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ZIMSEC A Level · 9158/3 · N2003

Economics Paper 3 November 2003

Questions
15
Total marks
125
Syllabus code
9158/3

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Questions
15
Pass mark
9
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 101

[1 marks]economic systems
In a planned (command) economy, decisions about what to produce, how to produce it, and for whom it is produced are made primarily by...
  1. Aconsumer sovereignty expressed through spending decisions.
  2. Ba central planning authority following a national economic plan.
  3. Cthe price mechanism responding to changes in supply and demand.
  4. Dindividual firms competing with each other for profit.

Question 201

[1 marks]consumer theory
The principle stating that as a consumer consumes successive additional units of a good, the extra utility gained from each additional unit falls is called the law of ___.

Answer this when you sit the paper.

Question 202

[1 marks]consumer theory
A consumer who buys two goods, X and Y, and wishes to allocate a fixed budget so as to maximise total utility is in equilibrium when...
  1. Athe marginal utility per dollar spent on X equals the marginal utility per dollar spent on Y.
  2. Bthe total utility gained from X equals the total utility gained from Y.
  3. Cthe price of X equals the price of Y, so that spending is split evenly.
  4. Dthe marginal utility of X equals the marginal utility of Y, regardless of price.

Question 301

[1 marks]economies of scale and firm size
Inefficiency that arises inside a large firm because the absence of strong competitive pressure allows its costs to drift above the minimum level actually needed to produce its output is called ___ inefficiency.

Answer this when you sit the paper.

Question 401

[1 marks]market structures and profit
In a perfectly competitive market, supernormal profits earned by firms in the short run attract new entrants, and competition drives price down in the long run until firms earn only ___ profit.

Answer this when you sit the paper.

Question 402

[1 marks]market structures and profit
Which market structure allows firms to go on earning supernormal profits in the long run, because significant barriers prevent new firms from entering to compete the profits away?
  1. Aperfect competition, where firms are price takers and entry is free.
  2. Bmonopolistic competition, where product differentiation gives firms some pricing power.
  3. Cmonopoly, where high barriers to entry block potential competitors.
  4. Da competitive market with free entry and exit for all firms.

Question 501

[1 marks]labour market theory
According to the marginal revenue productivity theory of labour demand, a profit-maximising firm hires workers up to the point where the marginal revenue product of labour equals the ___.

Answer this when you sit the paper.

Question 601

[1 marks]national income measurement
Which method of measuring national income calculates value added at each stage of production across all industries in the economy, specifically in order to avoid double counting?
  1. Athe value-added tax method, which sums tax charged on each transaction in the economy.
  2. Bthe output method, which sums the value added at each successive stage of production.
  3. Cthe income method, which sums wages, rent, interest and profit earned by factors of production.
  4. Dthe expenditure method, which sums spending on final goods and services in the economy.

Question 901

[1 marks]inflation and macroeconomic policy
A government policy that combats demand-pull inflation by cutting government expenditure or raising taxes, thereby reducing aggregate demand, is called ___ fiscal policy.

Answer this when you sit the paper.

Question 1001

[1 marks]unemployment
Unemployment that arises because a change in the industrial structure of the economy leaves workers with skills that no longer match the jobs available is known as...
  1. Aseasonal unemployment.
  2. Bcyclical unemployment.
  3. Cfrictional unemployment.
  4. Dstructural unemployment.

Question 1002

[1 marks]unemployment
Unemployment that occurs when workers are temporarily between jobs, for example while searching for a new position after leaving an old one, is called ___ unemployment.

Answer this when you sit the paper.

Question 1101

[1 marks]inflation
A situation in which government expenditure in a given period exceeds government tax revenue in that period is called a budget ___.

Answer this when you sit the paper.

Question 1102

[1 marks]inflation
A country's currency depreciates, making imported goods and imported raw materials more expensive in domestic-currency terms and pushing up firms' production costs. The resulting rise in the general price level is best described as...
  1. Acost-push inflation.
  2. Bhyperinflation.
  3. Cdemand-pull inflation.
  4. Dstructural inflation.

Question 1201

[1 marks]national debt and fiscal policy
The accumulated total of past government borrowing that has not yet been repaid is called the national ___.

Answer this when you sit the paper.

Question 1202

[1 marks]national debt and fiscal policy
Part of a country's national debt is owed to lenders within the country (internal debt) and part is owed to foreign lenders (external debt). Internal debt is generally considered less of an economic concern than external debt of the same size mainly because...
  1. Ainternal debt reduces the country's foreign exchange reserves in the same way that external debt does.
  2. Binternal debt does not have to be repaid, since it is owed to the government's own central bank rather than to outsiders.
  3. Cinterest payments on internal debt are a transfer of income within the domestic economy rather than to foreign lenders.
  4. Dinternal debt is automatically converted into shares of government-owned companies as it matures over time.

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