;

SUPPLEMENTARY EXAMINATION

Bachelor of Business Administration;

Bachelor of Commerce in Marketing Management;
Bachelor of Commerce in Human Resource Management;
PROGRAMME
Bachelor of Commerce in Information and Technology Management;
Bachelor of Commerce in Supply Chain Management;
Bachelor of Public Administration

MODULE Economics 1A

YEAR One (1)

INTAKE July 2014

DATE 09 January 2015

TIME 09h00 – 12h00

DURATION 3 hours

TOTAL MARKS 100

EXAMINER Mr N Homman

MODERATOR Mr H Matsongoni

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 ONE (20 Marks)

Choose the correct answer. Write down the question number and the correct letter next to it. E.g.
1.11 A

1.1. Which of the following is key to the way in which economists think?
a) Money
b) Wealth
c) Opportunity cost
d) Poverty
e) Balance sheet

1.2. Which one of the following is NOT a microeconomic concept?

a) The price of petrol.
b) The demand for potatoes.
c) The consumer price index.
d) The supply of pumpkins.
e) The e-toll fee in Gauteng.

1.3. Which one of the following statements is incorrect?

a) Choice always involves sacrifice.
b) Choice always involves opportunity cost.
c) Economists measure cost in terms of opportunity cost.
d) Economists consider only explicit monetary costs.
e) There are always costs involved in the use of scarce resources.

1.4. Which of the following in NOT viewed as a factor of production?

a) A sugar-cane plantation.
b) A skilled bricklayer.
c) N3 Freeway to Gauteng.
d) Machinery for milk processing.
e) None of the above.

1.5 Which one of the following may result in a decrease in the demand for frozen
vegetables, a normal good? a) A rise in consumers’ incomes.
b) An increase in the price of frozen vegetables.
c) A decrease in the price of freezers.
d) A decrease in the price of fresh vegetables.
e) A decrease in the price of frozen vegetables.
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1.6 If the government sets a maximum price above the equilibrium price:
a) a surplus will develop.
b) a shortage will develop.
c) excess supply will develop.
d) excess demand will develop.
e) the market will be unaffected.

1.7 The demand for chocolates is price elastic if:

a) an increase in price results in an increase in total revenue.
b) a decrease in price results in an increase in total revenue.
c) the good is a necessity.
d) a decrease in price results in a decrease in total revenue.
e) the quantity of chocolates demanded is not sensitive to changes in price.

Use the following data to answer Questions 1.8 and 1.9.

Quantity produced 1 2 3 4 5
Fixed costs 100 100 100 100 100
Variable costs 200 300 350 700 1 400

1.8 What is the average cost of producing 4 units?

a) 100
b) 700
c) 25
d) 175
e) 200

1.9 What is the marginal cost of the third unit?

a) 100
b) 300
c) 50
d) 700
e) 850

1.10 The maximum loss a firm should experience in the short run
is equal to: a) zero.
b) total costs.
c) total variable costs.
d) total fixed costs.
e) average total costs.

QUESTION TWO (20 Marks)

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Match the economic concepts given in COLUMN A with its description in COLUMN B. Write down
the question number and the correct letter next to it. E.g. 2.11 A

COLUMN A COLUMN B

2.1 Normal profit A Monetary payments for the factors of production and
other inputs bought or hired by the firm.
2.2 Explicit costs B These are goods exactly the same
2.3 Inferior goods C This is a market structure characterised by the
existence of one seller who provides a unique
product.
2.4 Diseconomies of D This is when a percentage change in quantity
scale demanded is greater than the percentage change in
price.
2.5 Macroeconomics E Opportunity costs not reflected in monetary
payments of factors of production
2.6 Elastic demand F Occur when the marginal product of an additional
worker exceeds the marginal product of the previous
worker.
2.7 Long run G This is the change to the total output resulting from
the employment of one more unit of a variable factor.
2.8 Command economy H This is a time period whereby all inputs used in
production by a given firm can be varied.
2.9 Marginal product I The government solely solves all the economic
problems.
2.10 Perfect competition J As income increases, the quantity demanded for
these goods declines.
K This is when average cost increases as output
increases.
L This refers to a period which is 5 years or more.
M Measures the responsiveness of the quantity
supplied to a change in price
N This is when firms are allowed to charge whatever
price they want to different customers.
O This branch of economics focuses on the whole
economy as opposed to individual parts.
P These are goods which does not have economic
value.
Q Is equal to the best return that the firm's self-owned
resources could earn elsewhere.
R This occurs when none of the individual market
participants can influence the price of the product.

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

QUESTION THREE

With the aid of examples define the following economic terms;

3.1 Economies of scope (4 marks)

3.2 Income elasticity of demand (4 marks)

3.3 Economic profit (4 marks)

3.4 Decreasing returns to scale (4 marks)

3.5 Black market (4 marks)

QUESTION FOUR (20 Marks)

4.1 Define what is meant by the term law of supply. (2 marks)

4.2 With the aid of clearly labelled diagrams, explain the difference between a change in quantity
supplied and a change in supply. (10 marks)

4.3 Briefly explain ANY FOUR (4) determinants of supply for the smartphone market in your
country. (8 marks)

QUESTION FIVE (20 Marks)

5.1 With the aid of a diagram, draw a Production Possibility Frontier (PPF) for an economy
producing televisions and potatoes. Use the diagram to explain the concepts of choice,
scarcity and opportunity costs. (10 marks)

5.2 Explain what will happen to the frontier in 5.1 if there was an occurrence of floods which
washed away most of
the potato plants. Illustrate your answer. (6 marks)

5.3 Use your frontier in 5.1 to explain the concept of ‘efficiency’ and (4 marks)
‘inefficiency’.
QUESTION SIX (20

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 Marks)

6.1 Suppose you are to specify a short run production function for a farmer producing tomatoes in
Mpumalanga.
6.1.1 Define the term short run. (2 marks)

6.1.2 Identify ANY TWO (2) fixed inputs and one variable input you might include in the
production function.
(4 marks)

6.2 Use a diagram to explain the law of diminishing marginal returns.

(8 marks)

6.3 Using appropriate diagrams and examples, distinguish between fixed costs and variable
costs. (6 marks) END OF PAPER

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