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ZIMSEC A Level · 6073/1 · N2021

Economics Paper 1 November 2021

Questions
38 of 40
Syllabus code
6073/1

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Questions
38
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 1

marginal utility
If a consumer gains 30 units of satisfaction from consuming 6 units of a commodity and 33 units from consuming 7 units. The consumer's marginal utility from the 7th unit is
  1. A- 3 units
  2. B3 units
  3. C33 units
  4. D63 units

Question 2

demand
Given the following demand curve, what causes a movement from point a to b.
  1. AA change in income.
  2. BA change in consumer tastes and preferences.
  3. CA change in price of the good.
  4. DA change in population.

Question 3

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

Question 4

monopoly
The cost behavior of a natural monopoly is characterised by
  1. Athe average cost still declining when the quantity demanded reaches a maximum.
  2. Bthe average cost rising when the quantity demanded reaches a maximum.
  3. Cthe marginal cost rising when the marginal revenue reaches zero.
  4. Dthe marginal cost falling when the marginal revenue is falling.

Question 5

costs and revenue
Normal profit is earned by a firm when
  1. Amarginal cost is equal to marginal revenue.
  2. Baverage cost is equal to average revenue.
  3. Cmarginal cost is equal to average revenue.
  4. Daverage cost is equal to marginal cost.

Question 7

circular flow of income
Which of the following is not an injection?
  1. Aimports
  2. Bexports
  3. Cgovernment spending
  4. Dinvestment

Question 8

terms of trade
Which one of the following formulae is used to measure the terms of trade?
  1. A(Index of export prices / Index of import prices) x 100
  2. B(Index of import prices / Index of export prices) x 100
  3. CIndex of exports / Index of imports
  4. DIndex of imports / Index of exports

Question 9

economic development
Which of the following conditions is not necessary for economic development to take place?
  1. AIncreasing the role of the private sector business.
  2. BIncreasing the level of savings and investment.
  3. CIncreasing women participation in decision making.
  4. DIncreasing protectionism in an economy.

Question 10

exchange rates
Devaluation of a county's currency results in exports
  1. Abecoming more expensive.
  2. Bbecoming more elastic.
  3. Cbecoming cheaper.
  4. Dbecoming more inelastic.

Question 11

demand for money
The speculative balances of money held by households are negatively related to
  1. Alevel of income.
  2. Breal income.
  3. Crate of interest.
  4. Dlevel of wealth.

Question 12

balance of payments
From the following, choose a policy which is likely to reduce a balance of payments deficit without causing inflation.
  1. Aa reduction in government expenditure.
  2. Bdevaluation of an economy's exchange rate.
  3. Cincreasing import tariffs.
  4. Drevaluation of a country's currency.

Question 13

production possibility curve

The diagram below shows shifts in an economy's Production Possibility Curve (PPC).

Which change could have come about as a result of an improvement in technology?

  1. AS to Y
  2. BT to S
  3. CW to T
  4. DW to Y

Question 14

diminishing marginal utility

The following table shows the total utility gained by an individual from the consumption of 3 goods.

TOTAL UTILITY

Units ConsumedCabbagesCarrotsPeas
11079
2181416
3252121
4302823
5323522

Which of the goods are subject to diminishing marginal utility?

  1. APeas only.
  2. BCabbages and Peas.
  3. CCabbages and Carrots.
  4. DCabbages, Carrots and Peas.

Question 15

price elasticity of demand

A manufacturer progressively reduces prices of his product in an attempt to increase revenue. The table below shows the outcome.

PriceTotal revenue
10750
9750
8750

What is the price elasticity of demand for the product?

  1. AUnitary
  2. BPerfectly inelastic
  3. CRelatively inelastic
  4. DPerfectly elastic

Question 16

cross elasticity of demand
The cross elasticity of demand for a good is 2. By how much will demand for good A increase if price of good B rises by 30%.
  1. A15%
  2. B28%
  3. C32%
  4. D60%

Question 17

indirect taxes

A specific tax is placed upon each bottle of perfume sold. In the following diagram, SS is the supply curve before imposition of a tax, StSt is the supply curve after tax.

Which area represents the revenue received by the government from the tax?

  1. AORWY
  2. BPQUT
  3. CPRWT
  4. DQRWU

Question 18

factor markets

Assume that a purely competitive firm uses labour (L) and capital (C) to produce a product. In which situation A, B, C or D would the firm be maximizing profit?

Each option gives, in order, MRP(L), MRP(C), Price(L) and Price(C).

  1. AMRP(L) 17, MRP(C) 15, Price(L) 12, Price(C) 12
  2. BMRP(L) 12, MRP(C) 15, Price(L) 12, Price(C) 15
  3. CMRP(L) 20, MRP(C) 10, Price(L) 10, Price(C) 20
  4. DMRP(L) 10, MRP(C) 20, Price(L) 20, Price(C) 10

Question 19

costs of production
A firm's total variable costs are $100 000. The average total cost is $50 and the average fixed cost is $30.
What is the firm's output?
  1. A1250 Units
  2. B2000 Units
  3. C3333 Units
  4. D5000 Units

Question 20

transfer earnings and economic rent

The diagram below shows the demand and supply curves for a factor of production.

Total transfer earnings are equal to

  1. AOPRQ
  2. BPRT
  3. COTRQ
  4. DOP1Q1

Question 21

market failure

The diagram below shows the imposition of an indirect tax to correct market failure.

The area ABC represents

  1. Aconsumer surplus.
  2. Bdeadweight loss.
  3. Cproducer surplus.
  4. Dproducer deficit.

Question 22

market failure

The diagram below shows an industry's supply and demand curves.

Output is restricted at OQ1, which area represents economic gain in welfare if output is expanded to the socially desirable level.

  1. AU
  2. BU + V
  3. CV + W
  4. DV + W + X

Question 23

subsidies

The diagram below represents the market for beef. The producers of beef will receive a subsidy as shown on the diagram.

The removal of the subsidy will reduce the consumer surplus by

  1. AP2P1NL
  2. BMNP1
  3. CP2LR
  4. DP2ML

Question 24

national income accounting
Which of the following would not give the value of the Zimbabwe's gross national income?
  1. AGross Domestic Product plus net property income from abroad.
  2. BGross Domestic Product plus property income from abroad.
  3. CNet National Product plus depreciation.
  4. DTotal factor income earned by Zimbabwean citizens.

Question 26

equilibrium national income
Suppose that in an economy C = $200 + 0,5 of GDP, I = 100,G=100, G = 140, X = $60 and M = 10% of GDP. Then equilibrium GDP equals.
  1. A$500
  2. B$1 250
  3. C$833,33
  4. D$790,60

Question 27

consumption and saving
The savings function of a closed economy with no government is given by the equation S = -$500 + 0,3Y. If the level of income in the economy is $5000, what is the Average Propensity to consume (APC)?
  1. A0,13
  2. B0,6
  3. C0,7
  4. D0,8

Question 28

unemployment
Involuntary unemployment refers to
  1. Athe proportion of the workforce which choose to remain unemployed when the labour market is equilibrium.
  2. Bworkers who choose not to accept employment at the existing wage rate.
  3. Cthe proportion of the workforce which is unable to find jobs despite being prepared to accept work at the existing wage rate.
  4. Dworkers who lose jobs because wages are at such a high level that demand for labour is exceeding supply.

Question 29

credit creation
Given that banks are required to maintain a cash to deposit ratio of 10% and that one bank receives a new deposit of $100 000. What will be the net increase in bank deposits?
  1. A$90 000
  2. B$100 000
  3. C$900 000
  4. D$1 000 000

Question 30

demand for money
A fall in the rate of interest leads to a
  1. Ashift in the demand curve for money to the left.
  2. Bshift in the demand curve for money to the right.
  3. Can increase in quantity demanded for money.
  4. Da decrease in quantity demanded for money.

Question 31

balance of payments
A major long-term problem created by a persistent current account deficit is that
  1. Ait is financed by borrowing hence debt crisis.
  2. Bit is financed by government hence increasing government expenditure.
  3. Cit is financed by firms hence low production.
  4. Dit is financed by households hence low consumption.

Question 32

elasticity

Total expenditure on good x rises if price falls but decreases if income falls. What can be concluded from this information?

Each option gives the price elasticity of demand for good x and then the income elasticity of demand for good x.

  1. APrice elasticity Elastic, income elasticity Negative
  2. BPrice elasticity Inelastic, income elasticity Negative
  3. CPrice elasticity Elastic, income elasticity Positive
  4. DPrice elasticity Inelastic, income elasticity Positive

Question 33

marginal utility

The table below shows the total utility that an individual derives from consuming different quantities of a good.

Quantity of goods consumed (units)Total utility (units)
124
245
363
478
590
699

The individual's marginal utility of money is $1 = 2 units of utility. What is the maximum quantity of the good that the individual can buy when its price is $6.

  1. A2 units
  2. B3 units
  3. C4 units
  4. D5 units

Question 34

perfect competition

A perfectly competitive firm finds that at its current level of output, marginal revenue is $2,00 and marginal cost is $2,50.

If the firm is a profit maximiser, what will happen to its price and output?

Each option gives what happens to price and then to output.

  1. APrice increases, output decreases
  2. BPrice increases, output unchanged
  3. CPrice unchanged, output decreases
  4. DPrice unchanged, output unchanged

Question 35

revenue curves

The diagram below shows the demand (AR) and marginal revenue (MR) curves for a firm.

In which segment should the firm reduce price in order to maximise its profits?

  1. ARS
  2. BRT
  3. CST
  4. DSU

Question 36

monetary policy
According to Keynesian analysis, what will be the result of a decrease in the money supply?
  1. AThe rate of interest will be reduced, thereby reducing the levels of investment and income.
  2. BThe rate of interest will be increased, thereby reducing the levels of investment and income.
  3. CThe level of income will be increased as a result of a lower rate of interest and higher level of investment.
  4. DThe price level will fall by the same percentage change as the decrease in the money supply.

Question 37

cost-benefit analysis
Whatever the problem under investigation, there are four main stages in the development of a Cost-Benefit-Analysis (CBA). Of the following stages, which one is not appropriate?
  1. Aidentification of all relevant costs and benefits
  2. Bputting a monetary value on all relevant costs and benefits
  3. CImplementation of the methods identified
  4. DDecision- making the interpretation of results from CBA

Question 38

exchange rates
Who would benefit from the depreciation of the Zambian Kwacha against the South African Rand?
  1. ASouth African students studying in Zambia.
  2. BZambian holiday makers visiting South Africa.
  3. CSouth African manufacturer exporting to Zambia.
  4. DA South African property company owning properties in Zambia.

Question 39

circular flow of income
If an open economy with government activity is in equilibrium and imports are greater than exports, which of the following must be true?
  1. ASavings are greater than investment.
  2. BInvestment plus government spending is greater than savings plus taxation.
  3. CTaxation is greater than government spending.
  4. DInvestment plus government spending is less than savings plus taxation.

Question 40

exchange rate systems
What is the argument in favour of flexible exchange rate compared to the fixed exchange rate system?
  1. AInflation will imported from other countries.
  2. BThere is no need for government to keep reserves of foreign currencies.
  3. CExports and imports prices are certain.
  4. DThere is need to consult and agree with trading partners.

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