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ZIMSEC A Level · 9158/1 · N2011

Economics Paper 1 November 2011

Questions
40
Syllabus code
9158/1

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Questions
40
Pass mark
24
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 1

positive and normative statements
In economics a statement is positive if it
  1. Aexamines the desirability of government economic policy.
  2. Bassumes current economic conditions remain unchanged.
  3. Cconcerns the factual outcomes of an economic action.
  4. Dis based upon the opinion of an economic advisor.

Question 2

production possibility curve
An economy is operating at a point on its production possibility curve.
What is true about the way the economy's resources are being used at this point?
  1. AAllocatively efficient: Possibly; Productively efficient: Yes; Socially desirable: Yes
  2. BAllocatively efficient: Yes; Productively efficient: Possibly; Socially desirable: Possibly
  3. CAllocatively efficient: Possibly; Productively efficient: Yes; Socially desirable: Possibly
  4. DAllocatively efficient: Yes; Productively efficient: Possibly; Socially desirable: Yes

Question 3

market equilibrium

The market demand for a product is made up of the demand for three firms K, L and M. The table shows the demand and the market supply from each firm.

What is the market equilibrium price?

  1. A$100
  2. B$90
  3. C$80
  4. D$70

Question 4

price elasticity of demand
From the table, in which price range is demand for the good K inelastic?
  1. A12−12 - 11
  2. B11−11 - 10
  3. C10−10 - 9
  4. D9−9 - 8

Question 5

price controls

The diagram shows the supply and demand curves for tickets for the Zimbabwe Football Association cup final.

If all tickets are sold at price OF rather than the market clearing price, which area in the diagram represents the resultant market loss of revenue?

  1. AVWT
  2. BFPWV
  3. CFPWT
  4. DQVTR

Question 6

price controls and taxes
A government intends to introduce a maximum price for maize, minimum price for wheat and a tax on sales of shoes. Who benefits from each market?
  1. AMarket for wheat: consumers; Market for maize: government; Market for shoes: producers
  2. BMarket for wheat: government; Market for maize: producers; Market for shoes: government
  3. CMarket for wheat: producers; Market for maize: producers; Market for shoes: consumers
  4. DMarket for wheat: producers; Market for maize: consumers; Market for shoes: government

Question 7

private and public goods
What is an essential characteristic of a private good?
  1. Aconsumption of the good by the user has no external effects on the consumption of others
  2. Bconsumption of the good by one person diminishes the quantity available to others
  3. Cit is produced by the private sector
  4. Dthe user has to pay for it

Question 8

elasticity of demand for labour
In which situation is it likely that the demand for labour would be inelastic?
  1. Alabour and capital are close substitutes
  2. Blabour costs are only a small proportion of total costs
  3. Cdemand for the final product that the labour produces is elastic
  4. Da large number of unemployed labour is available in the economy

Question 9

economies of scale

Firm X grows in size and is specialising in a narrower range of products.

What economies of scale will the firm be less able to benefit from?

  1. Afinancial
  2. Bmarketing
  3. Crisk-bearing
  4. Dtechnical

Question 10

perfect competition
A firm in perfect competition currently sells 100 units at $15 each.
What will be the revenue obtained by the firm if it increases its price to $20?
  1. A$0
  2. B$100
  3. C$1 500
  4. D$2 000

Question 11

monopoly price regulation

The diagram shows the initial cost and revenue curves of a monopoly.

What would be the firm's profit maximising quantity if the government fixes the price at OP?

  1. AOJ
  2. BOK
  3. COL
  4. DOM

Question 12

oligopoly and firm objectives

The diagram shows the cost and revenue curves of an oligopolistic firm.

What is the firm's objective if it produces output OX?

  1. Ato maximize profit
  2. Bto achieve normal profit
  3. Cto achieve productive efficiency
  4. Dto achieve allocative efficiency.

Question 13

minimum wage

The introduction of a minimum hourly wage for all workers over 20 years of age is expected to increase the average wage of these workers.

What will be the likely effect on the workers under 20 years?

  1. AUnemployment for under 20s: falls; Average wage for under 20s: fall
  2. BUnemployment for under 20s: rises; Average wage for under 20s: fall
  3. CUnemployment for under 20s: falls; Average wage for under 20s: rise
  4. DUnemployment for under 20s: rises; Average wage for under 20s: rise

Question 14

labour supply
An individual works 40 hours per week when the wage rate is $300 per hour. When the wage rate is increased to $350 per hour, the individual works 36 hours per week. What explains the change in the number of hours worked?
  1. Aa negative income elasticity of demand for leisure
  2. Ban income effect outweighing a substitution effect
  3. Can income effect reinforcing a substitution effect
  4. Da zero income effect

Question 15

wage differentials

The table shows the main characteristics of employment in two occupations.

What can be deduced from the table?

  1. AThere will be more competition for training courses to enter occupation X than occupation Y.
  2. BThose employed in occupation X attach less importance to leisure activities.
  3. CThose employed in occupation Y attach greater importance to job security.
  4. DOccupation Y has greater non-pecuniary advantages than occupation X.

Question 16

monetary policy
When the central bank lowers the reserve requirements,
  1. Ainvestors will purchase open market bonds.
  2. Bpeople will deposit more money.
  3. Cbanks will create more money.
  4. Dbanks must hold less money.

Question 17

inflationary and deflationary gaps
In the diagrams above, an inflationary gap is demonstrated by
  1. A(i) and (iii)
  2. B(ii) and (iv)
  3. C(ii) and (iii)
  4. D(i) and (ii)

Question 18

unemployment rate
In a country with a population of 20 million, there are 9 million people employed and 1 million unemployed. Calculate the unemployment rate?
  1. A11 %
  2. B10 %
  3. C9 %
  4. D5 %

Question 19

national income accounting

The gross domestic product (GDP) in a four sector economy is $3 452, government purchases are $1 865, consumer expenditure is $2 343 and gross investment is $1 379. The figures are millions of dollars.

What is the level of net exports?

  1. A+$93
  2. B+$123
  3. C-$45
  4. D-$2 135

Question 20

balance of payments
What is the purpose of the statistical discrepancy on the balance of payments accounts?
  1. Ato ensure that the sum of all debits equal to the sum of all credits
  2. Bto ensure that imports equal the value of exports
  3. Cto obtain an accurate account of the balance of payments deficit
  4. Dto obtain an accurate account of balance of payment surplus

Question 21

monetary approach to the balance of payments
Given that the money demand equals money supply and the balance of payment is in equilibrium. What would lead to a balance of payment surplus?
  1. Aa decrease in the money supply
  2. Ban increase in the money supply
  3. Ca decrease in the money demand
  4. Dan increase in disposable income

Question 22

national income concepts
What is the market value of all final goods and services produced in the economy in a given year?
  1. ANet National Product
  2. BNational Income
  3. CGross Domestic Product
  4. DGross National Product,

Question 23

cost benefit analysis
What is taken into account by Cost Benefit Analysis (CBA)?
  1. Aprivate costs and benefits only
  2. Bexternal costs and benefits only
  3. Cthe opportunity cost of investment expenditure
  4. Dboth private and social costs and benefits

Question 24

balance of payments
Which of the following may offset a current account deficit?
  1. Amerchandise trade surpluses
  2. Bmerchandise trade deficits
  3. Ccapital account surpluses
  4. Dcapital account deficit

Question 25

fiscal policy
Fiscal policy involves the control of
  1. Ainterest rates by the central bank.
  2. Bprices to cushion consumers.
  3. Cthe government budget.
  4. Dwages.

Question 26

exchange rate systems
Which of the following exchange rate systems is likely to result in large idle money balances in an economy?
  1. Afixed
  2. Bfloating
  3. Cdual
  4. Dmanaged floating

Question 27

invisible trade
Which of the following is an invisible export of Zimbabwe?
  1. Aexpenditure by holiday makers from China at Victoria Falls
  2. Brepayment of loan to the African Development Bank
  3. Cexpenditure by Zimbabwean soldiers in D.R.C
  4. Dexports of horticultural produce to a Japanese Bank

Question 28

consumption function

The line XY in the diagram shows a consumption function.

Which statement is true about the MPC and APC along XY?

  1. AMPC is always less than APC.
  2. BMPC is always greater than APC.
  3. CAPC = MPC = constant throughout.
  4. DOnly at Z is MPC = APC.

Question 29

inflation
Cost-push and demand-pull inflation respectively are caused by
  1. Aan increase in aggregate demand and an increase in aggregate supply.
  2. Ba decrease in aggregate demand and a decrease in aggregate supply.
  3. Can increase in aggregate supply and decreases in aggregate demand.
  4. Ddecreases in aggregate supply and increases in aggregate demand.

Question 30

GDP deflator
If 2000 is the base year for the GDP deflator, it follows that
  1. Anominal GDP = real GDP in the year 2000.
  2. Bnominal GDP is greater than the real GDP in the year 2000.
  3. Cnominal GDP is less than the real GDP in the year 2000.
  4. Dnominal GDP in 2000 will be greater than real GDP in 2001.

Question 31

paradox of thrift
The Paradox of thrift means that
  1. Aan increase in total savings lowers the level of real GDP.
  2. Ban increase in the MPS lowers the value of the multiplier.
  3. Can increase in the real GDP increases the investment demand.
  4. Dan increase in the APS lowers or leaves unchanged the level of savings.

Question 32

shifts in supply
The diagram shows the market conditions for good X. Which of the following changes cause a shift in supply from S1_1 S1_1 to S2_2 S2_2 ?
  1. Aan increase in the demand for the good
  2. Blower yields due to drought
  3. Ca contraction in supply
  4. Dan expansion in demand

Question 33

subsidies
Which of the following is likely to result from an increase in subsidies for mealie-meal?
  1. Aan increase in taxes
  2. Ban increase in poverty levels
  3. Can increase in the amount of maize grown by farmers
  4. Da marked increase in demand for mealie-meal

Question 34

externalities
Which of the following is an externality arising out of a premier soccer match?
  1. Adamage caused by soccer fans to shops around the soccer stadium
  2. Brevenue earned by commuter vehicle operators
  3. Cpayments by clubs to the city council
  4. Dearnings paid to soccer players

Question 35

public sector debt
What effect will government investment expenditure have on public sector debt in the long run?
  1. Aincreasing the public sector debt.
  2. Bprivate sector crowding out
  3. Cincreasing money supply
  4. Dincreasing interest rate

Question 36

types of unemployment
How best can structural unemployment be defined?
  1. Aunemployment that arises from changes in the pattern of demand or supply
  2. Bunemployment that occurs because some people are virtually unemployable
  3. Cunemployment that occurs during the period when workers are looking for a new job
  4. Dunemployment that is associated with industries where the demand for labour is lower at certain times of the year

Question 37

Phillips curve
The Phillips curve relates to which conflicting objectives?
  1. Alow unemployment and low inflation
  2. Blow unemployment and high inflation
  3. Clow unemployment and BOP deficit
  4. Dlow unemployment and equitable distribution of income

Question 38

government intervention in agriculture
Which of the following is not a valid reason for government intervention in agriculture?
  1. Auncertainty may discourage farming
  2. Bunstable prices may disadvantage consumers
  3. Cfluctuating prices cause fluctuating farm incomes
  4. Dconsumers need a variety of commodities through competition

Question 39

economic rent
Under which conditions will the economic rent received by certain type of labour decrease?
  1. Awhen the demand for labour shifts to the right
  2. Bwhen a trade union is formed to serve the profession
  3. Cwhen more professionals migrate to other countries
  4. Dwhen more training institutions are opened by government

Question 40

economic growth
Economic growth in Zimbabwe can be increased by
  1. Aincreasing income tax.
  2. Blimiting trade with South Africa.
  3. Cusing government funds to help finance basic research.
  4. Ddecreasing the time for which a patent is effective from 20 years to 5 years.

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