because:
(a) This is where the optimum factor combination occurs;
(b) It is not possible to expand production in the short run;
(c) At this point average cost is always at its lowest;
(d) No other quantity yields higher profits.

Q.1.18 Which of the following would lead to an inward shift of a nation's production (2)
possibilities curve?
(a) Immigration of skilled workers into the nation
(b) An increase in the average skill level of the population
(c) a decrease in the size of the working-age population
(d) Increased production of capital goods

Q.1.19 When economists say scarcity, they mean that: (2)

(a) Only a limited number of consumers would be interested in purchasing
goods.

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(b) The human desire for goods exceeds the available supply of time, goods and
resources.
(c) Most people in poorer countries do not have enough goods.
(d) Goods are so expensive that only the rich can afford them.

Q.1.20 Utility from consuming a good is understood by economists to mean: (2)

(a) How often we consume the good.
(b) How much satisfaction or benefit we get from consuming the good.
(c) How much it costs to buy the good.
(d) How we best use the good.

Question 2 (Marks: 15)

Answer all the questions.

Q.2.1 Distinguish between accounting costs and economic costs. (2)

Q.2.2 What is the difference between cross elasticity of demand for complements and (4)
for substitutes?

Q.2.3 List three requirements for the existence of a monopoly. (3)

Q.2.4 Explain three purposes of competition policy. (6)

Question 3 (Marks: 10)

Answer all the questions.

Q.3.1 Complete the table to determine the firm’s cost structure. (5)
Units Total fixed Total Total cost Average Marginal
produced cost (R) variable (R) total cost cost (R)
cost (R) (R)
0 40 - -
1 16
2 30

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Q.3.2 Use a diagram to illustrate the relationships between average fixed cost, average (5)
variable cost, average (total) cost and marginal cost.

Question 4 (Marks: 25)

Answer all the questions.

Q.4.1 Distinguish between total, average and marginal revenue. (7)

Q.4.2 Name and explain five determinants that can cause an increase in demand for a (10)
particular good.

Q.4.3 Explain four important differences between the labour market and other (8)
markets.

Question 5 (Marks: 30)

Answer all the questions.

Q.5.1 Show, with the aid of a diagram (MC and MR curves), when a firm’s profit is (6)
maximised and when it would decrease and increase. Assume that the firm is
operating in a perfectly competitive market.

Q.5.2 Make use of a diagram to illustrate (2) and explain (8) the backward bending (10)
individual supply curve of labour, clearly explaining the substitution effect and
income effect.

Q.5.3 The bottled water market has been in equilibrium for some time now with a price (4)
of 𝑃0 per bottle and quantity of 𝑄0 bottles per day. Assume that there is a general
increase in income levels in the South African economy ceteris paribus. Use a
diagram only to show how the equilibrium situation in the bottled water market
will be affected by these developments.

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Q.5.4 Using indifference curve analysis, illustrate (3) and explain (7) the impact of an (10)
increase in consumer’s income on the equilibrium of normal goods.

END OF PAPER

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