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ZIMSEC A Level · 6073/1

Economics Paper 1 Specimen 2018

Questions
39 of 40
Syllabus code
6073/1

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Questions
39
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

efficiency
Productive efficiency is achieved when
  1. Aa firm is producing on the lowest point of its average cost curve.
  2. Bthere are no further opportunities of substituting labour for capital.
  3. Call factors of production are fully employed.
  4. Dthe firm is maximizing profits.

Question 2

production possibility curve
The diagram shows a production possibility curve for country Z producing two goods X and Y. As one moves from left to right along the PPC, What happens to the opportunity cost?
  1. AIt remains constant.
  2. BIt is unitary.
  3. CIt increases.
  4. DIt falls.

Question 3

efficiency

The graph below shows short run production for a competitive firm.

At which point A, B, C or D does the firm achieve productive efficiency?

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

Question 4

business finance
Which of the following is the most suitable source of finance for a firm to acquire machinery?
  1. ABank overdraft
  2. BDebt factoring
  3. CHire purchase
  4. DTrade credit

Question 5

business organisation
Which of the following is an advantage of a public limited company over a private limited company?
  1. AEasy to set up.
  2. BMore capital can be raised.
  3. CThe firm enjoys secrecy.
  4. DThe firms enjoys economies of scale.

Question 6

factors of production
The key defining role of the entrepreneur is a
  1. Adecision maker.
  2. Bgood manufacturer.
  3. Cprofit maker.
  4. Drisk bearer.

Question 7

elasticity
If the demand for a good is inelastic an increase in its price causes total expenditure on the good to
  1. Abecome zero.
  2. Bdecrease.
  3. Cincrease.
  4. Dremain constant.

Question 8

demand
Effective demand for a commodity refers to the
  1. Adesire to purchase a commodity.
  2. Bgreat ability to purchase the commodity.
  3. Cneed for a commodity that one wants to purchase.
  4. Dwillingness to purchase the product backed by ability to pay.

Question 9

income elasticity
Income elasticity of demand is given by
  1. Achange in quantity demanded / change in income.
  2. B% change in quantity demanded / % change in income.
  3. C% change in quantity demanded / % change in income × 100.
  4. D% change in income / % change in quantity demanded × 100.

Question 10

demand

The diagram below shows the demand curves for a product.

A shift of the demand curve D1D1 to D2D2 could be caused by

  1. Aa decrease in quantity supplied.
  2. Ban increase in the price of a compliment.
  3. Ca decrease in consumers incomes.
  4. Dan increase in the price of a substitute.

Question 11

income elasticity

The diagram below shows the demand curve for commodity X.

Which of the following statements is correct? X is

  1. Aa normal good.
  2. Ban inferior good.
  3. Ca substitute.
  4. Da complimentary good.

Question 12

elasticity
Where on the graph below is price elasticity of demand greater than one?
  1. AAB
  2. BAD
  3. CBC
  4. DDC

Question 13

oligopoly

If firms in an oligopolistic industry agree to form a cartel, what are the likely effects on price and output produced?

The options give the effect on price and then the effect on output.

  1. Afalls and falls
  2. Bfalls and increases
  3. Cincreases and falls
  4. Dincreases and increases

Question 14

market structures
In a contestable market
  1. Abigger firms have preferential treatment from government.
  2. Babnormal profits are earned in both the short run and long run.
  3. Cthere is threat of potential entry by new firms.
  4. Dthere is a limited number of firms.

Question 15

costs and revenue

The diagram below shows the TR and TC curves for a firm.

At which level of output is the loss equal to the fixed costs?

  1. AQ3
  2. BQ2
  3. CQ1
  4. DQ0

Question 16

money supply
Why is plastic money not included in M1 definition even though consumers use it in carrying out transactions?
  1. AIt is not money but just electronic devices linking where money is kept and where it is to be spent.
  2. BIt is not issued by monetary authorities and some retailers issue it.
  3. CIt is not an asset, but is just a means of accessing money to settle debts.
  4. DIt is not acceptably transferrable as money is.

Question 17

monetary theory
According to monetarist theory what is the short-run effect of an unexpected increase in the money supply?
  1. AAn increase in the rate of interest.
  2. BAn appreciation of the foreign exchange rate.
  3. CAn increase in real wages
  4. DAn increase in employment.

Question 18

credit creation
The cash ratio of the banking system is 12.5%. Given a deposit of $25 000 the amount of money created in the economy is
  1. A2 000.
  2. B3 125.
  3. C200 000.
  4. D312 500.

Question 19

inflation
Demand-pull inflation is caused by
  1. Aan increase in indirect taxes.
  2. Ban increase in interest rates.
  3. Ca reduction in direct taxes.
  4. Da reduction in the money supply.

Question 20

supply

The graph below shows the supply curves of wheat.

What causes a shift of the supply curve from S0 to S1?

  1. AA rise in price of wheat.
  2. BA rise in price of barley.
  3. CA rise in income of farmers.
  4. DA subsidy given to wheat farmers.

Question 21

revenue

The diagram below shows the total revenue curve of a firm.

When (TR) Total Revenue is at its maximum then

  1. Amarginal revenue is zero.
  2. Bmarginal revenue is equal to marginal cost.
  3. Caverage revenue is equal to average cost.
  4. Dmarginal revenue is equal to average revenue.

Question 22

costs

The table below shows a firm's total and marginal cost and output

Output 1, total cost $300, marginal cost $20
Output 2, total cost $315, marginal cost $15
Output 3, total cost $325, marginal cost $10
Output 4, total cost $340, marginal cost $15
Output 5, total cost $360, marginal cost $20
Output 6, total cost $385, marginal cost $25

What is the average fixed cost of producing 4 units?

  1. A22.67
  2. B70
  3. C85
  4. D325

Question 24

comparative advantage

The diagram below relates to the production of cars and maize in countries W and Z with a given quantity of resources.

Using relative cost advantages, trade between countries W and Z can occur since

  1. Acountry Z has an absolute advantage in the production of cars.
  2. Bcountry W has an absolute advantage in the production of both cars and maize.
  3. Ccountry W has an absolute advantage in the production of cars and Country Z has a comparative advantage in maize.
  4. Dcountry W has a comparative advantage in the production of maize and Country Z has a comparative advantage in the production of cars.

Question 25

trade protection

The diagram below shows the domestic market for a good. With free international trade the price is P. The country then imposes a tariff on imports of the good causing domestic price to rise to P1.

As a result of the tariff imposition quantity of goods imported change from

  1. AZ to Y.
  2. BZ to X.
  3. CVZ to VY.
  4. DVZ to WY.

Question 26

exchange rates

The diagram below shows the effect of a devaluation on a country's balance of trade.

What explains the initial deterioration of the balance of trade?

  1. AIncreased export prices.
  2. BIncreased interest rates.
  3. CShort run inelastic demand for imports.
  4. DInsufficient foreign reserves.

Question 27

market failure
A socially efficient output is achieved when
  1. Amarginal social cost equals marginal social benefit.
  2. Bmarginal private cost equals marginal social benefit.
  3. Cmarginal private cost equals marginal private benefit.
  4. Dmarginal social cost equals marginal private benefit.

Question 28

taxation

The profits for three companies in the same industry are shown below.

Company X: profit $2 000, tax paid 200CompanyY:profit200 Company Y: profit 5 000, tax paid 400CompanyZ:profit400 Company Z: profit 9 000, tax paid $600

The nature of the tax applied in this economy is

  1. Aregressive.
  2. Bprogressive.
  3. Cproportional.
  4. Dexemptive

Question 29

market failure
The reason for government intervention in the market is
  1. Aexistence of diseconomies of scale.
  2. Bimbalance between buyers and sellers.
  3. Cexistence of significant economies of scale.
  4. Dexistence of negative externalities in production.

Question 30

labour markets
Other things being equal, which of the following causes the demand curve for labour to shift to the right?
  1. Aa rise in real wages
  2. Ban increase in immigration
  3. Can increase in productivity of labour
  4. Da fall in the money wage rate

Question 31

demand for money
In the liquidity preference theory, the speculative demand for money is low when bond price is
  1. Alow and interest rate is high.
  2. Blow and interest rate is low.
  3. Chigh and interest rate is high.
  4. Dhigh and interest rate is low.

Question 32

unemployment
Overtime, the national rate of unemployment may fall as a result of the following except
  1. Aan increase in money supply.
  2. Ban increase in the mobility of labour.
  3. Ca reduction in state unemployment benefits.
  4. Da reduction in trade union restrictive practices.

Question 33

economic growth
With reference to the diagram below, which of the following indicates actual economic growth?
  1. Aoperating at point E
  2. Bmovement from point C to point D
  3. Cmovement from point A to point B
  4. DA shift of PPC1 to PPC2

Question 34

unemployment

Below is the demand and supply curve for labour on the market.

What type of unemployment is caused by an increase in the wage rate to W1?

  1. AFrictional
  2. BClassical
  3. CCyclical
  4. DStructural

Question 35

macroeconomic policy

The government of a particular country introduces laws to reduce powers of trade union

This is an example of _________ policy

  1. Ademand
  2. Bfiscal
  3. Cmonetary
  4. Dsupply side

Question 36

the multiplier

In the diagram below S1 is the initial closed economy's savings function which then shifts to S2.

What is the effect on the multiplier and on the marginal propensity to save?

The options give the effect on the multiplier and then the effect on the marginal propensity to save.

  1. Afalls and falls
  2. Bfalls and rises
  3. Crises and rises
  4. Drises and falls

Question 37

the multiplier
What is the marginal propensity to consume for a closed economy with no government sector in which investment rises by $100 resulting in real gross domestic product (GDP) rising by$1000?
  1. A0,1
  2. B0,9
  3. C1,0
  4. D10,0

Question 38

statistics
The sales made by a supermarket in five days were 94,94, 98, 86,86, 90 and $91. What is the effect to the weekly mean of including Saturday's sales of $61?
  1. Adecreases
  2. Bincreases
  3. Cremains constant
  4. Dcannot be determined

Question 39

statistics
A survey was conducted by a chocolate manufacturing firm on its products. Which measure of central tendency helps the firm to establish the most favouredbrand?
  1. Amean
  2. Bmedian
  3. Cmode
  4. Drange

Question 40

data collection
One advantage of using interviews over questionnaires when collecting data is that
  1. Ait is less expensive.
  2. Bit permits anonymity and may result in more honest responses.
  3. Cit does not eliminate bias in the phrasing of the questions.
  4. Dit is suitable for use with both literate and illiterate respondents.

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