ECS1501 Oct/Nov 2017 exam paper — questions

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  1. Question 1 · Demand, supply and market equilibrium · 3 marks

    Consider the market for rain coats in the Western Cape. Using a demand-and-supply diagram, illustrate what would happen to the equilibrium price and equilibrium quantity of rain coats in that region if the Western Cape were to experience a good (above-average) rainy season. Be sure to label the diagram fully, including the axes, the original and new curves, and the original and new equilibrium points.Show the full question

  2. Question 2 · Demand, supply and market equilibrium · 8 marks

    This question is based on a diagram (not reproduced here) illustrating the market for meat, showing equilibrium price and quantity before any shock occurs. Question 2 (worth 8 marks in total) asks two things about the market for meat. First, using the given supply-and-demand diagram for meat, show and clearly label the effect on the equilibrium price and quantity of meat that results if the main cattle-farming area of a country suffers a severe drought. Second, based on this same drought scenario, explain in words the adjustment process by which the meat market moves from its old equilibrium to its new equilibrium position.Show the full question

  3. Question 3 · Demand, supply and market equilibrium · 5 marks

    In the market for newspapers, two events occur at the same time: firstly, Bafana Bafana wins the African Cup, causing everybody to want to read more about it in the paper; secondly, the paper on which the newspaper is printed becomes more expensive. The increase in demand caused by Bafana Bafana's win is larger in effect than the increase in cost caused by the more expensive paper. Draw a graph of the market for newspapers showing all these changes.Show the full question

  4. Question 4 · Government intervention: price controls, taxes and subsidies · 8 marks

    Using a diagram to support your answer, discuss the effect that would result from setting an effective maximum price control in the market for a hypothetical product, referred to as product A.Show the full question

  5. Question 5.1 · Price and income elasticity · 3 marks

    This question relates to price elasticity of demand and cross elasticity of demand concepts. Imagine you own a spaza shop and have calculated that the price elasticity of demand for bread in your specific market is 0,5. Determine at which price your total revenue would be maximised — R10 or R8 — and provide an explanation for your answer.Show the full question

  6. Question 5.2 · Price and income elasticity · 3 marks

    This question relates to price elasticity of demand and cross elasticity of demand concepts. Assume that the cross elasticity of demand between product A and product B is calculated to be -0,25. Based on this cross elasticity value, explain what type of relationship exists between product A and product B (i.e. what kind of goods they are).Show the full question

  7. Question B.1 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Choose the option that best completes the following: economics is fundamentally the study of what?Show the full question

  8. Question B.2 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Refer to the production possibilities diagram for the fictional country Utopia, which plots milk (litres) on the vertical axis against honey (honeycombs) on the horizontal axis. Two curves are shown: an outer curve labelled PPC1, which meets the vertical axis at 2000, and an inner curve labelled PPC2, which meets the vertical axis at 1800. Points D, E and F are marked at a milk level of 1800, corresponding to honey quantities of 55, 65 and 85 respectively, while points A, B and C are marked at a milk level of 1050, also corresponding to honey quantities of 55, 65 and 85 respectively. If Utopia is currently operating on PPC1, which point represents an efficient use of resources, and which point is unattainable?Show the full question

  9. Question B.3 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Using the same Utopia production possibilities diagram (milk on the vertical axis, honey on the horizontal axis, with PPC1 and PPC2 curves and points A to F as described), suppose Utopia is producing at point D and decides to increase honey production to 65 honeycombs. What is the opportunity cost of making this decision?Show the full question

  10. Question B.4 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Still referring to the Utopia diagram, what could plausibly explain the inward shift of the production possibilities curve from PPC1 to PPC2?Show the full question

  11. Question B.5 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Which one of the following statements is a normative statement (an opinion rather than a verifiable fact)?Show the full question

  12. Question B.6 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Which of the following countries is an example of a command economy?Show the full question

  13. Question B.7 · What economics is about: scarcity, choice and the economic problem · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Consider three economic systems: (a) a command system, (b) a market system, and (c) a mixed economy. In which of these systems will consumers be observed buying whatever goods they like using money earned from a wage or salary?Show the full question

  14. Question B.8 · Participants and the circular flow of income · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Considering the three major flows in the economy, what specifically generates an income for consumers (households)?Show the full question

  15. Question B.9 · Participants and the circular flow of income · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. If you sell your capital in the factor market, what type of remuneration will you receive in return?Show the full question

  16. Question B.10 · Participants and the circular flow of income · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A circular-flow-of-income diagram shows Firms and Households connected via a Factor market and a Goods market. Two arrows in the diagram, labelled a and b, run between the Factor market and Households: arrow a runs from the Factor market toward Households, while arrow b runs from Households toward the Factor market. What do arrows a and b represent?Show the full question

  17. Question B.11 · Participants and the circular flow of income · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Which one of the following statements about the goods market and the factor market is correct?Show the full question

  18. Question B.12 · Demand, supply and market equilibrium · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Suppose five companies supply bolts and screws to the market. If one of these companies closes down, what will happen in the market for bolts and screws?Show the full question

  19. Question B.13 · Demand, supply and market equilibrium · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A supply-and-demand graph shows price on the vertical axis and quantity on the horizontal axis. The original supply curve S and demand curve D intersect at equilibrium E1. The supply curve then shifts rightward to S1 (demand remaining unchanged), producing a new equilibrium E2, which lies at a lower price and higher quantity than E1. What caused the equilibrium to change from E1 to E2?Show the full question

  20. Question B.14 · Demand, supply and market equilibrium · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A supply-and-demand graph shows an upward-sloping supply curve S and a downward-sloping demand curve D, intersecting at point E where price equals PM and quantity equals QM. The demand curve's vertical intercept is P1 and its horizontal intercept is Q1. What area on this graph represents consumer surplus?Show the full question

  21. Question B.15 · Demand, supply and market equilibrium · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A dairy farmer producing fat-free milk can also sell the cream extracted in the process, making fat-free milk and cream joint products. After an influential magazine article publicises the health benefits of fat-free milk, the demand for fat-free milk rises. Given that cream is a joint product of fat-free milk production, what will happen to the equilibrium price and quantity of cream as a result?Show the full question

  22. Question B.16 · Price and income elasticity · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Suzi sells cakes at a student centre and knows that raising the price reduces the quantity she sells, while lowering the price increases the quantity sold. As a student of economics, she has calculated that her cakes face a relatively elastic demand curve. What should Suzi do to increase her total revenue?Show the full question

  23. Question B.17 · Consumer behaviour and utility · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Which of the following words is a synonym for 'utility' as used in economics?Show the full question

  24. Question B.18 · Consumer behaviour and utility · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A table records units consumed of cold drinks and burgers alongside their total utility, marginal utility and weighted marginal utility. For cold drinks: at 0 units, total utility is 0; at 1 unit, total utility is 200 (marginal utility 200, weighted marginal utility 20); at 2 units, total utility is 380 (marginal utility 180, weighted marginal utility 18); at 3 units, total utility is 430 (marginal utility 50, weighted marginal utility 5); at 4 units, total utility is 380 (marginal utility -50, weighted marginal utility -5). For burgers: at 0 units, total utility is 0; at 1 unit, total utility is 1 375 (marginal utility 1 375, weighted marginal utility 55); at 2 units, total utility is 1 875 (marginal utility 500, weighted marginal utility 20); at 3 units, total utility is 2 325 (marginal utility 450, weighted marginal utility 18); at 4 units, total utility is 2 450 (marginal utility 125, weighted marginal utility 5). Based on this table, at which unit of consumption does the law of diminishing marginal utility for cold drinks set in?Show the full question

  25. Question B.19 · Consumer behaviour and utility · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Using the same utility table for cold drinks and burgers, if a cold drink costs R10 and a burger costs R25, and Lindiwe has a total budget of R95, which of the following combinations of goods will she NOT be able to afford: 1 cold drink and 3 burgers; 2 cold drinks and 3 burgers; 3 cold drinks and 4 burgers; or 4 cold drinks and 2 burgers?Show the full question

  26. Question B.20 · Consumer behaviour and utility · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Given Lindiwe's budget of R95 (with a cold drink costing R10 and a burger costing R25) and the weighted marginal utility figures from the same table, which combination of cold drinks and burgers will maximise her total utility?Show the full question

  27. Question B.21 · Production and the costs of the firm · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Ben makes ice, which he sells to restaurants and petrol stations. He owns just one freezer (his only unit of capital) and employs one worker. When an extreme heat wave strikes, demand for ice rises sharply and Ben must supply more ice. Since he initially cannot afford another freezer, he instead hires two additional workers. Under this scenario, when would the 'long run' be considered to begin for Ben's ice-making business?Show the full question

  28. Question B.22 · Production and the costs of the firm · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Mfundo quits his job, where he earned a fixed monthly salary of R8 000, to start his own business. In the first month of the new business, he incurs expenses of R15 000 and earns total revenue of R13 000. What does Mfundo make in this first month?Show the full question

  29. Question B.23 · Production and the costs of the firm · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Which of the following statements is NOT true regarding the law of diminishing returns?Show the full question

  30. Question B.24 · Production and the costs of the firm · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A baker produces 1 000 loaves of bread per day at an average cost of R2 per loaf. If his total fixed cost is R1 000 per day, what is his total cost?Show the full question

  31. Question B.25 · Market structures: perfect competition to monopoly · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Complete the following statement about market structures: in a perfectly competitive market, there are ______ so that no single firm can influence the market price, meaning firms in such a market are ______; a monopolist, by contrast, is a ______, and its supply equals the market supply.Show the full question

  32. Question B.26 · Production and the costs of the firm · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A firm has a total fixed cost of R10 000, a total variable cost of R8 000, and a total revenue of R11 000. What should this firm do in the short run?Show the full question

  33. Question B.27 · Market structures: perfect competition to monopoly · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. What is the price elasticity of demand facing a single firm operating in a perfectly competitive industry?Show the full question

  34. Question B.28 · Market structures: perfect competition to monopoly · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A diagram of a perfectly competitive firm shows a U-shaped average cost curve (AC) and a rising marginal cost curve (MC), together with a horizontal price line where average revenue equals marginal revenue (AR = MR) at R10. The MC curve crosses the AC curve at point E3, where quantity equals 1 200 units and average cost equals R13. Based on this diagram, what is this firm making?Show the full question

  35. Question B.29 · Market structures: perfect competition to monopoly · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Complete the following statement: in the long run, ______ will ______ the industry so that the market supply curve shifts to the ______ until prices ______ sufficiently to allow all firms to make a normal profit only.Show the full question

  36. Question B.30 · Demand, supply and market equilibrium · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. In the market for fish there are four suppliers. At a price of R50 per fish, John's Fisheries supplies 120 fish. At R50, Snoek Kings supplies no fish at all, but would supply 230 fish if the price were R60 per fish. The Boat supplies 356 fish at a price of R50, and Sardine Runners supplies 54 fish at R50. What is the total market supply of fish at a price of R50 per fish?Show the full question

  37. Question B.31 · The labour market and wages · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Donald earns a nominal wage of R25 000 and receives a salary increase of R2 000. If the inflation rate is 9%, which of the following statements is true?Show the full question

  38. Question B.32 · The labour market and wages · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Which of the following factors would make a labour market less competitive?Show the full question

  39. Question B.33 · The labour market and wages · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Trade unions can use various strategies to try to raise the wage rates of their members. Which one of the following strategies will NOT tend to be accompanied by lower employment (that is, increased unemployment)?Show the full question

  40. Question B.34 · The labour market and wages · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. A labour market diagram shows an upward-sloping labour supply curve S and a downward-sloping labour demand curve D, intersecting at equilibrium point E. Four wage levels are marked on the wage-rate axis, from lowest to highest: ww1, ww2, ww3 (at the equilibrium level) and ww4. The government wants to set a minimum wage but is unsure at what level. Which of these wage rates would be effective — that is, would actually change the equilibrium wage rate and quantity of labour employed?Show the full question

  41. Question B.35 · The labour market and wages · 2 marks

    This is Section B of the ECS1501 October/November 2017 examination, consisting of 35 compulsory multiple-choice items, each worth 2 marks (70 marks in total, 84 minutes allowed). For each item, select the correct option from those listed. Using the same labour market diagram (with supply S, demand D, equilibrium E, and wage levels ww1 to ww4), which of the following would be true if the government sets the minimum wage at ww4?Show the full question

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