Economics Paper 3 June 2007

1. AUnlimited human wants for goods and services, set against limited resources available to satisfy them, forcing choices to be made.
2. BA shortage of a particular good at its current price, which encourages firms to raise that price.
3. CResources being left idle or wasted because a firm produces below its maximum possible output.
4. DA situation where government spending exceeds the tax revenue it collects in a given year, forcing it to borrow money or raise taxes to cover the shortfall.

1. AThe good being a necessity that consumers must keep buying regardless of price changes, since there are few or no other goods that can satisfyingly replace it.
2. BThe good taking up only a very small proportion of a consumer's total income.
3. CConsumers having formed a strong habit of buying the good over a long period.
4. DThe availability of close substitutes that consumers can switch to if the price of the good rises.

1. AEconomic profit and accounting profit are two different names for exactly the same calculation.
2. BEconomic profit subtracts the opportunity cost of resources the owner supplies, such as their own capital or time, in addition to the explicit costs deducted for accounting profit.
3. CEconomic profit is calculated using only cash receipts and payments, while accounting profit includes non-cash items such as depreciation.
4. DEconomic profit is always a larger figure than accounting profit, because it does not deduct explicit costs such as wages and rent.

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1. AFreedom of entry and exit for new firms into the industry.
2. BFirms producing identical, homogeneous products with no differentiation.
3. CA single firm that supplies the entire output of the industry.
4. DThe government fixing the price at which the product is sold.

1. AFirms being permanently unable to earn any profit, even temporarily in the short run, regardless of how differentiated their product might be.
2. BFirms facing no competition at all from other firms in the industry.
3. CFirms selling differentiated products, giving each some control over its own price.
4. DFirms being unable to freely enter or exit the industry in the long run.

1. AThe monopsony theory of wages, which states that a single dominant employer can pay workers a wage below their marginal product.
2. BThe marginal productivity theory of wages, which states that firms hire workers up to the point where the wage equals the value of the worker's marginal product.
3. CThe theory of compensating wage differentials, which states that riskier or less pleasant jobs pay higher wages to compensate workers for those conditions.
4. DThe human capital theory, which states that workers with more education and training earn higher wages because they are more productive, having invested time and money in acquiring valuable skills.

1. AThe free market, left alone, failing to allocate resources efficiently, for example due to externalities or public goods.
2. BGovernment intervention in the market, such as a legally imposed minimum price, causing the market price to rise above its free-market equilibrium level.
3. CA firm making an accounting loss during a particular trading period.
4. DConsumers switching from one brand to another because of a change in personal taste.

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1. APrivatization transfers ownership of the enterprise from the state to private shareholders, while commercialization keeps ownership with the state but requires it to operate on commercial, profit-oriented lines.
2. BPrivatization and commercialization both mean the same thing: converting a loss-making parastatal into a profitable one under state ownership.
3. CPrivatization keeps ownership with the state while removing government subsidies, and commercialization transfers ownership entirely to private shareholders.
4. DPrivatization applies only to agricultural parastatals, and commercialization applies only to manufacturing parastatals.

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1. ABy adding depreciation (capital consumption) to GDP at market prices, since worn-out capital must be replaced.
2. BBy adding net property income from abroad to GDP at market prices, since some of that output was earned by residents working or investing overseas.
3. CBy subtracting depreciation (capital consumption) from GDP at market prices, since some output only replaces worn-out capital.
4. DBy subtracting indirect taxes and adding subsidies to GDP at market prices, to reach factor cost.

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1. AA group of countries that remove tariffs among themselves and also adopt a single common external tariff against non-member countries.
2. BA group of countries that share a single currency and a single central bank while keeping separate tariffs against each other.
3. CA group of countries that harmonise their fiscal and monetary policies but continue charging tariffs on goods traded among themselves.
4. DA group of countries that remove tariffs and trade barriers on goods traded among themselves, while each member keeps its own separate tariffs against non-member countries.

1. AA group of countries that meet occasionally to discuss trade issues but pass no binding agreements or common policies.
2. BA group of member countries that, in addition to free trade and a common external tariff, also harmonise their economic policies such as fiscal, monetary, and regulatory policy.
3. CA group of countries that remove tariffs and other trade barriers among themselves and also adopt a single, common external tariff applied uniformly against all non-member countries.
4. DA single country that restricts all foreign trade in order to protect its domestic industries from competition.

1. AA general rise in prices caused by total demand in the economy persistently exceeding the economy's productive capacity.
2. BA general rise in prices caused only by an increase in the price of imported goods and services.
3. CA general rise in prices caused by increases in production costs, such as wages or raw material prices, which firms pass on as higher prices.
4. DA general rise in prices caused by a country's money supply growing far faster than its output, leaving more money chasing the same quantity of goods and services.

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1. ALow population growth combined with an ageing population and a low dependency ratio.
2. BAdvanced industrial infrastructure with the majority of the labour force employed in manufacturing.
3. CHigh income per capita relative to developed countries, with the majority of output and employment generated by the tertiary, or services, sector of the economy.
4. DLow income per capita relative to developed countries, with a large proportion of the population dependent on primary sector activities such as agriculture.

Answer this when you sit the paper.

Answer this when you sit the paper.