Economics Paper 3 November 2018

1. Asetting the output target that each private firm must reach during the year
2. Bowning all of the land, capital and enterprise employed in the country
3. Cproviding public and merit goods that the private sector would under-supply
4. Dfixing the price of every good and service that is sold in the shops

1. Araising the price of the goods that low-income households buy most often
2. Bremoving every tax that companies pay on the profits they earn
3. Crequiring all firms in the economy to pay exactly the same wage
4. Dcombining progressive taxation with grants such as school fee assistance

1. Athe price mechanism signals scarcity, so resources are allocated more efficiently
2. Bplanned economies had no way of collecting taxes from their citizens
3. Cthe state sector in a planned economy employed too few people to matter
4. Dplanned economies were unable to produce capital goods of any kind for their industries

1. Aprivate owners keep the reward of the risks that they take
2. Bnew products are exempt from taxation for their first five years
3. Cowners are required by law to reinvest a fixed share of their profits
4. Dthe state guarantees a market for whatever a private firm produces

1. Aprices are fixed by government rather than by the market for each good
2. Bfirms are unable to advertise the goods and services that they produce
3. Ceffort is duplicated and weaker firms fail, putting their workers out of work
4. Dconsumers are left with only one supplier to choose from for each good that they buy

1. Aavailable only to households whose income falls below a set level
2. Bnon-rivalrous and non-excludable, so one person's use leaves it available to others
3. Cproduced only by government departments rather than by privately owned firms in the market
4. Dsold at a price below the cost of producing it for each consumer

1. Anobody will pay for something they cannot be prevented from using
2. Bthe good is too expensive for any single private firm to produce
3. Cconsumers do not know that the good exists until government advertises it
4. Dthe good wears out too quickly for a firm to recover what it cost

1. Athe good has no substitutes, so buyers must purchase it at any price
2. Bproducers are willing to supply more of the good as its price rises
3. Ca fall in price raises real income and makes the good relatively cheaper
4. Dconsumers judge quality by price, so a cheaper good is bought more often

1. Aa good with no close substitutes available anywhere in the market
2. Ba strongly inferior staple whose income effect outweighs its substitution effect
3. Ca good whose supply cannot be increased however high the price may go
4. Da luxury good bought mainly to display wealth, so a high price adds to its attraction

1. Aperfectly elastic, since it can sell any quantity at the ruling market price
2. Bperfectly inelastic, since the quantity it sells never changes at all
3. Cunitary elastic, since its revenue is the same at every price it sets
4. Drelatively inelastic, since buyers of the product have few substitutes to turn to

1. Asupply is most elastic in the momentary period immediately after a price change
2. Bsupply becomes more elastic as the time period under consideration lengthens
3. Csupply becomes less elastic as the time period under consideration lengthens
4. Dthe elasticity of supply is the same in the momentary, short and long run

1. Athe product is perishable and cannot be stored for any length of time
2. Bthe producer holds large stocks and has idle plant and spare labour
3. Cthe factors of production used are highly specialised and immobile
4. Dentry into the industry requires a licence that is rarely granted

1. Aconsumers will switch to his maize from other staples whenever prices rise
2. Ba rise in price raises his total revenue, and a tax can largely be passed to consumers
3. Ca fall in price raises his total revenue, since a great deal more maize is then bought by consumers
4. Dthe quantity he sells rises sharply whenever he lowers his asking price

1. Aboth the price and the quantity supplied fall back to their earlier levels
2. Bthe price rises steeply, because the quantity offered cannot be increased quickly
3. Cthe price is unaffected, because supply and demand rise by the same amount
4. Dthe quantity supplied rises sharply while the price he receives stays almost unchanged

1. Amilk producers face no competition from producers in other countries
2. Bthe demand for milk does not change when its price changes
3. Cmilk is sold at a price that is fixed by government each season
4. Dit cannot be stored, so output cannot be held back or released later

1. Aa price above marginal cost to every consumer who buys from the firm
2. Ba lower price to buyers who purchase in bulk, reflecting the saving in delivery
3. Cdifferent prices to different consumers for the same good, for reasons unrelated to cost
4. Da higher price for a good of better quality than the price it charges for a poorer quality good

1. Aproduce the good at a constant average cost whatever quantity it makes
2. Bkeep its markets separate so that buyers cannot resell between them
3. Csell in a market where many other firms are producing the same good
4. Dobtain the permission of government before setting each of its prices

1. Agrowing fastest, whatever the elasticity of demand in that market may be
2. Bless elastic, because buyers there have few alternatives to turn to
3. Cmade up of the largest number of individual buyers of the product
4. Dmore elastic, because buyers there respond strongly to a change in price

1. Alow income buyers are served who could not afford a single uniform price
2. Bevery consumer is charged exactly the same price for the good in each of the markets
3. Cthe firm is prevented from earning any abnormal profit on its sales
4. Dthe good is produced at a lower cost than under a single-price policy

1. Athe firm withdraws the good altogether from the market in which the price is lowest
2. Bthe quantity of the good produced falls below what a single price would bring
3. Cconsumers in both markets end up paying the identical high price in the end
4. Dbuyers in the inelastic market pay more and lose part of their consumer surplus

1. Athe marginal revenue product of labour falls as more workers are employed
2. Btrade unions restrict the number of workers who may enter the occupation
3. Cemployers are legally required to pay a minimum wage to every worker
4. Dworkers offer fewer hours of work as the wage rate paid to them by firms rises

1. Alowers the number of hours each existing worker is willing to work
2. Breduces the profit that firms in the occupation are able to earn
3. Craises the price of the goods the occupation produces for sale
4. Ddraws more workers into the occupation and encourages longer hours

1. Aeach firm's total wage bill is equal to the profit it earns in the year
2. Bthe trade union and the employers' association have reached an agreement
3. Cthe wage is equal to the average cost of training a worker for the job
4. Dthe quantity of labour demanded equals the quantity of labour supplied

1. Aa fall in the wage actually paid, as employers cut hours to compensate
2. Ban excess supply of labour, so some workers lose or fail to find jobs
3. Can excess demand for labour, so employers compete to hire more workers
4. Dno change in employment, since firms simply absorb the extra wage cost

1. Araise wages only by reducing the number of workers employed
2. Braise both the wage and the level of employment above the monopsonist's choice
3. Craise the level of employment only by accepting a wage below the competitive level
4. Draise neither wages nor employment, since the employer sets both alone

1. Aimports and exports, while an indirect tax is levied on goods sold at home
2. Bincome and wealth, while an indirect tax is levied on spending
3. Cgoods and services, while an indirect tax is levied on incomes and wealth
4. Dcompanies only, while an indirect tax is levied only on private individuals

1. Acorporate tax charged on the profits of a company
2. Bpay as you earn income tax deducted from wages
3. Cvalue added tax charged on goods sold in a shop
4. Dcapital gains tax charged on the sale of an asset

1. Athe consumer, in every case, since the tax is added to the shelf price
2. Bwhichever side of the market has the more elastic curve
3. Cwhichever side of the market has the more inelastic curve
4. Dthe producer, in every case, since the producer pays it over to government

1. Araises the price of the good so that consumers stop buying it altogether
2. Btransfers the cost of the pollution from the third parties affected across to the government
3. Craises the firm's cost of production, so output falls towards the socially optimal level
4. Dcompels the firm to close and so removes the pollution from the economy

1. Athe tax must be paid by government rather than by the polluting firm
2. Ban indirect tax cannot legally be charged on a good that causes pollution
3. Cthe external cost cannot be measured accurately, so the right size of tax is unknown
4. Da tax on a polluting good always eliminates every unit of the pollution

1. Athe rate of inflation in the country compared with that of its trading partners
2. Ban agreement between the country's commercial banks and its largest exporters
3. Cthe demand for foreign currency by importers and its supply from exporters
4. Dthe central bank, which announces a new rate at the start of each month

1. Ais pegged by the monetary authorities and changed only by devaluation or revaluation
2. Bmoves each day with the demand for and supply of foreign currency
3. Cis set by the International Monetary Fund on behalf of member states
4. Dis recalculated every year from the relative price levels of the two countries

1. Amarket forces within a band, with official intervention if it moves outside
2. Bthe market alone, with the authorities never entering the foreign exchange market
3. Cthe rate at which the country's largest trading partner values its own currency
4. Dthe authorities alone, who announce the rate at which all trade must be settled

1. Aimports dearer at home and exports cheaper abroad, so import volumes fall and exports rise
2. Bthe country's foreign debt smaller when it is measured in local currency
3. Cimports cheaper and exports dearer, so consumers buy more from abroad
4. Dboth imports and exports dearer, so the total volume of trade falls

1. Athe government is unable to alter the exchange rate once it has been fixed
2. Bmuch of the import bill is fuel, machinery and medicines, whose demand is inelastic
3. Cthe country's exports are sold entirely within the southern African region
4. Da devaluation raises the foreign currency price of the country's exports

1. Aconsumption plus savings plus taxation, plus exports plus imports for the year
2. Bwages plus rent plus interest plus profit earned within the country in the year
3. Cconsumption plus investment plus government spending, minus exports plus imports
4. Dconsumption plus investment plus government spending, plus exports minus imports

1. Aconvert output measured at factor cost into output measured at market prices
2. Binclude the output of the informal sector along with that of the formal sector
3. Callow for the effect of price changes between one year and the next
4. Davoid counting the same output more than once as it passes along the chain

1. Acounts every good and service produced, whether it is traded or not
2. Bmeasures the total value of output produced in each country during the year
3. Cshows how evenly the income of each country is spread among its people
4. Dgives the value of output available on average to each person in each country

1. Athe two countries publish their statistics at different times of the year
2. Bone country counts government services in its national income and the other does not
3. Cone country measures its national income in its own currency rather than in dollars
4. Dincome is concentrated among a few in that country and much of its output is capital goods

1. Aexpressing them at the market prices ruling in each country in that year
2. Bconverting them at purchasing power parity rather than at official exchange rates
3. Cconverting them into United States dollars at the official rate of exchange
4. Dadding the value of imports and subtracting the value of exports in each country

1. Athe money supply and the rate of interest in the economy
2. Bthe regulation of wages and of prices charged in the shops
3. Cthe level of government spending and the rates of taxation
4. Dthe exchange rate and the level of tariffs charged on imports

1. Athe Reserve Bank of Zimbabwe and the Ministry of Finance
2. Bthe commercial banks and the Reserve Bank of Zimbabwe
3. Cthe Ministry of Finance and the country's revenue authority
4. Dthe Ministry of Finance and the Reserve Bank of Zimbabwe

1. Agovernment spending on a public works programme
2. Ba change in the rate of value added tax
3. Copen market operations in government securities
4. Da subsidy paid on the price of maize meal

1. Alower taxes and higher public spending raise aggregate demand, so firms hire more
2. Bhigher taxes leave households with less to spend, which lowers the price level
3. Cpublic works projects are staffed by workers brought in from other countries
4. Dthe central bank is obliged to lower interest rates whenever spending rises

1. Agovernment spending has no effect on the level of aggregate demand
2. Ba tax cut raises the price level but leaves household incomes unchanged
3. Cmuch of the unemployment is structural, so extra demand will not remove it
4. Dfiscal policy can be used only by a country with a floating exchange rate

1. Athe population stops growing, so fewer social services need to be provided
2. Bimports of raw materials fall, which improves the balance of payments
3. Cthe country no longer needs to borrow from any lender at any time
4. Dthe tax base widens, so public services can be funded without raising tax rates

1. Agrowth is measured by counting the number of people who are in work
2. Bexpanding firms take on more labour in order to produce the extra output
3. Cworkers leave the labour force as national income per head increases
4. Dthe government is obliged to employ everyone who is looking for work

1. Aa growing economy will spend the loan entirely on imported machinery
2. Ba growing economy will be able to service and repay the debt
3. Ca growing economy is required to accept whatever terms are offered
4. Dloans made to a growing economy are guaranteed by its trading partners

1. Aaggregate demand grows more quickly than productive capacity does
2. Bthe tax base widens faster than government is able to spend the revenue
3. Cthe balance of payments moves from a deficit into a surplus position
4. Daggregate supply grows more quickly than aggregate demand does

1. Agrowth reduces the total number of firms operating in the economy
2. Bthe labour force shrinks as households become better off than before
3. Cnew technology and structural change make some existing skills redundant
4. Dgrowing firms are legally required to reduce the hours their workers do

1. Aadding together the prices of every good and service sold in the economy
2. Bcomparing the money supply in one year with the money supply in the next
3. Crecording the wage increases won by trade unions during the course of a year
4. Dpricing a representative basket of goods weighted by household spending patterns

1. Athe index can only be calculated once the year has already ended
2. Bgovernment has no legal power to collect price data from retailers
3. Cthe prices of goods in the shops are not published anywhere
4. Dhouseholds differ in tastes and income, so no one basket fits them all

1. Aa higher price may reflect a better product rather than inflation
2. Bgoods whose quality changes are removed from the basket at once
3. Cbetter goods are always cheaper than the goods they have replaced
4. Dquality changes are recorded in a separate index of their own

1. Ataxpayers move into higher tax brackets as money incomes rise with prices
2. Bthe government delays its spending until prices have stopped rising
3. Cthe real value of the national debt rises as the price level increases
4. Dgovernment revenue falls because taxpayers can no longer afford to pay

Answer this when you sit the paper.

1. Aa conflict only when the exchange rate is fixed rather than floating
2. Bno conflict at all, since lower unemployment brings lower inflation with it
3. Ca trade-off, since lower unemployment tends to come with higher inflation
4. Da choice between growth and the balance of payments rather than the two named

1. Ait fixes the exchange rate against the currencies of trading partners
2. Bit guarantees that the country will run a surplus on its balance of payments
3. Cit removes the need for government to collect taxes from its citizens
4. Dit protects the value of money, of savings and of contracts made in money

1. Aa rise in the market share of the largest firms
2. Ban increase in the total number of firms trading
3. Cequilibrium on the balance of payments
4. Dthe maximisation of each firm's profit

1. Aa country with a trade deficit is unable to experience any inflation
2. Bprice stability is achieved automatically once a country's economy has begun to grow steadily each year
3. Cwithout growth there is nothing to distribute and without foreign currency imports cannot be paid for
4. Dinflation is impossible in an economy that is growing quickly

1. Ait reduces the amount of tax that firms have to pay on their profits
2. Bit makes the country's exports more competitive on world markets
3. Cit raises the wages of the workers who remain in employment
4. Dit wastes the economy's labour and causes poverty and social costs