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ZIMSEC A Level · 9158/1 · J2017

Economics Paper 1 June 2017

Questions
38 of 40
Syllabus code
9158/1

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Questions
38
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The questions

Question 2

production possibility frontier

The diagram shows two production possibility frontiers, JK and PQ, before and after technological progress has taken place.

After technological progress, what is the change in capital goods if OX consumer goods are produced?

  1. AMN
  2. BXN
  3. CYM
  4. DYQ

Question 3

income elasticity of demand
The income elasticity of demand for jewellery is 2. Other things being equal, a 10% increase in consumer income will
  1. Adecrease the quantity of jewellery purchased by 10%.
  2. Bdecrease the quantity of jewellery purchased by 20%.
  3. Cincrease the quantity of jewellery purchased by 10%.
  4. Dincrease the quantity of jewellery purchased by 20%.

Question 4

cross elasticity of demand

The table below shows estimates of own-price and cross elasticities of demand for margarine and jam.

elasticity with respect to the price of

commoditymargarinejam
margarine- 0,48+0,18
jam+0,14- 0,57

Other things being equal, what will be the change in the quantity of jam demanded as a result of a 1 % increase in the price of margarine?

  1. A- 0,14 %
  2. B- 0,18 %
  3. C+ 0,14 %
  4. D+ 0,18 %

Question 6

costs of production
The vertical distance between a firm's total cost and its total variable cost curves
  1. Adecrease as output decreases.
  2. Bis equal to the average variable cost.
  3. Cis equal to the marginal cost.
  4. Dis equal to the total fixed cost.

Question 7

production function
The relationship between a firm's output and the quantities of factor inputs it employs is shown by
  1. Aproductive efficiency.
  2. Breturns to scale.
  3. Cthe production function.
  4. Dthe average cost function.

Question 8

demand and supply

The diagram shows the demand and supply in the market for chickens.

The change from X1 to X2 illustrated in the diagram is consistent with a

  1. Astrike by market porters.
  2. Brise in the price of beef.
  3. Cfall in disposable incomes.
  4. Drise in the factor costs involved in producing chickens.

Question 9

price elasticity of supply
The elasticity of supply of a commodity measures the ease with which
  1. Aits production can be expanded in response to a change in price.
  2. Badditional units of a fixed factor used in its production can be obtained.
  3. Cadditional units of a factor used in its production can be purchased at market rates.
  4. Dunits of a variable factor can be substituted for units of a fixed factor used in its production.

Question 10

externalities and taxation
What would a socially efficient tax on alcohol achieve?
  1. Aeliminate alcohol consumption
  2. Bmaximise government revenue
  3. Creduce alcohol consumption to an optimal level
  4. Da neutral effect on the consumption and production of alcohol

Question 11

tax incidence
An excise duty imposed on a single commodity falls entirely upon the consumer if the
  1. Ademand curve is of unitary elasticity.
  2. Bdemand curve is perfectly elastic.
  3. Csupply curve is of unitary elasticity.
  4. Dsupply curve is perfectly elastic.

Question 12

derived demand for labour

In which one of the following industries A, B, C and D will an increase in wages cause most unemployment, other things being equal?

IndustryPrice of elasticity of demand for the product
A0,4
B1,0
C1,2
D2,0
  1. A0,4
  2. B1,0
  3. C1,2
  4. D2,0

Question 13

long run supply, perfect competition

In the diagram, SS represents the long run supply curve of a perfectly competitive industry.

Which one of the following statements explains the horizontal nature of the supply curve?

  1. AThere are diminishing returns to scale.
  2. BThere is only one firm in the industry.
  3. CFactor ratios are constant at all levels of output.
  4. DResources are available at constant prices to expand output.

Question 14

Lorenz curve and income distribution

The diagram refers to the distribution of income in a country.

Which line A, B, C and D shows the most even distribution of income?

  1. AA
  2. BB
  3. CC
  4. DD

Question 15

demand for labour
If labour is the only variable factor of a profit-maximising firm which is a price-taker in the labour market, the firm's demand curve for labour is its
  1. Amarginal revenue curve.
  2. Bmarginal factor cost curve.
  3. Cmarginal revenue product curve.
  4. Dshort run marginal cost curve.

Question 16

fixed costs
Which diagram shows the relationship between a firm's total fixed costs (TFC) and its level of output?
  1. AA
  2. BB
  3. CC
  4. DD

Question 17

opportunity cost, unemployment
The opportunity cost of unemployment to society is
  1. Athe reduction in wages due to an increase in the supply of labour.
  2. Bthe value of job seekers' allowances and other benefits paid to the unemployed.
  3. Cthe output which those unemployed could have produced if they had been employed.
  4. Dthe increase in the public sector borrowing requirements arising from the fall in tax revenue.

Question 18

monopoly, objectives of the firm

The diagram relates to a monopolist firm whose objective is to maximise output whilst still making normal profits.

What level of output will the firm produce?

  1. AOA
  2. BOB
  3. COC
  4. DOD

Question 19

supply, shifts versus movements
Which of the following will not cause a shift in the supply curve for mutton?
  1. Aa change in the prices of stock feeds
  2. Ba change in the goals of the firm
  3. Ca change in the technology of keeping sheep
  4. Da change in the market price of mutton

Question 20

national income comparisons
Why might GNP per capita of different countries in US$ be a poor indicator of comparative standards of living?
  1. Aa divergence in exchange rates from purchasing power parities
  2. Ba divergence in population growth rates
  3. Ca divergence in in rates of price and wage inflation
  4. Da divergence in ratios of imports to national income

Question 21

absolute advantage, gains from trade

The table shows the costs of producing a unit of food and a unit of clothing in Zimbabwe and Zambia expressed in their respective currencies.

countryfoodclothing
Zimbabwe$2$4
ZambiaK1K1

The exchange rate is fixed at K1 = $3

What level of transport cost per unit of each commodity would exactly eliminate the benefits of trade?

  1. AK 0,10
  2. BK 0,33
  3. CK 0,50
  4. DK 1,00

Question 22

balance of payments

The following information relates to Zimbabwe's balance of payments for 1980.

$ millions
visible trade: - 1 175
net invisibles: + 1 429
current balance: + 254
investment and other capital flow: - 2 227
balancing item: + 847

What was the balance for official financing for the year?

  1. A$ 847 m
  2. B$ 1 126 m
  3. C$ 3 532 m
  4. D$ 4 404 m

Question 23

national income accounting
The difference between Gross National Product and Net National Product is that one of them includes
  1. Ataxes.
  2. Bsubsidies.
  3. Cdepreciation.
  4. Dtransfer payments.

Question 24

externalities, social optimum

The diagram relates to the production of a good with significant external costs.

Which price would maximise net social benefit?

  1. AA
  2. BB
  3. CC
  4. DD

Question 25

terms of trade
Which of the following might improve a country's terms of trade?
  1. Ainflation
  2. Bcurrency depreciation
  3. Cimproved productivity of export industries
  4. Dimposition of quotas on imported goods

Question 26

maximum price controls

The diagram shows the market demand and supply curves for wheat.

What would happen if the government imposed a maximum price of $10?

  1. AThe quantity sold would be Q1.
  2. BThe quantity sold would be Q2.
  3. CThe government would need to supply Q1 to Q3.
  4. DThe quantity sold would increase from Q1 to Q3.

Question 27

exchange rate systems
What is the argument against the flexible exchange rate as compared to the fixed exchange rate?
  1. Awider interest rate fluctuations will be required.
  2. Breserves will be lost if demand for exports falls.
  3. Cinflation will be continuously imported from other countries.
  4. Dexporters are less certain of the prices at which they will be able to market their products.

Question 28

marginal cost of labour

To increase the labour force from 20 to 21 workers, an entrepreneur is forced to increase the daily wage rate from 30to30 to 31.

What is the marginal cost of labour per day?

  1. A$ 1
  2. B$ 21
  3. C$ 31
  4. D$ 51

Question 29

cost-benefit analysis

A cost-benefit analysis of a proposed underground railway produced the following data.

Annual costs and benefits$ m
Annual capital cost10
Operating and maintenance costs3
Fare revenue6
Savings to private travellers5
Savings to business10
Other economic benefits7

It can be deduced from the data that if the project is undertaken by the

  1. Aprivate sector, there would be a profit of $ 3 m.
  2. Bprivate sector, there would be a loss of $ 13 m.
  3. Cpublic sector, there would be a net social benefit of $ 15 m.
  4. Dpublic sector, there would be a net social benefit of $ 28 m.

Question 30

effects of inflation
Which one of the following is likely to be a result of inflation?
  1. Aa rise in the volume of exports
  2. Ba fall in the price of fixed assets
  3. Ca fall in the price of government securities
  4. Da fall in the transactions demand for money

Question 31

real and nominal wages

At the beginning of 2009, a worker earned $ 100 a week. In 2009 the Real Price Index (RPI) rose by 4 % and his wage rose by 7 %. In 2010 the RPI fell by 3 % and his wage fell by 2 %.

What happened to his real wage between the beginning of 2009 and the end of 2010?

  1. Afell by less than 5 %.
  2. Bfell by more than 5 %.
  3. Crose by less than 5 %.
  4. Drose by more than 5 %.

Question 32

policy objectives, conflicts
If a reduction in the unemployment rate is accompanied by a reduction in income inequality, then
  1. Afull employment and greater income inequality are conflicting goals.
  2. Bfull employment and greater income inequality are compatible goals.
  3. Creduced income inequality is a more important goal than achieving full employment.
  4. Dachieving full employment is a more important goal than reducing income inequality.

Question 33

shifts in supply

The diagram below shows the market condition for Good Y.

Which of the following causes a shift in supply from S1 S1 to S2 S2?

  1. Aan expansion in supply
  2. Ban expansion in demand
  3. Chigher yield due to good rains
  4. Dan increase in the demand for the good

Question 34

supply-side policies
Economists who favour supply-side policies would tend to support the government playing
  1. Ano role in the economy.
  2. Ba reduced role in the economy.
  3. Can expanded role in the economy.
  4. Da role in monetary policies only.

Question 35

total revenue under monopoly
A monopolist is faced with a downward- sloping straight line demand curve. Which of the diagrams A, B, C and D below correctly represents his total revenue curve?
  1. AA
  2. BB
  3. CC
  4. DD

Question 36

economic integration
What is the difference between a customs union and a free trade area?
  1. AThe customs union has a common external tariff with the rest of the world.
  2. BThe customs union requires fixed exchange rates among member countries.
  3. CThe free trade area needs to eliminate tariffs among member countries.
  4. DThe free trade area requires freedom of movement for labour and capital among member countries.

Question 37

demand for money, interest rates

What will be the likely effects on interest rates and bond prices of an increase in the demand for money?

Interest ratesBond prices
A fallfall
B fallrise
C risefall
D riserise
  1. AInterest rates fall, bond prices fall
  2. BInterest rates fall, bond prices rise
  3. CInterest rates rise, bond prices fall
  4. DInterest rates rise, bond prices rise

Question 38

national income accounting

The data below is based on Zimbabwe's National Accounts for a given year.

$ bn
Consumers' expenditure: 294
General government final consumption: 92
Gross domestic fixed capital formation: 89
Value of physical increase in stocks: 4
Exports of goods and services: 109
Imports of goods and services: 125
Taxes on expenditure: 75
Subsidies: 6
Capital consumption: 55

What was the Gross Domestic Product (GDP) at factor cost?

  1. A$ 394 bn
  2. B$ 410 bn
  3. C$ 463 bn
  4. D$ 479 bn

Question 39

balance of payments policy
Which policy is likely to correct a balance of payment deficit?
  1. Afree trade
  2. Bindigenisation
  3. Ccurrency devaluation
  4. Dnationalisation of industries

Question 40

economic growth
Which one of the following does not increase economic growth in Zimbabwe?
  1. Aindigenisation
  2. Bindustrialisation
  3. Cland reform
  4. Dlimiting trade with South Africa

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