: i : i test cope 02116010 MAY/TUNE 2012, ADVANCED PROFICIENCY EXAMINATION ECONOMICS ‘Unit 1— Paper 01 07 JUNE 2012 ( READ THE FOLLOWING INSTRUCTIONS CAREFULLY. ‘This test consists of 45 items. You will have 90 minutes to answer them. In addition to this test booklet, you should have an answer sheet, Do not be concerned that the answer shect provides spaces for more answers than there are items in Wis test ‘Bech item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you are about to answer and decide which choice is best. On your answer sheet, find the number which corresponds to your item and shade the space having the same letter as the answer you have chosen, Look at the sample item below. Sample Item Prime cost is calculated by adding direct factory expenses to cost of . Sample Auswer (A) © dpods used (B) _ goods’bought | @ (© materials used * 1 ae 8 ® (D) — dxaterials produded ‘The best answer to this item is “materials used”, s0 enswer space (C) has been shaded. Hf you want to change your answer, erase your old answer completely and fill in your new choice. 4 ‘When you/are told to begin, turn the page and work as quickly and as carefully as you can. If you canhot answer an item, omit it and go on to the next one. You can come back to that item later.| Your score will be the total number of correct answers, ‘You méy do'py rough work in this booklet. ‘You may use bilent non-progranjmable cdiculators to answer questions. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. Canvricht © 20ND Caribhean Braminatinns Corneil‘Which of the following BEST explains the term ‘indifference curve’? (A) Goods which give the consumer maximum satisfaction P_—_ The gombiuation of two goods which gives the consumer the =f level of satisfaction (©) Goods for whieh consumption is indifferent (D) Goods for which the budget line is the same em 2 xefers to the graph below which represents the market for ferry services. A ‘Tieket 8 price ‘Number of trips OF is the equilibrium ticket price for a return trip. If goverment imposes @ price ceiling to allow thie lower income groups 10 utilise more’of the ferry services, it should beplaced "4 (A) at te equilibrium price, OF {B) above the equilibrium price, OF v ‘below the equilibrium price, OF %) either above or below the equilibrium piice, OF The use of land io build hospitals reduces the ‘amount available for fgotory construction. ‘This BEST illustrates the concept of (A) choice © BO seal (© shortage (D) tationing, Which of the following simations ig MOST likely to gesult when there are limited resources? iA People must make choices. 3) The poor will become poorer. (©) The tich will acquire everything they desire. (©) Some firms will be forced out of ‘eusiness. Which of the following is an example of price ceiling? Rent controls )) Farm price supports (©) Atexon the markets () — Minimum wage laws rem 6 refers to the following diegfm showing the Production Possibility Frontier o Soda On the diagram above, point F represents (A) equilibeiun ) inefficiency {c) technical efficiency (©) attainable level of production3. 7. The total social cost of cutting trees for Hems 10-11 refer to the scenario below. amber and fyewood results inthe Due to technical problems being A experienced at the CMC bauxite plant, Mr (9) malcontent chu ‘i of floodis Shortly afterwards, it was noticed ‘that he 8 Se ee ‘purchased less fish fillets and more chicken {C) opportunity cost, to the individual, a of cutting the trees Pi vssing cimts Offiooding plus the 19: Whttype of good do fish filets represent? private cost of cutting the trees (A) Giffen @) Public 8. Which of the ‘following situations results gy ie in an external cost? ‘rior 6 rena eg eee type of good do chicken parts @®) Private citizens clean up the coe sidewalk (©) A fogd processing compeny ie aaa rides scholarships for needy oan ©) Disadvantaged youth trom inner ©) Ostentatious city communities enrol ina skills programme ‘Item 12 refers to the following diagram depicting consumer suzplus, Hem 9 refers to the following diagram which shows the demand and supply curves for apples, Priee 8 Quantity Cea mantel Which area on the diagram depicts , consumer surplus? 9. One exogenou$ variable that would affect the demand sr apples is, ¥ PUT ) RPT (A) supply 2 e (© oRTs income 4, 4 f @) outp? ‘C) the price of apples re . (©) quantity demanded‘Hem 13 reftrs to the graph below which shows the quantity and utility of ice cream consumed ‘Total / Marginal Uiiity of Tee crea (utils) Quantity of ice cream (number of cones) 13. Inthe graph, at which quantity is the consumer maximizing wility? @ () 1 : 5 Hiems 14-15 refer to the situation described below. After ransipg a Uhe-mile race Dwight drank 3 glasses of water. He got 20-utils fom dvinking the ‘ast glass éf wafer, 23 uils from drinking the second glass and 10 utils om drinking the third glass of water, a 14. What is Difight’s TOTAL utility after consuming the second glass of water? a 3 @, 2 oa x Oo 8 15. What is Dwight's MARGINAL utility after. consuming the second giass of water? oi z 3 and 4 v % 3 $ ©) 3 SUSESS 16. Which of the following is NOT a cause of market failure? (A) Imperfect knowledge (8) Extemalities (©, Monopoly WY teation 18. 17. Whenever people can enjoy the benefits of public goods without paying for them, the situation is knqwn as the (A) non-tival problem free-tider problem non-exchidable problem ) — crop-in-the-bucket problem ro ‘em 18 refers to the scenario below. Miss Beat feels unwell and visits ker local ocio: who, after examining her, discovers ‘an incurable illness. The doctor does not tell Miss Bent what he found but instead prescribes costly medicine for her. ‘What economic‘concept does the scenario describe? (A) Inefficiency @) Moral hazard (C) Adverse selection Asymmetric information “Voluntary agreements” is an example of which of the following types of intervention? 4 ‘roe market ) government (©) individual choice (©) private sector Ttem 20 refers to the following diagram showing the price and quantity of labour, Union Intervention in the Market wo 2 30 4 30 @ 7 . Quantity of labour a <—— Minimum wage set y by Union 8 90 tho 20. What wage rate would EACH worker be paid in the imperfect market structuze, without union intervention? = ¢ . a (Cc) ©) $1100 ~ © $2.250 $2750 $3300,ae Item 21 refers to the graph below 23. which shows a situation in which the ‘monopolistically competitive firm isin the Jong-rmn equilibrium. Price o Q a ‘Quantity 24, Using the marginalist approach to determine equilibrium price and quantity, what is the area between Q, and Q, called? (A) Minimum efficiency scale ) Equilibrium point (©), Shut-down point Gf Excess capacity 2, The retail trade in Jamaica is dominated ‘by six large firs, having market shares of 13%, 21%, 27%, 11%, 14% and x% respectively} Ts market i said tobe 25, (A) cétfoentrated @) indeterminate ws highly concentrated 26. oe ‘Which of the following are examples of a * positive externality? I, Obtaining » Bachelor's Degree in Beonomics T. Disposing of your waste in the nearby stream TI Repainting your house and planting roses Y Land I only fh) Tand [ITonly : (Wand tony ©) LWend IT Which of the following statements is TRUE. about deadweight loss of a tax? (A) The greater the elasticity of demand and supply, the lesser the deadweight loss of ¢ tax. {B) The lesser the elasticity of demand and supply, the greater the deadweight loss of a tax. YP) Toegeatertizclastciyofdemans and supply, the greater the deadweight loss of a tax. (@) __ Irrespective of the elasticity, the deadweight loss of a tax is always high. John took out an auto insurance policy and aweek later he carelessly drove his car into awl, This is an example of (A) asymmettic information (8) anegative externality (©, adverse selection mol head ‘The decision rulp for profit maximization ina firmis (A) _- total revenue ~ total costs (B) ‘average revenue = total costs ‘marginal revenue = marginal costs (D) average total revenue = ‘total costs‘tem 27 refers to the graph below which shows the social marginal costs (SMC), the private maxginal costs (PMC) and the [ social marginal benefits (SMB). smc Price PMc SMB 27. Which of the following is TRUE? (A) Output Q, is efficient because SMC > PMC : ®) Output Q, is efficient because PMC = SMB. (©) Output Q, is efficient because SMB > PMC Output Q, is efficient because SMB “SMC Se 28. 29. 30. ‘Toms 28-29 refer to the diagram below which, illustrates the demand and supply of health care in a particular market. If there is no health oare insurance, what ‘would be the equilibrium price and quantity of health care? ¥ P, and Q, Pyand Q, C) Pland Q @) PrendQ, Ifa health insurance company offers to pay half the cost of health care, what would be the price and quantity demanded by consumer? (A) P, and Q, @) Rand, Piand Q, )_-Fzand Q Ina perfectly competitive market, a firm can maximise its profit in the short ran. when (A) average costis the same as average (©) average revenue is the same as average variable cost (©) marginal cost is the same as average revenue marginal cost is the seme as marginal revenuea1. a2. 33. -8- ‘Which ofthe following is NOT likely to couse a shift in the supply curve for labour? Cost of labour ¥ Increase in birth rate (C)__Iaereased population growth (D) Migration of skilled workers Inacountry, the number of people classified ‘as employed is 200 000, the number of people classified as unemployed is 50 000. ‘The size of the Inbour force is (a) 150 000 (B) 200.000 250000 ) 300 000 38. “Longevity” ig a component of which of the following ineasures? Gini coefficient (B) Human Development Index (C)_ Fonrfirm concentration ratio (D) — Herfindahl Hirschman index 36. ‘The concept of “asymmetric information” indicates that information is re (a) avhilable feely (B) evenly distributed (©) notavailable teely ov uitvenly distributed Tiem 35 refers to the graph below which shows the'demand for and supply of «factor of production. D sea Quantity A shift of the demand curve from DD to DD, will result in ‘a decrease in economic rent 3) aniderease in economic rent (©) -adeorease in transfer caruings (D) an increase in transfer earnings If an investor borrows 81 000 at an interest rate of 14 per cent per sunum, the eamual interest payment is @ s 4 $ 140 fc)» $1,000 (@) $1680aoe ‘tem 37 refers to the following ‘graph which ‘tem 40 refers'to the graph below in which depicts a labour market, the Mecginal Revenue Product (MRP) curve has shifted from MRP, to MRP, ‘Wage Wage| ‘MRP, Quantity oflabour Quantity Labour 37. Which of the following economic concepts 40. Which of the following factors are MOST Goes the shaded triangle in the diagram likely to have caused this movement? represent? z Acise in worker: ‘productivity, (8) Poverty TL A fill in the pries ofthe final good Y Beonomic rent TL Anise in the price ofthe final good (C) Transfer ¢amings IV. Arise in the size of the labour force ©) Consumer surplus ¥ Ténd I only 3) Tand I only 38 When the government of a country pays (© andar 2 part of students’ university fee, the ©) TandtV only sovernment i ! (A) using taxes to discourage external Item 41 refers to the diagram below ‘cost applying indifference ‘curve analysis to ®) — exercisingits Power to implement labour supply, iegtistions Tneame ¥ subsillsing an extemal benefit ) intuit enteral cot 39. When examining the Lorenz curve, a Gini coefficient of 100% refers to perfect i (A) employment in the country B ‘equality of icome distribution v inequality of income distribution separation of the rich and the poor 41. Which of the following represents labour é . suppiy? , i @ ove : ® 0-8 omen Boa-10- ‘2. The labour force participation rete.can 44. Which of the following factors positively BEST be described as the ratio of affect social welfare? (A) the labour force to population I. A fall in crime statistics (B) employment to the labour force T, A fall in the level of consumption (©) omployment to the working age HL An improvement in the terms of population size trade AY) telabour force to the working age population size (A) Tand Tonly @®) Land Monly I (©) Wand only 43, The value of the Lorenz curve coefficient QP 3, Wand which repreents total inequality is wo 0 1 oa. © 1 v Item 45 refers to the following table which shows annual wheat production. Number of | Total Physical | Average Physical | Marginal Physical workers | Product (TPP) | Product (APP) | Product (MPP) 0 = i 3 3 2G) [ez aa g 4 45. What is thé average physital product (APP) when there is ONE worker? @® ®) 3 ,END OF TEST IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.