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CIMA C 04 Sample Question
CIMA C 04 Sample Question
3a FECB
21 May 2001
Day 1 – morning
INSTRUCTIONS TO CANDIDATES
Write your examination number in the boxes provided on the front of the answer book.
Write FECB on the line marked "Subject" on the front of the answer book.
Write your examination number on the special answer sheet for section A which is on page 3 of
this question paper booklet.
Detach the sheet from the booklet and insert it into your answer book before you hand this in.
Do NOT write your name or your student registration number anywhere on your answer book.
Tick the appropriate boxes on the front of the answer book to indicate which questions you have
answered.
Each of the sub-questions numbered from 1.1 to 1.26 inclusive, given below, has only ONE correct
answer.
Question One
1.1 Governments could raise labour productivity by all of the following EXCEPT which ONE?
1.3 If the demand for a good increases, which ONE of the following will occur?
A which goods and services and how much of each are to be produced.
B which goods will meet individual and social needs.
C which goods will maximise the rate of growth of welfare over time.
D which combination of resources should be used in production.
1.6 Which ONE of the following is NOT a potential source of market failure?
A External costs.
B External benefits.
C An unequal income distribution.
D The existence of monopolies.
A price leadership.
B price rigidity.
C collusion between producers.
D price competition.
1.8 Under monopolistic competition, excess profits are eliminated in the long run because of
1.9 The economic welfare case for governments increasing taxes on petrol to raise its real
price is that
1.11 Gross national product will be higher than gross domestic product if
1.12 In the circular flow model of the economy, the level of national income will always reach an
equilibrium because
1.13 All of the following are disadvantages of inflation EXCEPT which ONE?
1.17 An expansionary fiscal policy would be most likely to reduce unemployment if the country
had
1.19 The effect on a business of a contractionary fiscal policy will be greatest when the
business
1.21 If a country can produce all goods more efficiently than its trading partner, it should export
A no goods.
B only those goods in which it has an absolute advantage.
C only those goods in which its efficiency advantage is greatest.
D all goods.
1.22 All of the following are reasons for trans-national companies locating production of a good
in more than one country except one. Which ONE is the EXCEPTION?
1.24 All of the following are characteristics of the process of globalisation EXCEPT which
ONE?
1.26 Which ONE of the following would be likely to result in a rise in the value of UK sterling
against the Euro?
(Total = 52 Marks)
3a FECB
19 November 2001
Day 1 – morning
INSTRUCTIONS TO CANDIDATES
Answer the ONE question in section A (this has 26 sub-questions and is on pages 2 – 7).
Answer THREE questions ONLY from section B (these questions are on pages 8 – 12).
Write your examination number in the boxes provided on the front of the answer book.
Write FECB on the line marked "Subject" on the front of the answer book.
Write your examination number on the special answer sheet for section A. Detach the sheet
from the booklet and insert it into your answer book before you hand this in.
Do NOT write your name or your student registration number anywhere on your answer book.
Tick the appropriate boxes on the front of the answer book to indicate which questions you have
answered.
Each of the sub-questions numbered from 1.1 to 1.26 inclusive, given below, has only ONE
correct answer.
Question One
1.1 Which ONE of the following would lead directly to an outward shift in a country’s
production possibility frontier?
1.2 The cost of one good or service measured in terms of what must be sacrificed to obtain
it is called
A real cost.
B potential cost.
C opportunity cost.
D social cost.
1.3 All of the following are supply side policies which would promote economic growth
EXCEPT which ONE?
1.4 All of the following are essential features of a market economy EXCEPT which ONE?
1.6 If a business currently sells 10,000 units of its product each month at $10 each unit and
the demand for its product has a price elasticity of -2∙5, a rise in the price of the product
to $11 will
1.7 In the kinked demand curve model of oligopoly, the kink in the firm’s demand curve is
due to the firm’s belief that competitors will
1.8 Which ONE of the following is a natural barrier to the entry of new firms into an
industry?
A a public good.
B a private good.
C a government good.
D an external good.
1.11 In practice, a monopoly may have its market power limited by all of the following
EXCEPT which ONE?
1.12 All of the following are examples of where externalities are likely to occur EXCEPT
which ONE?
1.13 Whenever government intervention prevents prices from reaching their equilibrium level,
the result will always include ALL of the following EXCEPT which ONE?
A Shortages or surpluses.
B Demand and supply not equal.
C Reduced profits for producers.
D Resources not allocated by price.
1.14 Which ONE of the following would cause the value of the multiplier to fall?
1.16 The recession phase of the trade cycle will normally be accompanied by all of the
following EXCEPT which ONE?
1.17 According to the new classical school, in order to manage the economy, governments
should
1.18 All of the following will normally lead to a fall in the level of economic activity in an
economy EXCEPT which ONE?
1.22 Which ONE of the following shows the lowest degree of international mobility?
A Unskilled labour.
B Financial capital.
C Technical knowledge.
D Management.
1.24 A fall in the exchange rate for a country’s currency will improve the balance of payments
current account if
A the price elasticity of demand for imports is greater than for exports.
B the price elasticity of demand for exports is greater than for imports.
C the sum of the price elasticities for imports and exports is less than one.
D the sum of the price elasticities for imports and exports is greater than one.
1.26 Compared to a fixed exchange rate system, an economy will benefit from a flexible
exchange rate system because
(Total = 52 marks)
3a FECB
20 May 2002
Day 1 – morning
INSTRUCTIONS TO CANDIDATES
Read this page before you look at the questions
You are allowed two hours to answer this question paper. All questions are compulsory.
Answer the ONE question in section A (this has 26 sub-questions and is on pages 2-8)
Answer the THREE questions in section B (these are on pages 9-15)
You are advised to spend 10 minutes reading through the paper before starting to answer the questions.
You should spend no more than 55 minutes on answering the ONE question in section A, which has 26
sub-questions.
You should spend no more than 55 minutes on answering the THREE questions in section B.
Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leave
the examination hall with this booklet.
Do NOT write your name or your student registration number anywhere on this booklet.
TURN OVER
Each of the sub-questions numbered from 1.1 to 1.26 inclusive, given below, has only ONE correct
answer.
REQUIRED:
Place a circle “O” around the letter A, B, C or D that gives the correct answer to each sub-question.
If you wish to change your mind about an answer, block out your first answer completely and then circle
another letter. You will NOT receive marks if more than one letter is circled.
Please note that you will NOT receive marks for any notes or workings to these sub-questions.
Question One
A Land.
B Entrepreneurship.
C Labour.
D Money.
1.2 All of the following government policies would tend to raise the long-term rate of economic growth
EXCEPT which ONE?
1.3 All of the following are features of modern economic growth in developed economies EXCEPT which
ONE?
1.5 Which ONE of the following is true of the corporate form of business organisation?
D The liability of the owners for the debts of the corporation is limited.
1.6 A rise in the price of a good accompanied by a fall in the quantity sold would result from
A a decrease in supply.
B an increase in demand.
C a decrease in demand.
D an increase in supply.
1.7 If the demand curve for Good A shifts to the left when the price of Good B rises, we may conclude that
TURN OVER
1.9 All of the following will lead to an imperfect allocation of resources EXCEPT which ONE?
A There are some production costs that are not borne by the producer.
1.10 Constant returns to scale mean that as all inputs are increased,
1.11 All of the following statements about oligopoly are true EXCEPT which ONE?
B Oligopolistic firms do not generally produce where average costs are lowest.
D Oligopolistic firms can never achieve lower long-run average costs than could competitive firms in the
same industry.
B Reduction of competition.
C Economies of scale.
1.13 Which ONE of the following would tend to increase the degree of monopoly power of a company?
1.14 Which ONE of the following forms of government intervention would be most appropriate for dealing
with a failure by the business sector to provide public goods?
C Legal controls.
D Price controls.
1.15 In a boom period in the economy, the demand for electrical goods will rise more rapidly than the
demand for groceries because
TURN OVER
1.18 Which ONE of the following would lead a country’s balance of payments current account to move
towards a surplus?
1.19 All of the following would normally lead to a rise in the exchange rate for a country’s currency,
EXCEPT which ONE?
C The business could raise profit margins on exports without losing sales.
D In its home market, the business would face reduced competition from imports.
1.22 Multinational companies locate production in more than one country for all of the following reasons
EXCEPT which ONE?
1.23 All of the following are the likely consequences of increased international mobility of factors of
production EXCEPT which ONE?
D Increased flows of profits, dividends and factor earnings on balance of payments current accounts.
TURN OVER
A the difference between the government’s receipts and its expenditure over the period of a year.
B the difference between the exports of goods and services and imports of goods and services over the
period of a year.
D a statement of the economic transactions between residents of a country and the rest of the world
over a given period.
1.26 All of the following statements are true EXCEPT which ONE?
(Total = 52 Marks)
End of Section A
3a FECB
18 November 2002
Day 1 – morning
INSTRUCTIONS TO CANDIDATES
Read this page before you look at the questions
You are allowed two hours to answer this question paper. All questions are compulsory.
Answer the ONE question in section A (this has 26 sub-questions and is on pages 2-7)
Answer the THREE questions in section B (these are on pages 8-13)
You are advised to spend 10 minutes reading through the paper before starting to answer the questions.
You should spend no more than 55 minutes on answering the ONE question in section A, which has 26
sub-questions.
You should spend no more than 55 minutes on answering the THREE questions in section B.
Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leave
the examination hall with this booklet.
Do NOT write your name or your student registration number anywhere on this booklet.
Each of the sub-questions numbered from 1.1 to 1.26 inclusive, given below, has only ONE correct
answer.
REQUIRED:
Place a circle “O” around the letter A, B, C or D that gives the correct answer to each sub-question.
If you wish to change your mind about an answer, block out your first answer completely and then circle
another letter. You will NOT receive marks if more than one letter is circled.
Please note that you will NOT receive marks for any notes or workings to these sub-questions.
Question One
1.2 The importance of saving in promoting economic growth is because of the relationship between
savings and
A present consumption.
B future consumption.
C investment.
D interest rates.
1.3 Economic growth is desirable because it makes all of the following possible EXCEPT which ONE?
D Increased leisure.
1.7 Which ONE of the following will tend to make the demand for a company’s product LESS price elastic?
1.8 Which ONE of the following does NOT restrict the number of firms in an industry?
C Barriers to entry.
B To shift the demand curve for the company's product to the right.
C To make the demand curve for the product more price inelastic.
1.10 All of the following are features of oligopoly EXCEPT which ONE?
A Non-price competition.
C Entry barriers.
1.11 A policy of price discrimination by a monopolist may involve all of the following EXCEPT which ONE?
1.13 If, in the long run, a business doubles all the inputs it uses, but total output less than doubles, it is
experiencing
A diminishing returns.
D market saturation.
B its sales will fall only slightly if there is a fall in consumer income.
C its sales will be unaffected by changes in the prices of substitutes and complements.
D its sales will rise steeply when consumer income is rising rapidly.
1.15 In a market economy, prices perform all of the following functions EXCEPT which ONE?
C A signal to consumers.
D A signal to producers.
1.16 The minimum condition for a business to continue to operate in the short run is that
1.17 The government may discourage horizontal mergers in manufacturing industry because
A by controlling the sources of supply, the merged firms will have unfair advantages over rivals.
C consumers may lose out if the merged firm acquires market dominance.
B encourage saving.
1.22 All of the following are direct taxes EXCEPT which ONE?
A Corporation tax.
C Income tax.
1.23 Two countries, Northland and Southland, both produce two goods, X and Y. Northland has a
comparative advantage in the production of good X if
D less labour and capital are required to produce one unit of X than in Southland.
C The switching of cash from a bank account in one country to an account in another country.
1.25 If a country were to join a free trade area, its business sector would gain because
A it could get tariff-free raw materials from countries inside the free trade area.
C prices of competitors from countries not in the free trade area would rise.
D there would be fewer barriers to establishing subsidiaries in other countries in the free trade area.
1.26 All of the following are features of globalisation EXCEPT which ONE?
(Total = 52 Marks)
3a FECB
19 May 2003
Monday morning
INSTRUCTIONS TO CANDIDATES
Read this page before you look at the questions
You are allowed two hours to answer this question paper. All questions are compulsory.
Answer the ONE question in section A (this has 26 sub-questions and is on pages 2-8)
Answer the THREE questions in section B (these are on pages 10-15)
You are advised to spend 10 minutes reading through the paper before starting to answer the questions.
You should spend no more than 55 minutes on answering the ONE question in section A, which has 26
sub-questions.
You should spend no more than 55 minutes on answering the THREE questions in section B.
Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leave
the examination hall with this booklet.
Do NOT write your name or your student registration number anywhere on this booklet.
Each of the sub-questions numbered from 1.1 to 1.26 inclusive, given below, has only ONE correct
answer.
REQUIRED:
Place a circle “O” around the letter A, B, C or D that gives the correct answer to each sub-question.
If you wish to change your mind about an answer, block out your first answer completely and then circle
another letter. You will NOT receive marks if more than one letter is circled.
Please note that you will NOT receive marks for any notes or workings to these sub-questions.
Question One
1.1 For a business producing shirts and dresses, the opportunity cost of a dress is
A the market price that the business can obtain for a dress.
B the cost of the labour and raw materials used in making the dress.
C the shirts that could have been produced with the resources used to make the dress.
D the total cost of all the resources used to make one dress.
1.2 An increase in labour productivity in a business can be caused by all of the following EXCEPT which
ONE?
1.5 A slow down in economic growth in the US would be transmitted to the rest of the world by all
EXCEPT which ONE of the following processes?
1.9 Which ONE of the following would lead the demand curve for a good to shift to the right?
1.10 The law of diminishing returns applies to a business only when the quantity of
C at least one factor of production which is used in the production process is fixed.
D capital used in the production process is fixed but the amount of labour employed can be varied.
1.11 If a business is taxed by an amount equal to the external costs it imposes on the rest of society by its
production activity, then
A there will be a misallocation of resources because the price mechanism has been interfered with.
B the increase in costs will lead the business to produce more in order to maintain its profits.
C there will be no change in production and resource allocation because costs and prices will adjust.
D resource allocation will be improved since prices will more accurately reflect costs and benefits.
A The firm is able to reduce administration costs per unit of output when it opens a second production
plant.
B The firm can buy raw materials from other firms at lower prices when it buys in bulk.
D Training costs are reduced when the firm can draw on the pool of skilled labour in the region.
1.13 What is meant by the divorce of control from ownership in modern market economies?
A The employment of salaried senior managers who do not have significant shareholdings in the
companies that employ them.
C The growth in government regulation and control of business through regulatory bodies.
1.14 If the total revenue from the sales of a good rises by 10% when its price is increased by 10%, then the
demand for the good must
C be of unitary elasticity.
1.15 On scheduled airflights, airlines sell standby passenger tickets at discounted (lower) prices because
B the marginal cost is low up to the point where all seats on the aeroplane are occupied.
C the average cost for standby seats is less than the marginal cost.
C Sellers can earn only normal profits in both the short and the long run.
D There are no barriers to entry into, and to exit from, the market.
1.17 A merger between two companies producing similar products might be in the public interest for all of
the following reasons EXCEPT which ONE?
B The new company may be able to afford higher levels of research and development.
C The new company may be able to compete more effectively with an established large company.
D Increased control of the market by the company will limit the opportunities for overseas companies to
compete.
1.18 Which ONE of the following would lead to a fall in the value of the multiplier?
1.19 The weights used in an index of retail (consumer) prices take account of
B In developed economies cash and notes form only a very small part of the money supply.
D The more liquid a financial asset is, the higher is the expected rate of return.
1.21 The downswing phase of the trade cycle usually has each of the following features EXCEPT which
ONE?
1.22 Which ONE of the following would result from a reduction in interest rates?
1.23 If there is inflation caused by excess aggregate demand, which ONE of the following policies is likely
to be most effective in controlling the rise in prices?
B the amount of tax revenue received by the government rises over time.
D high income earners pay more direct tax than do low income earners.
1.25 A multinational company may wish to locate production in an economy to which it currently exports for
all of the following reasons EXCEPT which ONE?
A There is little cost for the company to move its capital and management to the other economy.
1.26 The process of globalisation leads to all of the following EXCEPT which ONE?
(Total = 52 Marks)
End of Section A
3a FECB
17 November 2003
Monday morning
INSTRUCTIONS TO CANDIDATES
Read this page before you look at the questions
You are allowed two hours to answer this question paper. All questions are compulsory.
Answer the ONE question in section A (this has 26 sub-questions and is on pages 2 – 9).
Answer the THREE questions in section B (these are on pages 10 – 16).
You are advised to spend 10 minutes reading through the paper before starting to answer the questions.
You should spend no more than 55 minutes on answering the ONE question in section A, which has 26
sub-questions.
You should spend no more than 55 minutes on answering the THREE questions in section B.
Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leave
the examination hall with this booklet.
TURN OVER
Each of the sub-questions numbered from 1.1 to 1.26 inclusive, given below, has only ONE correct
answer.
REQUIRED:
Place a circle "O" around the letter A, B, C or D that gives the correct answer to each sub-question.
If you wish to change your mind about an answer, block out your first answer completely and then circle
another letter. You will NOT receive marks if more than one letter is circled.
Please note that you will NOT receive marks for any notes or workings to these sub-questions.
Question One
1.1 The cost of one product, measured in terms of what must be given up to produce it, is called the
A real cost.
B opportunity cost.
C total cost.
D potential cost.
1.2 Which ONE of the following would be most likely to raise economic welfare in a country in the long
run?
A A rise in unemployment.
1.4 Which ONE of the following is a supply side policy designed to promote long-term economic growth?
D Raising aggregate demand to encourage firms to expand their supply of goods and services.
1.5 Conventional measures of national income fail to give an accurate indication of sustainable economic
welfare because they
1.6 Which ONE of the following would be the outcome of a market economy operating with a high degree
of competition?
A The interaction of demand and supply would ensure that resources are equally distributed.
B Companies would produce only those goods that are desirable for society since only such goods can
be sold at a profit.
D Producers would respond to changes in demand and consumers would respond to changes in supply.
TURN OVER
B a rise in price will lead to a larger than proportionate fall in sales volume.
1.8 What will be the effect of a rise in the price of cars on the demand curve for petrol?
There will be
1.9 If the imposition of a congestion charge on the use of cars in cities does not significantly reduce the
use of cars for travelling to and from work (commuting), this must be because
D what matters is the marginal cost of driving and this will not be affected.
1.10 Which ONE of the following, in a competitive labour market, would explain differences in wages
between occupations in the long run?
B In the long run, everyone has to accept the wage levels determined by the market.
C The skill and knowledge content of some occupations acts as a barrier to entry.
A An increase in demand will lead to higher prices only if supply is price inelastic.
B A shortage of goods can occur if prices are above the equilibrium level.
C The imposition of a minimum price for a good will always lead to a surplus of output over demand.
D If prices are flexible, there can be no market surpluses or shortages in the long run.
1.12 Oligopolistic competition is often characterised by the avoidance of price competition. Which ONE of
the following is the best explanation for this?
C The expectation that rival companies will always reduce prices in response to a price cut.
D Price reductions would encourage the entry of new competitors into the industry.
1.13 Assuming that pollution reduces economic welfare, which ONE of the following would be most likely to
raise long-term economic welfare?
1.14 Railway companies offering off-peak services at reduced prices must ensure that, in the short run,
these reduced prices cover at least
C overhead costs.
TURN OVER
1.17 In comparing perfect competition with monopoly, which ONE of the following statements is true?
B In the short run, firms in both monopoly and perfect competition attempt to minimise average fixed
costs.
C In the long run, firms in both monopoly and perfect competition produce where average costs are
lowest.
D Profits in perfect competition will be reduced in the long run by the entry of new firms, but long-run
monopoly profits are protected by entry barriers.
1.18 A country’s gross national product (GNP) will be greater than its gross domestic product (GDP) when
C Internally-generated funds.
D Commercial banks.
1.20 All of the following are effects on a business of a reduction in interest rates EXCEPT ONE.
1.21 Other things being equal, which ONE of the following is a typical feature of the recovery phase of the
trade cycle?
1.22 A significant fall in stock market values in a country will be likely to contribute to a contraction of the
circular flow of income because
A the circular flow is one of individual wealth of which shares are a part.
B reductions in consumer wealth will encourage lower consumption and higher saving.
C the buying of shares is an injection into the circular flow, and falling share prices will discourage the
buying of shares.
D outflows from the economy increase as investors switch savings to overseas stock markets.
TURN OVER
1.24 The comparative advantage theory of international trade shows that countries can benefit from trade
because
B all countries have an absolute advantage in the production of some goods and services.
C they can profit by running a trade surplus with the rest of the world.
D countries can acquire imported goods at a lower opportunity cost than from domestic production.
1.25 A multinational company may wish to locate production in a number of countries for all of the following
reasons EXCEPT ONE.
(Total = 52 Marks)
End of section A
TURN OVER