r % FORM TP 2018187 rESr coDE 02116020-| MAY/JUNE 2OI8 CARIBBEAN EXAMINATIONS COUNCIL CARIBBEAN ADVANCED PROFICIENCY EXAMINATION@ ECONOMICS UNIT l -Paper02 2 hours 30 minutes READ THE F'OLLOWING INSTRUCTIONS CAREFULLY. I This paper consists ofTHREE questions, one from each module. Answer ALL questions 2 Write your answers in the spaces provided in this booklet. 3 Do NOT write in the margins. 4 You may use a silent, non-programmable calculator to answer questions. 5 If you need to rewrite any answer and there is not enough space to do so on the original page, you must use the extra lined page(s) provided at the back of this booklet. Remember to draw a line through your original answer. 6 If you use the extra page(s) you MUST write the question number clearly in the box provided at the top of the extra page(s) and, where relevant, include the question part beside the answer, DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. Copyright @ 2017 Caribbean Examinations Council All rights reserved. f_oz, ffi t6o2otcupE 2ol8 r rilil llflilu flil ffit ]ilI ilililililfl]fl ililil 021 1602003 J r -l 4 AnswerALL questions. MODULE l. (a) l: METHODOLOGY - DEMAND AND SUPPLY Define EACH of the following terms: (i) The law of equi-marginal utility [2 marksl (ii) Producer surplus [2 marksl GO ON TO THE NEXT PAGE 02tr6020lcAPE 2018 L HH ffiil illl llll lllll lllll ffi illl llllt lllll lllll llll 0211602004 lil I t- -l 5 (b) Table I shows an individual's utility from consuming units of chocolate bars and candy bars. TABLE I: AN INDIVIDUAL'S UTILITY FROM CONSUMING UNITS OF CHOCOLATE BARS AND CANDY BARS Ibtal Utility Units of Marginal Utility Maryinal Utility Per Dollar Chocolate BarV Candy Bars Bar Candy Bar 0 0 0 I 40 22 2 72 42 3 96 60 Chocolate Consumed (i) (ii) Chocolate Bar Candy Bar Chocolate Bar Complete Table I given that the price of one chocolate one candy bar is $2. Candy Bar bar is $4 and the price of [8 marksl Explain why the optimal bundle of the two goods would be I unit of chocolate bars and 2 units ofcandy bars. [3 marksl GO ON TO THE NEXT PAGE 02n6020tcAPE 2018 L ffi lliillililllt llllllffiillflflflil]]llll] 021 1602005 J t- -l -6(c) With the aid of a well-labelled diagram, assess the total welfare effect of the imposition of an indirect tax on candy bars. [0 marksl Total25 marks GO ON TO THE NEXT PAGE 02rr6020lcAPE 2018 L EH ililil|fl llllilflr illl lllll l]ll llil lllll lllll llll llll 021 1602006 I r -7 -l - MODULE 2: MARKET STRUCTURE, MARI(ET FAILURE AND INTERVENTION 2. (a) List FOUR measures used by the government to control market failure. [4 marksl (b) Explain the role of advenising in monopolistic competition and perfect competition. Monopol isitc competition. GO ON TO THE NEXT PAGE 02tt6020tcAPE 2018 L ffi I ll!il ffi ffit ilil ffil lilt tilll flfl ilil l]il til 0211602007 lu J r 8- -l Perfect competition [6 marksl GO ON TO THE NEXT PAGE 02tt6020lcAPE 2018 L Efi r llllil lllll llIll ffi flll lllf, lllll llil lllll l]ll llll llll 021 1602008 J r -l -9(c) With the aid of a well-labelled diagram, explain how negative externalities lead to market failure. [6 marksl GO ON TO THE NEXT PAGE 02rt6020tcAPE 2018 L H# r tilfl l]ll ffir llllr il]t ilfl til lllfi ffi I]lI 021 1602009 ilt til J r -10- (d) -l With the aid of a diagram, analyse the pricing and output decision of the monopolist [9 marksl Total25 marks GO ON TO THE NEXT PAGE 02tt6020lcAPE 2018 L mrr.t: Hffi ililil llill [] ffiilfll llil llill illllllil llllffiillll 021 1602010 I t- - ll -l - MODULE 3: DISTRIBUTION THEORY 3. (a) Distinguish between EACH of the following pairs of concepts: (i) 'Transfer earnings' and 'economic rent' [4 marksl (ii) 'Absolute poverty' and 'relative poverty' [4 marksl GO ON TO THE NEXT PAGE 02tt6020lcAPE 2018 L ffi IrflilIil rffi [] tilt]il tffi ffirfl]ilu 0211602011 ll] til I t- -12(b) -l Identify TWO categories of persons who are mone susceptible to poverty and explain why they are more susceptible. GO ON TO THE NEXT PAGE o2n6020lcAPE 2018 L ffi r ll]ll ffi ffit il] ffi ffi llfl ffir llr] ffi fllr ffi 0211602012 I l- - -l 13 - [8 marksl (c) Analyse the effects of geographical mobility and occupational mobility on wages. GO ON TO THE NEXT PAGE 02116020/CAPE 2018 L H# llIIillllllffillllilflililffiflililillllllffillll 021 160201 3 I r -l -14- [9 marksl Total25 marks END OF TEST IF YOU FINISH BEF'ORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST. 02116020/CAPE 2018 L Hfi I lllfl llfi ffi ffit tfll lilt lffi mll l]lt ilfl lil llll 0211602014 I
