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ZIMSEC A Level · 9158/1 · N2014

Economics Paper 1 November 2014

Questions
28 of 30
Syllabus code
9158/1

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Questions
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Pass mark
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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
Which of the following is not a positive statement?
  1. AThere is a deficit on the balance of trade.
  2. BUnemployment is currently above 50 %.
  3. CInflation rate has fallen to a single digit.
  4. DControlling inflation is more important than economic growth.

Question 2

Production possibility curve

The diagram below shows a production possibility curve.

Point D is a possible combination of output when

  1. Athere is inefficiency in production.
  2. Bsuch output is desirable but unattainable.
  3. Cpreferences and tastes are only for civilian goods.
  4. Dmilitary goods are exported while civilian goods are imported.

Question 3

Economic systems
In a planned economy, the basic question of who gets the output is answered through
  1. Aconsumer votes.
  2. Bgovernment directives.
  3. Cproducer preferences and sovereignty.
  4. Dthe interaction of supply and demand forces.

Question 4

Purchasing power parity
The exchange rate derived from purchasing power parity is based on
  1. Athe inflation differentials.
  2. Bcomparison of consumer baskets.
  3. Cdemand and supply of foreign currency.
  4. Dgovernment controls on the exchange rate movements.

Question 5

Taxation
Which tax regime is being used in an economy where an individual's successive earnings are as given below?
  1. Aneutral
  2. Bprogressive
  3. Cproportional
  4. Dregressive

Question 6

Producer surplus

The schedule below shows the prices a producer is willing to accept for successive units of a good.

If the market price is $10 per unit, what is the producer's surplus?

  1. A$ 10,00
  2. B$ 12,50
  3. C$ 37,50
  4. D$ 50,00

Question 7

Revenue and elasticity

The diagram shows the demand curve and its associated marginal revenue curve.

At price P, total revenue is

  1. Aincreasing.
  2. Bdecreasing.
  3. Cat its highest.
  4. Dat its lowest.

Question 8

Monetary policy
A tight monetary policy could be offset by
  1. Aa budget surplus.
  2. Ba decline in the velocity of money.
  3. Can increase in the velocity of money.
  4. Da deterioration in the profit expectations of business.

Question 9

Monopolistic competition
The firm under monopolistical competition is likely to produce less and set a higher price than under perfect competition because the firm
  1. Afaces increasing costs.
  2. Bmust incur selling expenses.
  3. Cfaces decreasing returns to scale.
  4. Dfaces a downward sloping demand curve.

Question 10

Contestable markets
Long run profit levels for a contestable market are likely to be
  1. Abreakeven.
  2. Bnormal.
  3. Csubnormal.
  4. Dsupernormal

Question 11

Cartels
Producers in a monopolistically competitive industry agreed to form a cartel. What are the effects on quantity produced and profits earned?
  1. Aeffect on quantity: falls; effect on profit: falls
  2. Beffect on quantity: falls; effect on profit: rises
  3. Ceffect on quantity: rises; effect on profit: rises
  4. Deffect on quantity: rises; effect on profit: no change

Question 12

Cross elasticity of demand

Assuming The Herald and The Independent sales are 300 and 250 copies respectively. The price of The Herald rose from 80 cents to 100 cents and sales for The Independent rose to 280.

The cross elasticity of demand for the newspapers is

  1. A0,12.
  2. B0,25.
  3. C0,37.
  4. D0,48.

Question 14

Price elasticity of demand

A producer progressively reduces the price of his product as shown in the table below.

What is the price elasticity of demand for the product?

  1. Aperfectly elastic
  2. Brelatively elastic
  3. Cperfectly inelastic
  4. Drelatively inelastic

Question 15

Demand for money
The speculative demand for money is positively associated with
  1. Awealth.
  2. Binflation.
  3. Cinterest rate.
  4. Dgeneral price level.

Question 16

Wage differentials
Wage differentials can arise from the
  1. Ademand and supply of labour.
  2. Bminimum wage legislation.
  3. Cdemand for labour only.
  4. Dsupply of labour only.

Question 17

Economic integration
An economic integration providing for the duty free movement of goods between member states and a common external tariff is
  1. Aa common market.
  2. Ba customs union.
  3. Ca free trade association.
  4. Dan economic union.

Question 18

Excess capacity

The diagram shows the monopolist's demand and marginal cost curves.

Excess capacity is shown by

  1. AQ2 - Q1.
  2. BQ3 - Q2.
  3. CQ4 - Q2.
  4. DQ3 - Q1.

Question 19

Role of profit
Economic profit affects
  1. Aallocation of resources and the level of resource use.
  2. Bmisallocation of resources and the level of income.
  3. Cthe allocation of resources but not the level of resources.
  4. Dthe level of resource use but not the allocation of resources.

Question 20

National income accounting

The information below relates to an economy.

$ Million: Consumption 600; Government 400; Investment 400; Exports 500; National income 1 800

What is the value of net exports?

  1. A$ 100 million
  2. B$ 300 million
  3. C$ 400 million
  4. D$ 500 million

Question 21

Fixed exchange rates
By fixing the exchange rate, the Central Bank gives up its ability to
  1. Aadjust taxes.
  2. Bdepreciate the domestic currency.
  3. Cinfluence the economy through fiscal policy.
  4. Dinfluence the economy through monetary policy.

Question 22

Real GDP

The table shows an economy producing only guns and butter.

Given that year 2004 is the base year, the real Gross Domestic Product in 2005 is

  1. A2 640.
  2. B17 000.
  3. C25 800.
  4. D43 200.

Question 24

Shut-down point

The diagram below shows the cost curves of a firm.

At price P1 the firm

  1. Aincurs an economic loss.
  2. Bincurs normal profits.
  3. Cis operating at full capacity.
  4. Dshould shut down.

Question 25

Comparative advantage

The table shows the production possibilities before opening up for trade to take place.

What can be deduced from the table?

  1. ACountry 2 should specialise in good A.
  2. BCountry 1 has a comparative advantage in good B.
  3. CEngaging in trade will not benefit both countries.
  4. DEngaging in trade will benefit Country 2 at the expense of Country 1.

Question 26

Terms of trade
In which of the following situations must the terms of trade be moving in favour of a country?
  1. Awhen official reserves are increasing
  2. Bwhen the balance of trade is in a surplus
  3. Cwhen there is a fall in both export and import prices
  4. Dwhen import prices rise at a slower rate than its export prices

Question 27

Real GDP per head
In one year, economic growth was 5 %, consumer price index fell by 6 % while population size rose by 2%. What was the appropriate rise in real GDP per head?
  1. A-3 %
  2. B1 %
  3. C9 %
  4. D13 %

Question 28

Labour supply
When the wage rate increases from 5to5 to 7,50 per hour, Joseph works more hours because his
  1. Aincome effect outweighs his substitution effect.
  2. Bsubstitution effect outweighs his income effect.
  3. Cincome and substitution effects offset each other exactly and the firm's demand for his labour increases.
  4. Dincome and substitution effects offset each other exactly and his supply of labour increases.

Question 29

Price controls
Black markets are associated with price
  1. Afloors and the resulting product surpluses.
  2. Bfloors and the resulting product shortages.
  3. Cceilings and the resulting product shortages.
  4. Dceilings and the resulting product surpluses.

Question 30

Exchange rate determination
The demand for Zimbabwe dollars on the foreign currency market increases when
  1. Aexports increase.
  2. Bimports increase.
  3. Clocals go on holiday abroad.
  4. Dscholarships are given by a local trust fund to study abroad.

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