FINAL ONLINE SUMMATIVE ASSESSMENT
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PROGRAMME
Bachelor of Business Administration;
Bachelor of Public Administration;
Bachelor of Commerce in Entrepreneurship;
Bachelor of Commerce in Financial Management;
Bachelor of Commerce in Retail Management;
Bachelor of Commerce in International Business;
Bachelor of Commerce in Marketing Management;
Bachelor of Commerce in Supply Chain Management;
Bachelor of Commerce in Human Resources Management
Bachelor of Commerce in Information and Technology Management;
Bachelor of Commerce in Accounting
MODULE
Economics 1 A
YEAR
One (1)
INTAKE
July 2020
DATE
08 December 2020
TOTAL MARKS
100
Answer ALL the questions
[100 MARKS]
Write down numbers 1 to 25 in your answer book and next to each number write the letter that represents the correct
answer; e.g. 26 D
1. A basis for the systematic study of economics exists because
(4 marks)
A Resources are scarce in relation to material wants.
B Governments interfere because there is always an efficient allocation of scarce resources.
C Individual economic actors never make rational economic decisions.
D Resources are plentiful relative to wants, therefore an allocation problem arises.
E The market consistently fails to allocate resources efficiently, thereby establishing the need to study economics.
2. The law of increasing opportunity cost is reflected in the shape of the
(4 marks)
A Production possibilities curve concave to the origin.
B Production possibilities curve convex to the origin.
C Horizontal production possibilities curve.
D Straight- line production possibilities curve.
E Upward-sloping production possibilities curve.
3. A production possibility frontier shows
(4 marks)
A The maximum combination of inputs that can be used to produce output in a typical economy.
B The maximum revenue that can be generated from the sale of output produced by
limited resources in an economy.
C The minimum quantities of commodities that can be produced from limited but fully-employed resources in an
economy.
D The maximum quantities of commodities that can be produced from limited but fully-employed resources in an
economy.
E The quantities of factors of production available to produce goods and services in an economy.
4. An increase in the price of gasoline will most likely cause the demand curve of tyres to
change in which direction.
A
B
C
D
E
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To the left, because gasoline and tyres are substitutes.
To the left, because gasoline and tyres are complements.
To the right, because gasoline and tyres are substitutes.
To the right, because gasoline and tyres are complements.
To the right, because an increase in the price of gasoline makes consumers poorer and thus
not willing to pay as much for tyres.
(4 marks)
5. For an inferior good, the quantity demanded
A
B
C
D
E
Does not change when income rises or falls.
Rises when income falls.
Falls when income falls.
Rises when income rises.
Responds directly to changes in income.
6. The law of diminishing returns states that if increasing quantities of a variable factor are applied
to a given quantity of fixed factors, then
A
B
C
D
E
(4 marks)
(4 marks)
The marginal product, the average product and total product of the variable factor will eventually decrease.
Total product will eventually begin to fall.
The average product will eventually decrease with constant marginal product.
The marginal product will eventually decrease with constant average product.
The average product will eventually decrease, but only if total product is held constant.
7. A change in demand is said to take place when there is a
A
B
C
D
E
Shift of the demand curve.
Shift of the supply curve.
Movement along the demand curve.
Quantity change.
Price change.
8. The opportunity cost of money that a firm’s owner has invested is an example of
A
B
C
D
E
Implicit costs.
Direct production costs.
Sunk costs.
Accounting costs.
Explicit costs.
9. A firm’s marginal cost is the increase in its total cost divided by the increase in its
A
B
C
D
E
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(4 marks)
Average cost.
Quantity of labour.
Average revenue.
Output
Capital.
(4 marks)
10. In the long run, a profit maximising firm produces any given level of output by choosing the
production method that
A
B
C
D
E
(4 marks)
Shows a flat total cost curve.
Produces that output at the lowest possible cost.
Maximises the marginal product of all factors.
Maximises the marginal product of labour.
Minimizes labour input.
11. Which of the following characteristics would you not associate with perfect competition
(4 marks)
i. Influence over market price
ii. Product differentiation
iii No uncertainty about market conditions
iv Agreements between sellers to control supply
v Economic profit in the long run
A
B
C
D
E
i, ii, iii, iv and v
i, iv and v
ii, iv and v
i, ii, iii and v
i, ii, iv and v
12. In the context of the circular flow of economic activity, which of the following would not be a traditional
activity of the government?
(4 marks)
A
B
C
D
E
Purchases of labour services from households
Purchases of capital goods from firms in goods markets
Provision of public goods and services
Transfers of tax revenues to low-income groups or regions
Sales of consumer goods to foreign buyers
13. If milk is a normal good, then a decrease in consumers’ income will definitely cause
A
B
C
D
E
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a decrease in the demand for milk.
an increase in the demand for milk.
an increase in the supply of milk.
a decrease in the supply of milk.
an increase in the demand and supply of milk.
(4 marks)
14. Zero economic profit earned by firms in a perfectly competitive market indicates that
A
B
C
D
E
firms will exit in the long run.
total revenue covers all variable costs of production exactly.
MR < AR.
P = ATC.
zero normal profit.
15. In the market for cream, which of the following events would increase demand, ceteris paribus?
A
B
C
D
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(4 marks)
shows how much an individual is willing and able to consume at each and every price.
is the horizontal summation of all the individual demand curves in a market.
is the vertical summation of all the individual demand curves in a market.
is a positive slope.
shows how much individuals are willing to supply at each and every price.
18. In the market for air travel, which of the following variables would decrease demand,
ceteris paribus?
A
B
C
D
E
(4 marks)
the demand for domestic air travel will increase.
the demand for car rentals, a complement in consumption, will increase.
the demand for domestic air travel will decrease.
the demand for car rentals, a complement in consumption, will decrease.
the demand for car rentals, a substitute in consumption, will decrease.
17. Market demand
A
B
C
D
E
(4 marks)
Increased health fears regarding the consumption of too much fat (cream contains fat)
A fall in the income of consumers
An increase in the price of scones, a complement
A drop in the price of yoghurt, a substitute
16. If the price of domestic airline tickets increases, then, ceteris paribus:
A
B
C
D
E
(4 marks)
An increase in rental rates for hired cars, a substitute
A rise in income of tourists
A rise in the price of air travel
A rise in the price of hotel accommodation, a complement
A drop in the price of air travel
(4 marks)
19. In the market for diamonds, assuming everything else remains unchanged, the equilibrium price of
diamonds will decrease if
A
B
C
D
E
(4 marks)
there is a shortage of diamonds.
the price of gold, a complement, decreases.
the supply of diamonds decreases.
the price of cubic zirconia’s, a substitute, increases.
there is a technological improvement in mining equipment.
20. There is an increase in the number of adverts highlighting the dangers of consuming artificial sweeteners (as
opposed to sugar). Which of the following is likely to occur in the market for sugar, as a result of this (4 marks)
A
B
C
D
E
An increase in both price and equilibrium quantity traded
A decrease in price and an increase in equilibrium quantity traded
A decrease in both price and equilibrium quantity traded
An increase in price and a fall in equilibrium quantity traded
None of the above is likely to result
21. In the market for first year economics textbooks, assuming everything else remains unchanged, the equilibrium
price of textbooks will increase if
(4 marks)
A
B
C
D
E
there is a surplus of textbooks.
the price of university education, a complement, increases.
the supply of textbooks increases.
the cost of the publication of textbooks increases.
there is a drop in the cost of paper necessary to produce textbooks.
22. If the cross elasticity of demand between bread rolls and cheese is –3,0, this implies that these
goods are
A
B
C
D
E
luxuries.
complements.
necessities.
substitutes.
income inferior goods.
23. If the cross elasticity of demand for two goods, A and B, is +5,0, then this implies that these
goods must be
A
B
C
D
E
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(4 marks)
luxuries.
complements.
necessities.
substitutes.
income inferior goods.
(4 marks)
24. In economics, the short run is a period of time
A
B
C
D
E
(4 marks)
of one year or less.
in which all inputs are variable.
in which all inputs are fixed.
in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied.
in which all inputs are variable but technology is fixed.
25. A perfectly competitive firm is referred to as a
A
B
C
D
E
(4 marks)
price giver.
price taker.
price maker.
price cutter.
price setter.
END OF PAPER
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