FINAL EXAMINATION

Bachelor of Business Administration;

Bachelor of Commerce in Human Resource Management;
Bachelor of Commerce in Marketing;
Bachelor of Commerce in Entrepreneurship;
PROGRAMME Bachelor of Commerce in Financial Management;
Bachelor of Commerce in Information and Technology Management;
Bachelor of Commerce in Retail Management;
Bachelor of Commerce in Supply Chain Management;
Bachelor of Commerce in Public Administration
MODULE Economics 1A

YEAR One (1)

INTAKE July 2018

13 November 2018
DATE
09h00-12h00
TIME

DURATION 3 hours

TOTAL MARKS 100

INSTRUCTIONS TO THE CANDIDATE

1. Questions must be attempted in the answer book provided.

2. All queries should be directed to the invigilator; do not communicate or attempt to communicate with any other
candidate.
3. You have THREE HOURS to complete this paper. You are not allowed to leave the examination room within
the first hour and in the last 15 minutes of this examination.
4. This is a CLOSED BOOK examination.
5. Read ALL instructions carefully.

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SECTION A [40 MARKS]
Answer ALL questions in this section.

QUESTION 1 (10 Marks)

Provide definitions for the following terms.

1.1 Monopoly (2 marks)

1.2 Variable cost (2 marks)
1.3 Average product (2 marks)
1.4 Opportunity cost (2 marks)
1.5 Substitutes (2 marks)

QUESTION 2 (10 Marks)

Match Column A with Column B. Write down the question number and the correct letter next to it. E.g. 2.6 F

COLUMN A COLUMN B
2.1 Monopolistic competition A There are no fixed inputs - all the inputs are variable.
2.2 Long-run B Earns normal profits in the long-run
2.3 Marginal product C When price equals minimum average variable cost.
2.4 Shut-down point D Opportunity costs not reflected in monetary payments of factors of
production
2.5 Implicit costs E This is the change to the total output resulting from the employment of one
more unit of a variable factor
F A firm can expand output only by increasing the quantity of its variable
inputs.
G Refers to a market structure where firms are so few that each firm must
consider the others’ actions and reactions

QUESTION 3 (20 Marks)

State whether the following statements are True or False. Write down the question number and the word True or
False next to it. E.g. 3.11 True

3.1 Microeconomics is concerned with the economy as a whole.

3.2 The positive slope of the production possibilities frontier shows that more of one good can only be obtained by
sacrificing the other good.
3.3 Households are buyers, and firms are producers and sellers of goods and services in the goods and services
market.
3.4 An increase in the costs of factors of production will cause a decrease in demand.
3.5 A change in the price level of a good will cause a shift of the demand curve.
3.6 If the market price is set above the equilibrium price, there will be an excess supply.
3.7 If the government sets a minimum price below the equilibrium price, this will have no effect on the market.
3.8 The kinked demand curve theory is difficult to test effectively because it does not actually explain how the price
is initially determined.
3.9 Revenue increases when the price is reduced for inelastic demand.
3.10 If marginal product is increasing, average product is decreasing.

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SECTION B [60 MARKS]
Answer ANY THREE (3) questions in this section.

QUESTION 4 (20 Marks)

4.1 With the aid of a fully labelled diagram, draw a Production Possibility Frontier (PPF) for an economy producing
computers and pizzas. Use the diagram to explain the concepts of choice, scarcity and opportunity costs.
(10 marks)

4.2 With reference to the diagram in question 4.1, distinguish between ‘efficiency’ and ‘inefficiency’. (4 marks)

4.3 With the aid of a separate diagram, illustrate and explain what would happen if there was a discovery of an improved
technique for producing pizzas. (6 marks)

QUESTION 5 (20 Marks)

5.1 In the market for bread, use a fully labelled diagram to explain the difference between the government enforcing a
minimum price below the equilibrium price, and the government enforcing a minimum price above the equilibrium
price ceteris paribus. Assume the equilibrium price for bread is R12 per loaf. (10 marks)

5.2 With the aid of a fully labelled diagram, explain what would happen in the market for printers if the price of ink
cartridges increases ceteris paribus. (10 marks)

QUESTION 6 (20 Marks)

6.1 Define price elasticity of demand and how it is measured. (5 marks)

6.2 With the aid of diagrams, discuss the five different categories of price elasticity of demand. (15 marks)

QUESTION 7 (20 Marks)

7.1 Give an outline of the differentiating characteristics of perfect competition and monopolistic competition.
(10 marks)

7.2 Using a fully labelled diagram, discuss the profit maximizing position of a monopoly making economic profit in the
short run and explain what will happen to this firm in the long run. (10 marks)

END OF PAPER

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