%.

You mus! sigp lblorv and rcturn this booklet with

.thcAnslverShcet. Fsiturc to do so may resuit
in disqualitication. rESr coDE 02116010
FORM TP 2013166 MAY/JUNE 20 I3
CARIBBEAN BXAMINATIONS COUNCIL
CARIBBEAN ADVANCED PROFICIENCY EXAMINATION9
BCONOMICS
Unitl-Paper0l
I hour 30 minutes

1l JUNE 2013 (a.m.)

RBAD THE FOLLOWING INSTRUCTIONS CAREFULLY.

l. This test consists of 45 items. You will have I hour and 30 minutes to answer them.
In addition to this test booklet, you should have an answer sheet.

3. Do not be concerned that the answer sheet provides spaces for more answers than there are
items in this test.

4. Eaclt 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.

5. On your answer sheet, find the number wlrich 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

Samole Answer
(A) goods used
(B)
(C)
goods bought
materials used
@@ o@
(D) materials produced

The best answer to tlris item is "materials used", so answer space (C) has been shaded.

6. If you want to change your answer, be sure to erase your old answer completely and fill in

,:-r 1 ffi;, ::.,0 ," begin, turn the page and work as quickty and as carefully as you can.
lf you cannot answer an item, omit it and go on to the next one. You can come back to that
itenr later. Your score will be the total number of correct answers.
8. You may do any rouglr work in this booklet.
9. You may use silent non-programmable calculators to answer questions.
-
- DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
-
I
Copyright O 2009 Caribbean Examinations Council
- All rights reserved.
-
- 02r|60|0/cAPE20r3
 l. Which of the follorving situations is MOST 4. Which of the following BEST describes
likely to result wherr there are limited the'marginalist princiPle'?
resources?
(A) Average cost eqtrals average revellue.
(A) P'eople nrust make choices. (B) Marginal cost equals average
(B) The poor wi.ll become poorer. revellue.
(C) Only the rich can acquire everything (C) Average cost equals marginal
. they desire. revenue.
(D) Some firnrs will be forced out of (D) Marginal cost equals marginal
business. revellue.

) A baker can bake arry of two combinations Item 5 refers to the following diagrarn
of cakes ahd loaves of bread using the showing the Production Possibiliry Frontier.
following options.

Loaves of Cakes
Bread
96 l2
75 t5

What is the opportunity cost of producing

one cake?

(A) lloafofbread
(B) 5 loaves ofbread
(c) 7 loaves of bread
(D) 8 loaves ofbread

f,. On the diagranr, point F represents

3. Wlrich of the following is an example of a
ngnrative econom ic staternent?
(A) inefficiency

(A) A reduction in the price of goods

(B) equilibriurn
(C) technicalefhciency
will benefit consumers. (D) an unattainable level of production
(B) The governnrent should provide
free medication for senior
citizens.
(c) An increase irr interest rates will
attract foreign investors.
(D) An increase in the minimum wage
rvil I incfease infl ation.

GO ON TO THE NEXT PAGE

- 02 r | 60 rO/cAPE 2013
 6. Which of the following situations results Item 9 refers to the diagram below which
in an external cost? shows a firm operating in a perfectly
competitive market.
(A) Private citizens clean up the
sidewalk.
(B) Individuals place litter at the side
of the road.
(C) A Food processing company I

provides scholarships for needy

children.
(D) Disadvantaged youth fronr inner
city conrnrunities enrol in a skills
programme.
a --
7. Supply functions are positively sloped
because
9. Which segment of the curves shown
represents the short-run supply curve?
(A) of tlre law of increasing returns
(?) less is supplied at higher (A) CtoE
.output
pnces (B) BtoD
(C) more output is supplied at higher (C) AtoD
prices (D) Ato F
(D) extra output must be attracted from
elsewhere
10. If the demand flor a seller's product is
inelastic and he lowers the price, his total
Item 8 refers to the diagram below which revenue will
represents the market for ferry services.

Ticket
rit
(A) increase
I

(B) decrease
(C) fluctuate
(D) remain the same
F

11. Which of the following is an example of

\" a price ceiling?

Number of Tlips (A) Rent controls

(B) Farm price supports
(C) Taxes on the market
8. OF is the equilibrium ticket price for a (D) Minimum wage laws
return trip. If government imposes a price
ceiling to allow the lower income groups to
utilise more of the ferrv services. it should
be placed
.
(A) either above or below OF
(B) at the equilibrium price, OF
(C) above the equilibriunr price, OF
(D) below the equilibrium price, OF

GO ON TO THE NEXT PAGE

_ 02 r r60 rO/CAPE 20 r3
 -4

12. Which of the following BEST explains the 14. The demand curve fbr a normal good is

tenn.' indifference curye'? said to be negatively sloped.

(A) Goods for wlriclr the budget line is Which of the flollowing diagrams would
the same NOT represent a normal good?
(B) Goods for which consumption is
indifferent (A) Pricc
(c) Coods wlrich give the consttmer
maxirnunr satisfaction
(D) The combination of two goods
which give the consumer the
same level of satisfaction

Item 13 refers to the following diagram

depicting consumer surplus.
Quantity

U
Price (B) Pricc

R
o
Quantity

11. Which area on the diagram depicts Quantity

consumer surplus?

(A) RPT (C) Pricc

(B) PUT
(c) ottTs'
(D) OUrD'

Quantitl,

(D)

a Quantity

CO ON TO THE NEXT PACE

- 02 r r60 r0/cAPE 2013
 -5-
Itenr 15 refbrs to the diagram belou, which shows total marginal utility of ice cream and the
quantity of ice cream.

=^
;9
OD cl

<a
\q

E
F

..----.....-
pru
Quantity of Ice Cream
(number of cones)

15. In the diagram, at which quantity of ice cream is the consumer maximizing utility?

(A) |

(B) 3
(c) 4
(D) s

16. Wlrich of the follorving market structures is r8. 'Voluntary agreements' is an example of
characterised by several firnrs rvhich are too wh ich ofthe following types of intervention?
small to influence the rnarket?
(A) Free market
(A) Perfect competition (B) Government
(B) Duopolistic competition (C) Private sector
(C) Oligopolistic competition (D) Individualchoice
(D) Monopolistic competition

t7. On which of the following assumptions

perfect competition based?

(A) Perfect control of price

(B) Large number of buyers
(c) Large number of big firms
(D) Small numberof individual firms

GO ON TO THE NEXT PAGE

- 02 I r60 rO/cAPE 20 t3
 -6

19. If a firm cannot prevent a consumer Itern 21 refers to the diagranr below
lrom enjoying the berrefits of a good it showing tlre social marginal costs (SMC),
produced at low cost, the good is the private nrarginal costs (PMC) arrd the
social rrrarginal benefits (SMB).
(A) excludable SMC
(B) non-excludable
(c) rival in consumptiott
(D) norrrival in consumption

Itenr 20 ref'ers to the graph below

whiclr shorvs a situation in which the
monopolistically corrrpetitive firrn is in tlre
long-run eQui I ibri urn. SMB

vt v2 euantity

2t. Which of the following is TRUE?

(A) Output Q2 is efficient becarrse

SMC > PMC.
(B) Output Q I is eFficient because
SMB: SMC.
(c) Output Q2 is efficient because
PMC = SMB.
(D) Output Q I is efficient because
20. Using tlre marginalist approach to determine SMB > PMC.
equilibrium price and quantity, what is the
anea betu,een Q, and Q, called?
)', Which of the following is NOT a

(A) Excess capacity characteristic of the oligopolistic industry?

(B) Shut-dowrr point
(C) Equilibriurn point (A) Tlrere are rnany buyers.
(D) Mininrunr efficiency scale (B) The firrns are price takers.
(c) There are few firnrs in the industry.
(D) The goods may be identical or
differentiated.

CO ON TO THE NEXT PAGE

_ 02 | r60 rO/CAPE 20 r3
 23. Wlrich ol'the fbllowing is NOT a cause of Items 28-29 refer to the graph below rvhiclr
market failure? shows the denrand for and supply of health
care in a particular market.
(A) Taxation
(B) Monopoly
(C) E.rternalities
(D) IrnperfectknorVledge

24. If tlre production of a good results irr

positive external ities then

(A) a tax should be irrrposed on tlre good

(B) production oFthe good should cease
(c) prodriction of tlre good slrould be
subsidized
(D) too lrlany l'esources are going into Qz Qr QI Quantity
the production of tlre good
28. lfthere is no health care insurance, what
.25. A s[tuation is defined as 'Pareto efficierrt' would be the equilibriurn price and quantity
if it is of healtlr care?

(A) possible to urake someorre better (A) P, and Q,

offwithout rnaking someone else (B) P, and Q"
worse off (C) P, and Q.-
(B) irnpossible to nlake anyone better (D) P- and Q-
offwithout rnaking someone else
worse off
(c) possible to nrake sonleone lvorse 29. lf a health insurance company ofTers to pay
offand everyone else better off half the cost of health care, lvhat would be
(D) impossible to make anyone better the price and quantity dernanded by the
offwitlrout making someone pay consurner?

(A) P, and Q,
26. A situation in which people enjoy the (B) P, and Q"
benefits of public goods without paying (c) P, and Q,
for thenr. is known as the (D) P. and Q-

(A) norr-rival problern

(B) flree-rider problern 30. Which of the following contributions are
(C) non-excludable problern exanr ples of privatization?
(D) drop-in-the-bucket problern
(A) Regulatiorr and iianchising
(B) Frarrchising arrd redistribution
27. If the cost of providing a good to an (c) Contracting out artd deregulation
additional person is zero, the good is (D) Deregulation and nationalization

(A) a free rider good

(B) non-excludable
(C) a private good
(D) non-rival

CO ON TO THE NEXT PAGE

Q2 r r60 rO/cAPE 20 r3
 -8-
31. If an investor borrows $ I 000 at an interest Item 35 refers to the following diagram
rate of I4 per cent per annum. the annual depicting a labour market.
interest payment would be

(A) $ t4
(B) $ r40
(c) $r 000
(D) $r 680
sL

32. Which ofthe following is NOT likely to cause .,. r. )

ashift in the supply curve for labour? MRPL
0
(A) Cost of labour Quantity Labour
(B) Increased birth rate
(C) Increased populatiorr growth 35. Which of the fol lowing economic concepts
(D) Migration of skilled workers does the shaded area in the triansle
represent?

33. 'Which ofthe following terms describes the (A) Poverty

relationship between factor rewards and (B) Economic rent
costs of production? (C) Transfer earnings
(D) Consumer surplus
(A) Direct
(B) lnverse
(C) Indirect Item 36 refers to the table below rvhich
(D) Negative shows the percentage of national income
earned by various factors of production.

34. Which of the following countries has Factor Percentage oZ

the GREATEST ineoualitv of income
Income Earned
distribution?
Land 15%
Countla Value of Gini
Labour 25%
Coelficient Capital 20%
(A) P 0.1
Entrepreneurship 40%
(B) a 0.3
36. The table represents
(c) R 0.7
(D) S 0.9 (A) cost of firms of each factor
(B) size distribution of income
(c) personal distribution of income
(D) functional distribution of income

CO ON TO THE NEXT PAGE

_ 02 r | 601O/cAPE 2013
 9-
Iterrr 37 refers to the following diagranr of Itern 38 refers to the graph below shorving tlre
a Lorenz curve. demand and supply for a factor of production.

;i,

"'"'l'
o D

o^
S".i
\\
SJts
() :.:
\

Quantity
20 40 60 80 100 38. A shift of tlre demand curve front DD to
Percentage of Households D,D, will result in
37. By. exarninirrg the portion of the entire area (A) a decrease in econornic rent
that is shaded, an econor.t.list can determine (B) an increase in economic rent
the (C) a decrease in transfer earnings
(D) an increase in transfer earninss
(A) Ginicoefficient
(B) concentration ratio
(C) elasticiry coefficierrr 39. "Longevity" is a cornponent of which of
(D) rnarginal rate of substitution
the following measures?

(A) Gini coefficient

(B) Human Development Index
(C) Fair-firm concentration ratio
(D) Herfindahl-Hirschman index

40. When exarrrining the Lorenz curve, a Cini

coefficient of 100%o is regarded as total

(A) errrployment in the country

(B) equality of incorne distribution
(C) inequality of inconre distribution
(D) separation of the rich and the poor

CO ON TO THE NEXT PACE

02 r I 6010/cA PE 20 | 3
 _ t0 _

41. The higher the demand for houses, and Items 44-45 refer to the information below.
hence the higher their price, the higher will
be the demand for bricklayers. Jack's Inc. paid wages in the amount of
$20 000, rent $2 000 and interest $l 500.
The concept explained above BEST The business realized a profit of$5 000.
describes
44. For the factor of production, capital, how
(A) derived demand much did Jack's Inc. pay?
(B) increase in denrand
(C) increase in factors demanded (A) $ I sOo
(D) increase in quantity demanded (B) $ 2 000
(c) $ s 000
(D) $20 000
42. ln the factor market. land is similar to
labour in that
45. For the factor of production, entrepre-
(A) the owners of both maY be neurship, how much did Jack's Inc. pay?
represented bY a trade union
.(B) the determinants of supply of both
(A) $ I 5oo
of them are similar (B) $ 2 ooo
(C) both are demanded for their (c) $ s 000
contribution to Production (D) $20 o0o
(D) both are fixed in suPPlY and are
indestructable

.43. Under the CARICOM Single Market and

Economy (CSME) agreement, a plumber
from Grenada now works as an electrician
in Trinidad. What types of labour mobility
have occurred?

L Vertical
il. Horizontal
ilt. Geographical
tv. Occupational

(A) I and III only

(B) Il and III only
(c) ll and IV only
(D) III and IV only

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

021 r6010/CAPE 2013