The Independent Institute of Education 2017

MODULE NAME: MODULE CODE:

PRINCIPLES OF MICROECONOMICS PMIC6111
PRINCIPLES OF MICROECONOMICS PMIC6111d
PRINCIPLES OF MICROECONOMICS PMIC6111e
PRINCIPLES OF MICROECONOMICS PMIC6111f
PRINCIPLES OF MICROECONOMICS PMIC6111p
PRINCIPLES OF MICROECONOMICS PMIC6111w
ECONOMICS A (MICRO) ECMS6211
ECONOMICS A (MICRO) ECMS6211d

ASSESSMENT TYPE: TEST (PAPER ONLY)

TOTAL MARK ALLOCATION: 60 MARKS
TOTAL HOURS: 1 HOUR (+5 minutes reading time)
INSTRUCTIONS:
1. Please adhere to all instructions in the assessment booklet.
2. Independent work is required.
3. Five minutes per hour of the assessment to a maximum of 15 minutes is dedicated to
reading time before the start of the assessment. You may make notes on your question
paper, but not in your answer sheet. Calculators may not be used during reading time.
4. You may not leave the assessment venue during reading time, or during the first hour or
during the last 15 minutes of the assessment.
5. Ensure that your name is on all pieces of paper or books that you will be submitting. Submit
all the pages of this assessment’s question paper as well as your answer script.
6. Answer all the questions on the answer sheets or in answer booklets provided. The phrase
‘END OF PAPER’ will appear after the final set question of this assessment.
7. Remember to work at a steady pace so that you are able to complete the assessment within
the allocated time. Use the mark allocation as a guideline as to how much time to spend on
each section.
Additional instructions:
1. This is a CLOSED BOOK assessment.
2. Calculators are allowed
3. For multiple-choice questions, give only one response per question. The marker will ignore
any question with more than one answer, unless otherwise stated. You should, therefore, be
sure of your answer before committing it to paper.
4. Answer All Questions .

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Question 1 (Marks: 20)

Multiple-choice questions: Select one correct answer for each of the following. In your answer
booklet, write down only the number of the question and next to it, the letter of the correct
answer.

Q.1.1 If a good is scarce: (2)

(a) It only needs to be limited.
(b) It is not possible to produce any more of the good.
(c) It is desirable but limited.
(d) There will always be a shortage of the good at the current price.

Q.1.2 Which one of the following is the most accurate definition of economics? (2)
(a) Economics is the study of stocks and bonds.
(b) Economics is the study of how people allocate unlimited resources.
(c) Economics is the study of how consumers choose to spend their income.
(d) Economics is the study of how society chooses to allocate scarce resources.

Q.1.3 The importance of the ‘ceteris paribus’ assumption is that it (2)

(a) Allows one to hold all variables constant so the economy can be carefully
observed in a suspended state.
(b) Allows one to separate normative economic issues from positive economic
ones.
(c) Allows one to generalise from the whole to the individual.
(d) Allows one to analyse the relationship between two variables whilst under
the influence of other variables.

Q.1.4 The private ownership of property and the use of the market system to (2)
coordinate economic activity are most characteristic of
(a) A command economy
(b) A mixed economy
(c) A market economy
(d) A traditional economy

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Q.1.5 A point beyond the boundary of an economy’s production possibilities curve is (2)
(a) Efficient.
(b) Inefficient.
(c) Attainable.
(d) Unattainable.

Q.1.6 John spends R5 000 on a new carpet. What is the opportunity cost to him of the (2)
carpet?
(a) R5 000
(b) The land, labour and capital used in manufacturing the carpet.
(c) The reduction in his bank balance due to purchasing the carpet.
(d) The other things he could have bought with the R5 000.

Q.1.7 If the demand for milk is downward sloping, then an increase in the price of milk (2)
will result in a(n)
(a) Increase in the demand for milk.
(b) Decrease in the demand for milk.
(c) Increase in the quantity of milk demanded.
(d) Decrease in the quantity of milk demanded.

Q.1.8 An upward-sloping supply curve shows that (2)

(a) Buyers are willing to pay more for particularly scarce products.
(b) Suppliers are willing to increase production of their goods if they receive
higher prices for them.
(c) Suppliers expand production as the product price falls.
(d) Buyers are willing to buy more as the product price falls.

Q.1.9 Which of the following is not an example of a factor of production? (2)

(a) A forest.
(b) Money.
(c) Mineral deposits.
(d) Rubbish collectors.

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Q.1.10 What are the three basic decisions that must be made by all economies? (2)
(a) How much will be produced, when it will be produced, and how much it will
cost;
(b) What the price of each good will be, who will produce each good, and who
will consume each good;
(c) What will be produced, how goods will be produced, and for whom goods
will be produced;
(d) How the opportunity cost principle will be applied, if and how the law of
comparative advantage will be utilized, and whether the production
possibilities constraint will apply.

Question 2 (Marks: 10)

State if the following statements are true or false

Q.2.1 Choices are costly because we must give up other opportunities that we value. (1)

Q.2.2 In the circular flow model firms demand products and supply resources. (1)

Q.2.3 Macroeconomics deals with the study of the whole economy including the topics (1)
of inflation, unemployment and economic growth.

Q.2.4 Scarcity exists when our wants exceed the available resources. (1)

Q.2.5 The statement ‘all economies should become socialist’ is positive. (1)

Q.2.6 The market where households sell the use of their inputs to firms is called the (1)
product market.

Q.2.7 There is an inverse relationship between price and quantity demanded. (1)

Q.2.8 A change in the price of a good leads to a change in the quantity supplied, and a (1)
change in its supply.

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Q.2.9 Excess supply is also referred to as market surplus. (1)

Q.2.10 Loss and savings are examples of flow variables. (1)

Question 3 (Marks: 10)

Q.3.1 The PPC below shown is for South Africa. Suppose that the South African economy
produces only 2 types of goods: capital and consumer goods. Use the PPC to
answer the questions that follow.

Consumer

7
F
6 A

5 B

E

Capital
12 15 18

Q.3.1.1 Write down the letter of the point(s) that indicate(s) the following on the
PPC above.
(i) Efficient production (1)

(ii) Unemployment (1)

Q.3.1.2 Redraw the PPC above, and illustrate the effect of an increase in the (3)
skills of workers on the economy.

Q.3.2 Differentiate between a positive and a normative statement. (2)

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Q.3.3 Name any three conditions to be met for a market to exist. (3)

Question 4 (Marks: 10)

Explain, with the aid of diagrams (one diagram per event), how each of the following events will
have an effect on either the demand or the supply curve of petrol motorcars:

Q.4.1 Petrol motorcars become more fashionable and desirable. (5)

Q.4.2 There are cost-increasing changes in technology used for producing these (5)
motorcars.

Question 5 (Marks: 10)

Q.5.1 Make use of a well labelled diagram to illustrate an excess demand. (4)

Q.5.2 Briefly discuss the main strengths and weaknesses of the three basic types of (6)
an economic system.

END OF PAPER

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