r

V/hich
~carcit}I")

of the following

BEST

defines the

_l1~!II__::lrefers

to the foIlow

I

ng d iagrarns

E~~~lli:i&!:·~_?Lr_?~o_d
are lji

lICii(J_I!_P(J~.s i~1i:W'X_

(1\)- -:,--. Good S ,,11](1 services to consumers
short supply.
There

'C) ~-~ .(D)

(Ire not enough resources at present - Tile excess of human wants over the economy's resources. The wants society are grcn.ter til an tile suppl y of goods.

available

Capital
gOIH]S

R

or

(Al

~)~---7
Co ns II III cr goods
R

2_

A baker can bake .my combination w; I'lg the fo Ilowing options below.

of items

(IJ)

Capital goods

____

What is the opportunity
cake? (A)

cost of producing

one

_____,lL__:;, Consumer goods

(D) (C)

CD)

I loafof bread .5 loaves of bread 7 IOCl ves 0 r bread 8 loaves of bread

It (C) Capital goods

-----~-~
~~7
COIlSll

3

Wh i c h of the following sta tcrnents 13EST defines a 'product ion possibility frontier' ') .,(A) The limit of the combinations of goods and services that can be and in a
(D)

mcr goods

It Capital goods

cn)
(C) (D)

produced

The combinations of goods services that may be produced
country

The mixture of goods and services that are desired by a country An i l lustrat.io n of 8Jl economy producing goods and services for j ts
cinzens

l__----::..~---7

Consumer

goods

4.

Which diagram opportunity costs? (A) A B

i l iustrntcs

decre.as

ing

CB)

If

(C) (D)

C
D

(A)

I)

-------

Qrn

.\

Price
(B)

0-------

.--~-~ QID-'

(C)

.

o --- ------I

(2/1)

-----==/

Prlce
(D)

o

-_
-------.--+
Qfl}'

.-------.----.-.6. A variable as whose value is determ incd

independently of the model may be classified

CA)
(8)

exogenous endogenous

(C)
(D)

relational
functional

(JO ON TO THE NEXT PAGE 021160lOJCAPE2007

·4-

JJ_Ql15_7_-=--B .. refer

10

the following

~A,~!.I.l",,'.':'..

~Ji!f!€~ft~'. iflr},

di agrurns L:~.Ulltl;:tIbudget line

Uell1_~ re krs (0 the d iagralll bci ow

,

Good y

-,

(IcJII aluTe;]

QlIariiit,f'

Or

('

()

,--~~ •.--.~--.---.:~

Income

..y

9,

The diagram above BEST descr ibes (he relationship between income and quantity demanded of
(A) a normal good a gi ffen good an inferior good ostentatious goods

7,

What has happened to cause the budget to shift Irorn ab (0 cd'!

iiue

(A) (D)
(C)

Consumer

income decreased prices remained unchanged.

and

(8) (C) CD)

Tile price of good x fell, ceteris pal ibus The price of good x rose and the price ofgoody fell.

10.

The following is a caption [rom Tropic Island daily newspaper.

CD)

The prices of good x and y fell in the same proportion,

8,

sloping and convex to (he origm. 'The shape is convex because the
(A) (B) (C) consumer opportunity

rei

is downward

l

~------......--~~
~:InCJ(EN I'nJCE~-~~~~~~~-~'r AS lJlnI;-;;'-'-;-;-THREATENS TBE ISLAND

- -------~----'"----------.,---- .......

-----~~- -~--' could have Jed to the

Which of the following

cost

IS

fall in chicken prices? (A) (B) (C) Increasing demand for cI iicken Decreasing demand for chicken Increasing supply of chicken

increasmg
g inal ralc of substitution mcrcasing rn arg inal rale of substitution decreasing co nsurn er o pp o r t um tv cos t decreasing
rnar
IS

IS

(D)

IS

CD)

Decreasing supply of chicken

-5 .Ht;:F!..Jl. ((Jers
in

the diagram

below'

14,

Which

of

lilt:

Io l lo wi n g U['.)T

d e lme

s

'margined cost'?

rom pi
.~Q~ILpuL _ _ ..__ ._.
[0

(B)

The addition

total fixed
U11 I i

(USb

ljom
pill ('0';;15

prucluci ng one more

ol out

(C)
(D)

The acid iri on to avera ge loud

from producing one more unit uf' output The addition to average variable costs from prod uc m g one more un r! o f
output

11

In the above diagram

of; IS

the consumers'

] S.

initial budget line. The price ofx falls and the· budgel I inc pivots to de. What is the income effect ofrhis price change? (A) (f~) (C) (D)

There is ad irect relationsh supplied and price. This (A)
(8) (C) (D) producers

Ip between
JS

quantuy so because
prices

believe that higher lead 10 greater profits

fg fh
hb

prod ucers wan t to sec u re ca p II at

ell U ipment to mass product: goods
as producers

bu

hg

y m arc

0 l fl factor

0

r

production,
as production for factors

Its puce

goes down
competition 11·ICI(;'~Ses

increases,

ofproduction

J 2.

Which

ofthe

following

UESTdescribes

the

their

COSI

of demand sloping demand curve'! (A)
(B)

PrJ ce e lasticity

of a downward 16
The table below shows tile percentage of

Decreasing elasticitiy price decreases
The sa m e elasticity

of demand

as

~ . . or prooucnon.

National

Income

earned by various factors

of d ern an d

throughout

(C)
(D)

J ncreas I ng e la st if: i ty C1 f clerna nd as price decreases Unitary elasticity of d e.m a n d
throughout

Land Labour
Capital

---_._

..__ .._.j.
.
~

15% 25%
20%

.

En trepren e llfSlll This table represents

40°;') _

13.

In the short run which ofihe NOT affected by fixed cost?

folJowing

is

(A)
(B) (C)

functional distribu lion 0 f lncorne personal distriburion of Income size d isrri bul ion of 1ncorne

(A) (8) (C)

Total Cost Marginal Cost Average Cost

CD)

cosrro flrrns of each

factor

CD)

Average Fixed Cost

-6 17. l n the grClph be low [he t'-./I arg i net1 Revenue
:~~

20_

The MRP

CIJI've

sloDes

downward

because

p-r.odB'a;;;eJaTvc."l'[[!TR!lif-F~dH~ 1ll-·lVt H.Y
_ - - __ _~"'_~~'i;,,~_--•

I

lo

':~-:-::::~~:'tA'p~=a~fr~rlIT51iI:~l_f5Jl~~\:P:,q_ft §l~t~C)Ts(13)-'
(C) (D)

Wnge

It om oth er uses iess-()r-aTa{jorl_.~_{Jtinal\deci
lower price

at a

more of a factor is dernandetl ata lower puce the marginal physical product IS constantly falling

0--------Qmllltity of labour

llem 21 belews
the demand production.

refers to the graph showing

and supply

for a factor

of

Which are the factors to have LIKELY caused this movement?

MOST Price

s

1\ Ill. IV (A)

A rise in the price of the final good A rise in the size of the labour force
A fall in the price of the final good

A rise in worker productivity l and 11only [[ arid III only I and IV only [I and IV only

(m
(C)
(U)

D

o
will Gause the demand

_____

S

D

Quantity

I

--

::.,_

18 _

Which of the following

for labour curve to shin to the right? (A) A decrease A!l

21

A shift of the demand D,Dr will result in
I

-

curve

(rom

DD to

(l\) (C)
(D)

ill the price ofthe product i 11C re (\s e in the p ric e 0 f a

(A)
(8) (C) (D)

substitute factor of production A rise in the wage rate A decrease ill the productivity

in transfer earnings an increase in economic rent
a decrease a decrease in transfer earrungs in economic rent

all increase

of

labour 22.
19 _ Wh ich of the following I.cnTIS explains relationship between factor rewards costs ofproduction? (1\) Inverse Which of the following countries has the greatest inequality of income distribution?

the and

Value or Gini coeffieicnt -----1-----'.J

(8)

(C)
(D)

Direct Inel i tee!
Negative

.3 7

'-- __ (A) (8) (C)

D, _ _

---"-I3 C D

,9

__

Country A
Country Country Country

(D)

-7-

23

The labour force rna! be defined

as persons

26,

v\,'hJch of the following
examining
IS shaded"

call be obl<lincd by
ofihc enure ,Ire-,'I lh~lt

who

Dr':, em

ployed

pills

the '

the poruon

- (AT--;"~-riTtli:mffiTETI)rtQ§f!'J~_flJ
(C)
(D)

under em played

(11)

The giui coefficient

worklil'g-pop~l!!~! IQIl
mtluence the labour

(C)
(D)

Th e cQi-il~erii-r[li-1(_1;1-jifi()
The margina' rate
0("

substitution

24 _

WhICh ofthe following

force': participation rate?
Total Population 11. Ill.

27

Which of the following measures are MOST LI KELY 10 contri bute to pCl verry reduct Ion
in the long run?

Demand
Change
j

fOI

labour I.
Increased ed ucauon

in altitudes

a,1and \ ra In ing
0 I'

(A)
(13) (C) (D)

and II only

n
III

opporrun i1ics
Increased Increased taxes on producers o c c u p a t i on a l
n ecess iII es

I and llf only II anel III only r, Jl and J[f

and

IV.
II CHIS 25 - 26 refer to the followin f a Lorenz Curve. g diagram (A) (E1)

geographical mobil ity of labou 1Establ ishment of a gOvtmIT1CI11 soc i al
wei hue program

(1

(C)
(D)

I, Jl and 1II only I, II and IV only 1, J!I and IV only II, Jll and TV only

E 0
,U

QJ

Ion!
..,
80.
~
<:<l

l':

28.

"ro

o ~,
(,lJ. ~ Oil ._

DEST describes concept ofa wei tare function?

Which of the following

the

._.

U .0. .__-

QJ

~ "3 U S I...
QJ

60
40 20
l.------l -----'----. .__l
__ _l_

(A)

;J

A Iunctioning government welfare I;ay~~enl'_syslern \vl;~rc e :-~IY()I~~-----benefits
The re I a t ion s h j P between an ind i vidual's well being and the factors that influence it The function ol Govemmentto help those less fortunate by giving [hem

(13)

20

,,40

60

80

lOO--~

(C)
(D)

%01' households 25~

Wha I docs 111 d ragrarn ind ica te abo ut iJ )COI ne j d rstn burien? ..... W hieh- of (/-\)
t he-.fO-l-l-aw
Hl

s

month Iy grants 111e relationsh ip between the~i I. ffereur economic functions ofGuvenlJ1lenl-

g -can-: j,egcd_ -i V'e+),

(8) (C)
(D)

r lis

It 15 d istributed equall y cJ istr I bored at a consian t rate.
I

influence social welfare?
(A) (8) (C)
(D) Fall in crime

Sixty per cent 0 r households recei ve

II is unequally disuibured.

sixty per cent of income.

Fall in interest rates Rise in employment
Rise in inflauon

30, 'vVhich IS-lin e xamp le of ()sYflll'llelli~:

()

--

J I,

111 ((lnmllion?

Perfect corn pelion is based on following assumptions?

v,,11 ie h cd' the

(I:lj
(B) (C)

U\l
Large number
Large nurn bel
0

One patty has rriore knowledge
the other

than

(C)
(D)

f!5tg
s-

abl1i.iithc Illat,tei:--

0 l-buyet

(D)

Both parties equally lack knowledge about the matter. ' One party refuses Tcj- share
information with another party,

Items 32 - 33 refer to the following diagram wh ich shows the cost and revenue curves 0 r a profit maximising monopolistically competitive finn, Cos!
Revenue

Me

H Q-----,-~-

o

----------_-----"---

x

y

------7
Oulpu t

MR
32_ Which one of the following rectangles represents total cost ofthe firm?
(A) (B)

33

Which rectangle represents total revenue of the firm atequilibriurn? (A)
(8)

OPWX
ORUX

OPWX
ORUX

(C)

OSTX

(D)

OQVY

(C)

CD)

OSTX OQVY

rn 1 1Ol'

tvc:s PF?007

GO ON TO THE NEXT PAGE

- c)

--

34

Tile con.Iiuon

necessary

fOI

normal pr::)JlI is

th.u

\Vhich Ol"lIH:: rollowing 'rnarginalis: principle.'?

13ES'I"descllbes

tile

(Li)
(C)

average
a v e rage marginal

cost
cost

nlu-s-C'be,.oequai
must be equal

[I)

(D) (C)
(D)

lvl argi

margrua I coS[----·
(f)

n a l cost revenue

equals

a v e r a ge rnarg iu a l
1Tl8rgllll:li

revenue

Average revenue

c o st equals cosl equals

(0)

a verag e cost

must

be -c'q II a I to

Marginal
revenue

average revenue

35

Which ofthe following

is responsible for the

38,

Co uut r i e s that

allow

m u l t i n at i ou a l

'kink' in the demand linn?
(A) Rival

C! irve

of

the oligopolist

ic

corporations to undertake investment benefit from (A) (B)

direct

foreign

(B)

(C)
(D)

firms ill an oligopoly match C uts bu t not price increases. Rival firms in an oligopoly match price increases but not price cuts, The products sold by oligopolistic Ii rm S me SlJ bstanti a IIy d i fferent iron 1 price
each other.

transfer

pricing

practices

of the

mulf national corporal ion rapid depletion of local natural resources transfer of technology and production

(C)
(D)

techniques
In 0 110 pso

ny

po we

rill

\"iage

The products sold by oligopof istic firms are slightly d liferent from each
other. 39.

negotiations

The po int at which the firm rn perfect competition cover') its variable costs is called
the (A) (B) (C) (D) closing down point

11.~!n3i> refers to the diagram
shows a firm operating
corn peritive rn arker.
/\

below which

in a perfectly variation point
econorn ies or scale pu i III long run equilibrium point

3(i.

Which

segment

of

the c u r v e s shown

repl esents the short run supply (A)

curve?

C[O E B to D A to D
Ato F

(8)

(C) CD)

- 10 Lteonl.'tU refers (0 lhe diagram below showing cos I 811~ ['eve n IJ e-Gd urv,eS-E-j=j31uri'H~:e% ---_
.-.:..:.~
:".

42
,--

l\--hlfket failure
rn a rket eeo

.Iescribes

the laiiurc

ofthe

...

1l01~1 _to X

ach i_e_vQ:o,g!ks:_C[ic.j_eq~

-il1t\ (ish);_

-aI10caliol') 01
(A) (B) (C) (D)

Me

resources
capital machinery labour

43.

Markel failure
(A)

is usually

corrected

by

(D)
(C) (D) 40_ I r the inc!ustry is mandated cost pricing, to aclopt margi what price wi II it charge'!
1181

consumers public firms private firms
Government

44. (/\ )
(Fl) 1-'

P1

I

Which combination BEST examples of'privatisation? (A) (B) (C)
(D)

describes

(C)
(I))

P;

l' 1

Deregulation and franchising Contracting out and regulation Deregulation and nationalisation F ranch is i ng aJ id red istn buti on

41

Econ om ice [f c ienc y in producti on occu rs
when

45. (i\)

(ll) (C)

all firms are maximising profits and producing where M.e = MR there is no spare capacity the output of one good cannot be
increased without reducing output of another good (he

The concept that (A)

of' adverse selection'

implies

persons

who have
10

insurance

may

lend
(D)

be less care Iu I and UJUS

CD)

the economy does not have to depend On imported goods

(C)

increase risks persons who take out insurance ate those with the highest risk those who sell insurance policies arc
more well i nforrned than those who buy them

(D)

those who refuse insurance policies are often the same on es who really
need them

fFYOlJFINlSnBEFOltETIM.EISCALLED,CHECKYOLJRWOIU(ONTHfSTEST.

'''~

f

1(:-/\'

,,/,-,

A DC ')f\il7

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