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ZIMSEC A Level · 9158/1 · N2013

Economics Paper 1 November 2013

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

opportunity cost
Opportunity cost means
  1. Athe price of a good in terms of the price of the other good.
  2. Bthe price of a good in terms of the best alternative forgone.
  3. Cthe price of one good in terms of the other in barter trade.
  4. Dthe time lost in costing goods and services.

Question 2

public goods
Which of the following is not a characteristic of a public good?
  1. AIt is non-rejectable.
  2. BIt is non-excludable.
  3. CIt is non-rival in consumption.
  4. DIt is provided by the private sector.

Question 3

production possibility curve
Which of the following can be derived from a production possibility frontier?
  1. Athe opportunity cost of producing product A to B
  2. Bthe characteristics of products A and B
  3. Cthe income level of consumers in the economy
  4. Dthe method of production in the economy

Question 4

factor markets
The demand for a factor of production is said to be 'derived'. This means
  1. Athe demand for the factor is price elastic.
  2. Bthe demand for the factor is price inelastic.
  3. Cthe demand for the factor is decreasing.
  4. Dthe factor is not demanded for its sake but for the product to be produced.

Question 5

utility
The consumer is said to be in equilibrium when
  1. Athe price of X is at its maximum whilst that of Y is at its minimum.
  2. Bthe relative prices are equal to the marginal rate of substitution.
  3. Cthe price of X is equal to the price of Y.
  4. Dthe quantity demanded of X is equal to that of Y.

Question 6

demand
The diagram below shows the demand curve for good A. What would cause a movement along the curve from P to Q?
  1. Aa change in consumer tastes
  2. Ba decrease in the demand for A
  3. Can increase in the production costs for A
  4. Da reduction in the price of a substitute

Question 7

production and costs

The diagram below shows a firm's average cost curve (AC1) when it is operating plant size I and LRAC represents its long run average cost.

The reason for LRAC to be lower than AC1 at output OQ2 is that

  1. Athe optimum capacity of plant size I is OQ1.
  2. BLRAC embodies higher fixed costs than AC1.
  3. Cthe LRAC embodies greater economies of scale.
  4. Dthe market for the product is greater at OQ2 than the optimum of plant size I.

Question 8

factor markets

In a given production process, labour and capital are substitutable. What will be the effect on the quantities of labour and capital employed if the government introduces a subsidy on capital investment?

The options give the quantity of labour and then the quantity of capital.

  1. Adecrease, increase
  2. Bdecrease, uncertain
  3. Cincrease, increase
  4. Duncertain, increase

Question 9

production and costs

A firm's average variable costs are $30,00 at an output level of 20 000 units. Its total fixed costs are $20 000,00.

For the firm to earn normal profit, which price should it charge per unit?

  1. A$1,00
  2. B$3,00
  3. C$30,00
  4. D$31,00

Question 10

returns to scale
When a firm increases all its inputs threefold its output increases twofold. What does this illustrate?
  1. Aincreasing returns to scale
  2. Bdecreasing returns to scale
  3. Cthe law of diminishing costs
  4. Deconomies of scale

Question 11

market structures
Perfect competition differs from monopolistic competition in that
  1. Athere are few firms.
  2. Bproducts are homogeneous.
  3. Cthere are barriers to entry of new firms.
  4. Dfirms earn abnormal profits in the long run equilibrium.

Question 12

perfect competition
The diagrams below show total revenue curves for four different firms (A, B, C and D). Which firm is producing under conditions of perfect competition?
  1. AA
  2. BB
  3. CC
  4. DD

Question 13

profit maximisation

The diagram below shows a firm changing from profit maximisation to sales maximisation.

What are the price and output combinations before and after the change?

The options give the combination before the change and then the combination after the change.

  1. AP1 and Q1, then P2 and Q3
  2. BP4 and Q1, then P3 and Q2
  3. CP2 and Q3, then P1 and Q1
  4. DP3 and Q2, then P2 and Q3

Question 14

monopoly
If a monopolist sets a price equal to its average cost, what would happen?
  1. AIt would break-even.
  2. BIt would make a loss.
  3. CIt would maximise revenue.
  4. DIt would maximise profits.

Question 15

market equilibrium

Good A and Good B are substitutes. What will be the effect on the equilibrium price and quantity of Good A of an increase in the supply of Good B?

The options give the price and then the quantity demanded.

  1. Adecrease, decrease
  2. Bincrease, increase
  3. Cincrease, decrease
  4. Ddecrease, increase

Question 16

elasticity of supply
In which period is elasticity of supply equal to zero?
  1. Athe short run
  2. Bthe mometary period
  3. Cthe long run
  4. Dthe very long run

Question 17

consumer surplus

The table below shows a student's demand schedule for freezits.

Price (cents): 100 for the 1st freezit, 70 for the 2nd, 50 for the 3rd, 20 for the 4th.

If the freezit market price is 20 cents, what is his consumer surplus if he buys 2 freezits?

  1. A20 cents
  2. B40 cents
  3. C130 cents
  4. D170 cents

Question 18

factor markets

The diagram below shows the demand and supply conditions of a particular labour market.

In equilibrium the amount of economic rent and transfer earnings received by the employees are

  1. Aareas OTRQ and TUR respectively.
  2. Bareas PTR and URT respectively.
  3. Careas PTR and PRQO respectively.
  4. Dareas PUR and PRQO respectively.

Question 19

income distribution
The evenness of income distribution in an economy can be deduced from the
  1. ALorenz curve.
  2. Bindifference curve.
  3. Cproduction possibility frontier.
  4. DPhillips curve.

Question 20

subsidies
A subsidy is totally beneficial to consumers when demand is
  1. Arelatively elastic.
  2. Bperfectly elastic.
  3. Cperfectly inelastic.
  4. Dunitarily elastic.

Question 21

national income accounting

The following data is taken from a country's national income accounts.

Total domestic expenditure at market prices 200mExports200m Exports 48m
Imports $52m
Indirect taxes $40m
Net Property Income from abroad +$2m
Depreciation (capital consumption) $20m

The value of net national product is

  1. A$142 m.
  2. B$178 m.
  3. C$182 m.
  4. D$222 m.

Question 22

macroeconomic policy

How would the government deal with the twin evils of hyperinflation and unemployment?

The options give the measure for hyperinflation and then the measure for unemployment.

  1. Atighten import controls, lower interest rates
  2. Brevalue currency, cut government expenditure
  3. Ccontrol prices, subsidise industries
  4. Dration foreign currency, cut government expenditure

Question 23

balance of payments

Zimbabwean firms sell more minerals to the United States of America and buy more banking services from the United Kingdom. How would the Zimbabweans' balance of payments be affected?

The options give the visible balance and then the invisible balance.

  1. Aimproves, improves
  2. Bimproves, worsens
  3. Cworsens, worsens
  4. Dworsens, improves

Question 24

exchange rates
What is meant by an appreciation of a currency?
  1. Aa fall in value caused by government intervention
  2. Ba fall in value caused by market forces
  3. Ca rise in value caused by market forces
  4. Da rise in value caused by government intervention

Question 25

exchange rates

What effect would a rise in a country's exchange rate have on its export and import prices?

The options give export prices and then import prices.

  1. Aincrease, increase
  2. Bincrease, decrease
  3. Cdecrease, decrease
  4. Ddecrease, increase

Question 26

the multiplier
Which one of the following would cause the value of the multiplier to be reduced?
  1. Aan increase in consumption
  2. Ban increase in government expenditure
  3. Can increase in the volume of exports
  4. Dan increase in the rate of taxation

Question 27

the multiplier

The following data represent a consumption function for a closed economy with no government.

Income ($m) 120, consumption ($m) 116
Income 140, consumption 132
Income 160, consumption 148
Income 180, consumption 164
Income 200, consumption 180
Income 220, consumption 196

What is the value of the multiplier when income is $200?

  1. A0,2
  2. B0,8
  3. C5,0
  4. D10,0

Question 28

consumption and saving

The diagram below represents a consumption function for a closed economy without government.

Which of the following diagrams represents the corresponding saving(s) function?

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

Question 29

inflation
A rise in the index of retail prices is evidence of a fall in the
  1. Acost of living.
  2. Bexchange rate.
  3. Cterms of trade.
  4. Dvalue of money.

Question 30

national income accounting
If consumer expenditure is $30 billion, government expenditure is $10 billion, investment is $20 billion, exports are $16 billion and imports are $20 billion, what is the GDP?
  1. A$56 billion
  2. B$76 billion
  3. C$80 billion
  4. D$96 billion

Question 31

money and banking
The speculative demand for money is directly influenced by
  1. Athe value of current transactions.
  2. Bthe marginal propensity to consume.
  3. Cthe marginal efficiency of capital.
  4. Dthe expected level of interest rates.

Question 32

inflation
Which of the following would cause cost-push inflation?
  1. Aa higher level of consumption
  2. Ban increase in trade unionism
  3. Can increase in labour productivity
  4. Dan appreciation of the exchange rate

Question 33

unemployment
Zimbabwe's steel industry is closed down as buyers switch their purchases of steel to another country. What type of unemployment will result from this?
  1. Acyclical
  2. Bfrictional
  3. Cseasonal
  4. Dstructural

Question 34

unemployment
If government would want to reduce the non-accelerating inflation rate of unemployment (NAIRU), which measure would be inappropriate?
  1. Aa reduction in interest rates
  2. Ban increase in rates of unemployment benefits
  3. Cthe abolition of state-imposed minimum wage rates
  4. Dthe introduction of travel allowances for unemployed workers to search for jobs

Question 35

taxation

The following table shows the breakdown of a government's tax revenue.

Income tax $80m
Corporation tax $40m
Customs duties $20m
Value added tax $70m
Inheritance tax $10m

What is the total amount of revenue received from indirect taxes?

  1. A$220 m
  2. B$130 m
  3. C$90 m
  4. D$30 m

Question 36

index numbers

The following bundle of goods and their weights are considered in calculating the cost of living.

Medication, weight 3, current price x
Education, weight 5, current price 120
Entertainment, weight 2, current price 105

If the current value of the retail price index is 114, what is the current price for medication, x?

  1. A100
  2. B110
  3. C115
  4. D120

Question 37

comparative advantage
In international trade, comparative advantage refers to the ability of the country to produce
  1. Aall goods at lower cost measured in terms of labour input than its trading partners.
  2. Ball goods at lower costs measured in money terms than its trading partners.
  3. Ca good at a lower opportunity cost than its trading partners.
  4. Dsome goods which are demanded internationally.

Question 38

development economics

From the table below, which country is likely to be the least developed?

Country A: population 100 million, real GDP $600m, life expectance 58 years
Country B: population 200 million, real GDP $2 000m, life expectance 70 years
Country C: population 300 million, real GDP $2 100m, life expectance 58 years
Country D: population 400 million, real GDP $3 600m, life expectance 70 years

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

Question 39

development economics
Why do developing countries on average, have a low savings ratio?
  1. ACitizens have a range of saving institutions to choose from.
  2. BGovernments do not promote saving.
  3. CAverage income per head is low.
  4. DInterest rates tend to be high.

Question 40

development economics
Economic development is different from economic growth mainly because it
  1. Ais an increase in the GDP.
  2. Bimplies an improvement in social welfare.
  3. Cis an improvement in the terms of trade.
  4. Dis an outward shift of the production possibility frontier.

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