1. Lesotho National Development Corporation
Since its establishment the Lesotho National Development Corporation (LNDC) has
been the Lesotho Government’s main means of promoting industrial development.
The LNDC is now expanding its job creation programme by promoting exports and
encouraging firms to grow in size. It also encourages and supports local
entrepreneurs. Two of the projects it has supported are local chicken farms and the
building of a private hospital. The slogan of the LNDC is ‘We build industry’.
In subsequent years, government policy focused on the development of other
businesses. In particular, tech and hospitality businesses witnessed the entry of many
new firms and revenues for both business sectors grew. Revenue is the money that
a business realizes from the sales of its products. Of the total revenue of about $25
million realized by all businesses in Lesotho in 2015, tech and hospitality alone
accounted for 18%.
(a) Define the factors of production, enterprise and capital.
[4]
(b) Identify, from the first paragraph of the extract, one project in the primary sector
and one project in the secondary sector.
[2]
(c) Calculate, from the extract, the
(i) total revenue made by tech and hospitality businesses alone.
[2]
(ii) total revenue made by businesses other than tech and hospitality.
[2]
(d) Explain the policies that a government might use to encourage private businesses.
[6]
(e) Analyse three factors that determine the extent to which a factor of production will
be used in the production process.
[6]
(f) Discuss whether the social benefits of building a hospital exceed the social costs.
[8]
Section B
Answer only three questions from this section.
2. In 2013, an earthquake on the Iran/Pakistan border destroyed many factories and
homes. Some officials wanted the Governments to rebuild the factories and homes,
even though there would be an opportunity cost. Others suggested that some people
should be encouraged to emigrate.
(a) Define ‘opportunity cost’.
[2]
(b) Explain why the economic problem can never be solved.
[4]
(c) Using a production possibility curve diagram, analyse the effect of the destruction
of some of its resources on an economy.
[6]
(d) Discuss whether the social benefits of rebuilding factories and homes will exceed
the social costs.
[8]
3. The Nigerian cement market is a monopoly and many experts have argued that this
has stunted the growth of the industry and informed the high prices of cement. The
market has been deregulated but many firms have found it hard to enter the industry
due to its high set up and operation costs. The market is still far from the desired level
of competition that will bring gains to consumers. There are also fears as to whether
a small business can effectively compete with a large, established firm.
(a) Define the term ‘monopoly’.
[2]
(b) Explain two characteristics of a monopoly.
[4]
(c) Discuss whether small firms can effectively compete with large firms.
[6]
(d) Discuss whether or not the cement industry changing from a monopoly market to
a competitive market will benefit consumers.
[8]