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Section A: Multiple Choice Questions Question 1 Which of the following statements are correct? i) An increase in the price of a product will cause the demand curve of a substitute product to shift to the left. ii) If a producer manufactures a unit elastic product, he/she cannot influence total revenue by changing the price. iii) Frictional unemployment occurs when people are between jobs. iv) The elasticity of products changes over time. v) If products X and Y are complimentary, an increase in X's price will lead to an increase in demand for Y. A) i, ii, iii & v B) i, iii & v D) ii, iv & v C) ii, iii & iv E) i & iii Question 2 Which of the following statements are correct? i) The production possibility frontier is steeper at the right end than the left because some resources are better suited to make some products than others. ii) Perfectly inelastic demand is a horizontal line. iii) The production possibility frontier illustrates how much of each product is manufactured in the economy. iv) Inflation causes higher interest rates. v) The production of consumer goods and capital goods will always occur on the production possibility curve. A) i, ii, iii & v B) i, iii & v C) ii, iii & iv D) ii, iv & v E) i & iii Question 3 Which of the following statements are correct? i) The 4 production factors are Capital, Labour, Land & Entrepreneurship. ii) Lower interest rates cause inflation. iii) A price floor leads to surplus production. iv) If products X and Y are complimentary, an increase in X's price will lead to an increase in demand for Y. v) The elasticity of products changes over time. A) i, ii, iii & v B) i, iii & v C) ii, iii & iv D) ii, iv & v E) i & iii
Question 4 Which of the following statements are correct? i) The number of buyers who gain from the price ceiling is greater than the original number of buyers. ii) A price ceiling creates an excess demand. iii) A price ceiling generates winners as well as losers. iv) To have an effect, the price ceiling must be set at a lower level than the original market price. v) A price ceiling is an example of government intervention to assist the producer. A) i, ii, iii & v B) i, iii & v D) ii, iv & v C) ii, iii & iv E) i & iii Question 5 (12) Which of the following statements are correct? i) If a producer manufactures a unit elastic product, he/she can influence total revenue by changing the price. ii) The Reserve Bank can limit inflation by decreasing the supply of money. iii) Public goods are excludable in nature. iv) Perfectly inelastic supply is a vertical line. v) The elasticity of products changes over time. A) i, ii, iii & v B) i, iii & v D) ii, iv & v C) ii, iii & iv E) i & iii Question 6 100 90 80 70 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 Demand and Marginal Revenue If a profit maximising monopolist with a constant unit cost equal to R40 faces the demand curve plotted in the graph, then the monopolist's total revenue will be equal to: A. R120. B. R220. C. R240. D. R400. E) None of the above.
Question 7 A decrease in price from R45 to R40 per bottle water leads to an increase in demand of 1500 to 2000 bottles. The elasticity of demand of bottled water is? A) 0.149 B) 4.444 D) -4.262 C) -0.149 E) None of the above. Question 8 ( What could be said about equilibrium prices and equilibrium quantities if demand should increase and supply should decrease? A) Price will increase and quantity will decrease. B) Price will increase and quantity's movement is uncertain. C) Price will increase and quantity will increase. D) Price will decrease and quantity will increase. E) Price's movement is uncertain and quantity will decrease. Question 9 (1½) In which of the following circumstances will the demand curve for coal in South Africa shift to the right? i) Eskom implements load shedding. ii) Economic growth increases from the previous period. iii) The demand for petrol (are manufactured from coal) increases. iv) China, a large consumer of coal, experiences higher economic growth. v) Great quantities of methane gas (a substitute) is discovered in the Karoo. A) i, ii, iii & v B) i, iii & v C) ii, iii & iv D) ii, iv & v E) i & iii Question 10 Which of the following statements are correct? i) Lower interest rates lead to higher inflation. ii) Inflation can be caused by higher aggregate demand in the economy. iii) A price floor leads to surplus production. iv) Perfectly inelastic demand is a horizontal line. v) The 4 production factors are Capital, Labour, Land & Entrepreneurship. A) i, ii, iii & v B) i, iii & v C) ii, iii & iv D) ii, iv & v E) i, & iii
Question 11 Put the following events in a chronological order. A) Excess reserves increase, Investment spending increases, Money supply falls, Real GDP increases. B) Excess reserves decrease, Investment spending increases, Money supply falls, Real GDP increases. C) Excess reserves increase, Money supply rises, Interest rate falls, Investment spending increases. D) Aggregate demand increases, Money supply increases, Interest rate falls, Investment spending increases. E) Excess reserves increase, Interest rate falls, Money supply rises, Investment spending increases. Question 12 Which of the following statements are correct? ATC i) MC=_. AQ (02-01) ii) The formula for point elasticity is: Ed=p₂²_-p²1. P2+2 iii) The misuse of public goods can be addressed with tax. TP iv) AP=_. Q v) TC = TFC + TVC. A) i, ii, iii & v B) i, iii & v D) ii, iv & v C) ii, iii & iv E) i & iii Question 13 Which of the following will shift the aggregate demand curve of South Africa to the left? i) An increase in household debt. ii) A sharp increase in the fuel price. iii) A decrease in real interest rates. iv) A decrease in household income. v) A decrease in government debt. A) i, ii, iii & v B) i, iii & v C) ii, iii & iv D) ii, iv & v E) i, & iii
Question 14 Which of the following will shift the aggregate demand curve of South Africa to the left? i) An increase in household debt. ii) A sharp increase in the price of electricity. iii) An increase in real interest rates. iv) A sharp decrease in government spending. v) An increase in government spending. A) i, ii, iii & v B) i, iii & v C) ii, iii & iv D) ii, iv & v E) i & iii